EX-10.55..09

 
SECOND AMENDED AND RESTATED

MASTER LEASE AGREEMENT

BETWEEN

HEALTH CARE REIT, INC.

HCRI COLD SPRING PROPERTIES, LLC

HCRI LOUISIANA PROPERTIES, L.P.

AND

EMERITUS CORPORATION

OCTOBER 17, 2008

 
 

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TABLE OF CONTENTS

SECTION
 
PAGE
ARTICLE 1:
LEASED PROPERTY, TERM AND DEFINITIONS
2
1.1
Leased Property
2
1.2
Indivisible Lease.
2
1.3
Term
2
1.4
Definitions
3
1.5
Landlord As Agent
13
1.6
Rocky Hill Ground Lease
13
1.6.1
General
13
1.6.2
Landlord Acceptance of Rocky Hill Ground Lease Obligations
13
1.6.3
Compliance with Rocky Hill Ground Lease; Rent Payments Thereunder
13
1.6.4
Termination or Expiration of Rocky Hill Ground Lease
14
1.6.5
Remedies
14
1.7
Termination of the Summerville Lease
14
ARTICLE 2:
RENT
14
2.1
Base Rent
14
2.2
Base Rent Adjustments.
15
2.2.1
Base Rent Adjustments - Additional Investment Advances
15
2.3
Additional Rent
15
2.3.1
General Additional Rent
15
2.4
Place of Payment of Rent
15
2.5
Net Lease
15
2.6
No Termination, Abatement, Etc
15
2.7
Transaction Fee
16
ARTICLE 3:
 IMPOSITIONS AND UTILITIES
16
3.1
Payment of Impositions
16
3.2
Definition of Impositions
17
3.3
Escrow of Impositions
17
3.4
Utilities
18
3.5
Discontinuance of Utilities
18
3.6
Business Expenses
18
3.7
Permitted Contests
18
ARTICLE 4:
 INSURANCE
19
4.1
Property Insurance
19
4.2
Liability Insurance
20
4.3
Builder's Risk Insurance
20
4.4
Insurance Requirements
21
4.5
Replacement Value
21
4.6
Blanket Policy
21

 
 

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SECTION
 
PAGE
4.7
No Separate Insurance
22
4.8
Waiver of Subrogation
22
4.9
Mortgages
22
4.10
Escrows
22
ARTICLE 5:
INDEMNITY
22
5.1
Tenant's Indemnification
22
5.1.1
Notice of Claim
23
5.1.2
Survival of Covenants
23
5.1.3
Reimbursement of Expenses
23
5.2
Environmental Indemnity; Audits
23
5.3
Limitation of Landlord's Liability
24
ARTICLE 6:
USE AND ACCEPTANCE OF PREMISES
24
6.1
Use of Leased Property
24
6.2
Acceptance of Leased Property
24
6.3
Conditions of Use and Occupancy
25
6.4
Tenant Solely Responsible
25
6.5
Opportunity to Inspect
25
ARTICLE 7:
MAINTENANCE AND MECHANICS' LIENS
25
7.1
Maintenance
25
7.2
Required Alterations
26
7.3
Mechanic's Liens
26
7.4
Replacements of Fixtures and Landlord's Personal Property
26
ARTICLE 8:
DEFAULTS AND REMEDIES
27
8.1
Events of Default
27
8.2
Remedies
29
8.3
Right of Set?Off
32
8.4
Performance of Tenant's Covenants
32
8.5
Late Payment Charge
32
8.6
Default Rent
33
8.7
Attorneys' Fees
33
8.8
Escrows and Application of Payments
33
8.9
Remedies Cumulative
33
8.10
Waivers
34
8.11
Obligations Under the Bankruptcy Code
34
8.12
California Remedies
34
8.12.1
Remedies
34
8.12.2
Damages
35
ARTICLE 9:
DAMAGE AND DESTRUCTION
36
9.1
Notice of Casualty
36
9.2
Substantial Destruction
36
9.3
Partial Destruction
37
9.4
Restoration
37

 
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SECTION
 
PAGE
9.5
Insufficient Proceeds
38
9.6
Not Trust Funds
38
9.7
Landlord's Inspection
38
9.8
Landlord's Costs
38
9.9
No Rent Abatement
38
ARTICLE 10:
 CONDEMNATION
39
10.1
Total Taking
39
10.2
Partial Taking
39
10.3
Condemnation Proceeds Not Trust Funds
39
ARTICLE 11:
TENANT'S PROPERTY
40
11
Tenant's Property
40
11
Requirements for Tenant's Property
40
ARTICLE 12:
RENEWAL OPTIONS
41
12.1
Renewal Options
41
12.2
Effect of Renewal
41
ARTICLE 13:
RIGHT OF FIRST OPPORTUNITY AND OPTION TO PURCHASE
42
13.1
Right of First Opportunity
42
13.1.1
Fair Market Value
43
13.2
Option to Purchase
45
13.2.1
Option Price
45
13.2.2
Summerville Fair Market Value
46
13.2.3
Closing
47
13.2.4
Failure to Close Option
47
13.2.5
Failure to Exercise Option to Purchase
47
13.2.6
Early Option to Purchase Dayton Facility
47
ARTICLE 14:
NEGATIVE COVENANTS
47
14.1
No Debt
47
14.2
No Liens
47
14.3
No Guaranties
48
14.4
No Transfer
48
14.5
No Dissolution
48
14.6
Subordination of Payments to Affiliates
48
14.7
Change of Location or Name
48
ARTICLE 15:
AFFIRMATIVE COVENANTS
49
15.1
Perform Obligations
49
15.2
Proceedings to Enjoin or Prevent Construction
49
15.3
Documents and Information
49
15.3.1
Furnish Documents
49
15.3.2
Furnish Information
49
15.3.3
Further Assurances and Information
50

 
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SECTION
 
PAGE
15.3.4
Material Communications
50
15.3.5
Requirements for Financial Statements
50
15.4
Compliance With Laws
50
15.5
Broker's Commission
51
15.6
Existence and Change in Ownership
51
15.7
Financial Covenants
51
15.7.1
Definitions
51
15.7.2
Coverage Ratio
51
15.8
Facility Licensure and Certification
52
15.8.1
Notice of Inspection
52
15.8.2
Material Deficiencies
52
15.9
Transfer of License and Facility Operations
52
15.9.1
Licensure
52
15.9.2
Facility Operations
52
15.10
Bed Operating Rights
53
15.11
Power of Attorney
53
ARTICLE 16:
ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
54
16.1
Prohibition on Alterations and Improvements
54
16.2
Approval of Alterations
54
16.3
Permitted Alterations
54
16.4
Requirements for Permitted Alterations
54
16.5
Ownership and Removal of Permitted Alterations
55
16.6
Minimum Qualified Capital Expenditures
55
16.7
Signs
55
ARTICLE 17:
CONTINGENT PAYMENT
56
17.1
Contingent Payment
56
ARTICLE 18:
ASSIGNMENT AND SALE OF LEASED PROPERTY
56
18.1
Prohibition on Assignment and Subletting
56
18.2
Requests for Landlord's Consent to Assignment, Sublease or Management Agreement
56
18.3
Agreements with Residents
57
18.4
Sale of Leased Property
57
18.5
Assignment by Landlord
58
ARTICLE 19:
HOLDOVER AND SURRENDER
58
19.1
Holding Over
58
19.2
Surrender
58
19.3
Indemnity
58
ARTICLE 20:
[RESERVED]
59
ARTICLE 21:
QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES
59
21.1
Quiet Enjoyment
59

 
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SECTION
 
PAGE
21.2
Subordination
59
21.3
Attornment
59
21.4
Estoppel Certificates
60
ARTICLE 22:
REPRESENTATIONS AND WARRANTIES
60
22.1
Organization and Good Standing
60
22.2
Power and Authority
61
22.3
Enforceability
61
22.4
Government Authorizations
61
22.5
Reserved
61
22.6
Condition of Facility
61
22.7
Compliance with Laws
61
22.8
No Litigation
61
22.9
Consents
62
22.10
No Violation
62
22.11
Reports and Statements
62
22.12
ERISA
62
22.13
Chief Executive Office
63
22.14
Other Name or Entities
63
22.15
Parties in Possession
63
22.16
Access
63
22.17
Utilities
63
22.18
Condemnation and Assessments
63
22.19
Zoning
63
22.20
Pro Forma Statement
64
22.21
Environmental Matters
64
22.22
Leases and Contracts
64
22.23
No Default
64
22.24
Tax Status
65
ARTICLE 23:
RESERVED
65
ARTICLE 24:
SECURITY INTEREST
65
24.1
Collateral
65
24.2
Additional Documents
66
24.3
Notice of Sale
66
24.4
Recharacterization
66
ARTICLE 25:
MISCELLANEOUS
66
25.1
Notices
66
25.2
Advertisement of Leased Property
66
25.3
Entire Agreement
67
25.4
Severability
67
25.5
Captions and Headings
67
25.6
Governing Law
67
25.7
Memorandum of Lease
67
25.8
Waiver
67

 
(v)

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SECTION
 
PAGE
25.9
Binding Effect
67
25.10
No Offer
67
25.11
Modification
67
25.12
Landlord's Modification
68
25.13
No Merger
68
25.14
Laches
68
25.15
Limitation on Tenant's Recourse
68
25.16
Construction of Lease
68
25.17
Counterparts
68
25.18
Custody of Escrow Funds
69
25.19
Landlord's Status as a REIT
69
25.20
Exhibits
69
25.21
WAIVER OF JURY TRIAL
69
25.22
CONSENT TO JURISDICTION
69
25.23
Attorney's Fees and Expenses
70
25.24
Survival
70
25.25
Time
70
25.26
Subtenant
70

 

 
SCHEDULE 1:
INITIAL RENT SCHEDULE

 
SCHEDULE 2:
TRANCHE 2 FACILITIES

 
EXHIBIT A:
LEGAL DESCRIPTIONS

 
EXHIBIT B:
PERMITTED EXCEPTIONS

 
EXHIBIT C:
FACILITY INFORMATION

 
EXHIBIT D:
LANDLORD’S PERSONAL PROPERTY

 
EXHIBIT E:
DOCUMENTS TO BE DELIVERED

 
EXHIBIT F:
TENANT’S CERTIFICATE AND FACILITY FINANCIAL REPORTS

 
EXHIBIT G:
GOVERNMENT AUTHORIZATIONS TO BE OBTAINED; ZONING PERMITS

 
EXHIBIT H:
PENDING LITIGATION

 
EXHIBIT I:
LIST OF LEASES AND CONTRACTS

 
EXHIBIT J:
WIRE TRANSFER INSTRUCTIONS

 

 
(vi)

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SECOND AMENDED AND RESTATED MASTER LEASE AGREEMENT

This Second Amended and Restated Master Lease Agreement (“Lease”) is made
effective as of October 17, 2008 (the “Amended Effective Date”) by and among
Health Care REIT, Inc., a corporation organized under the laws of the State of
Delaware (“HCRI” and a “Landlord” as further defined in §1.4 below), having its
principal office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio 43603-1475, HCRI Cold Spring Properties, LLC, a limited liability company
organized under the laws of the State of Delaware (“HCRI-Cold Spring” and a
“Landlord” as further defined in §1.4 below), having its principal office
located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475,
HCRI Louisiana Properties, L.P., a limited partnership organized under the laws
of the State of Delaware (“HCRI-LA” and a “Landlord” as further defined in §1.4
below), having its principal office located at One SeaGate, Suite 1500, P.O.
Box 1475, Toledo, Ohio 43603-1475, and Emeritus Corporation, a corporation
organized under the laws of the State of Washington (“Tenant”), having its chief
executive office located at 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121.
 
R E C I T A L S
 
A. Effective as of March 28, 2002, HCRI and HCRI Mississippi, LLC, as landlord,
and Tenant entered into a certain Master Lease Agreement (“Master Lease”).
 
B. Effective as of September 30, 2003, HCRI, HCRI Mississippi, LLC, HCRI
Massachusetts Trust II, and HCRI Texas Properties, Ltd., as Landlord, and Tenant
entered into a certain Amended and Restated Master Lease Agreement (as amended,
the “Amended and Restated Master Lease”) as amended by a certain First Amendment
to Amended and Restated Master Lease Agreement (“First Amendment”) dated as of
June 22, 2005, as further amended by a certain Amendment of Master Lease and
Termination of Memorandum of Lease (“Second Amendment”) dated as of August 2,
2007, which removed the Fort Myers, Florida facility, which was sold to Tenant,
as further amended by a certain Third Amendment to Amended and Restated Master
Lease Agreement (“Third Amendment”) dated as of June 30, 2008, which, among
other things, [i] removed eighteen facilities known as the Tranche I Facilities,
as defined in and pursuant to a certain Asset Purchase Agreement (“Asset
Purchase Agreement”) by and among HCRI and certain affiliates (collectively,
“Seller”) and Tenant dated as of June 9, 2008, and [ii] added two facilities
pursuant to a certain Master Lease Roll Up Agreement dated on or about June 30,
2003.
 
C. Effective as of March 1, 2007, HCRI, HCRI-LA and Senior Living Properties,
LLC, entered into a certain Amended and Restated Master Lease Agreement
(“Summerville Lease”) for the Summerville Facilities (hereinafter defined).
 
D. Pursuant to the Asset Purchase Agreement, Seller agreed to convey to Tenant
certain facilities, including those listed in Schedule 2 hereto (the “Tranche 2
Facilities”), at a closing (“Tranche 2 Closing”) to occur no earlier than
October 1, 2008, and no later than December 31, 2008.  Upon the Tranche 2
Closing, the Tranche 2 Facilities are to be removed from the Lease.
 

 
 

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E. Pursuant to the Third Amendment, Landlord and Tenant agreed to amend the
Lease to add the Summerville Facilities to the Lease at the time of the
Tranche 2 Closing.
 
F. The Tranche 2 Closing occurred as of October 17, 2008.
 
G. Landlord and Tenant desire to amend the Amended and Restated Master Lease
[i] to remove the Tranche 2 Facilities, [ii] to add the three Summerville
Facilities pursuant to the Third Amendment, and [iii] to reflect the changes
made in the First Amendment, Second Amendment and Third Amendment.  This Lease
amends, restates and replaces the Amended and Restated Master Lease in its
entirety.
 
H. Landlord desires to lease the Leased Property, as hereinafter defined, to
Tenant and Tenant desires to lease the Leased Property from Landlord upon the
terms set forth in this Lease.
 
NOW, THEREFORE, Landlord and Tenant agree as follows:
 
ARTICLE 1:  LEASED PROPERTY, TERM AND DEFINITIONS
 
1.1           Leased Property.  Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Leased Property, subject, however, to the
Permitted Exceptions and subject to the terms and conditions of this Lease.
 
1.2           Indivisible Lease.  This Lease constitutes one indivisible lease
of the entire Leased Property.  The Leased Property constitutes one economic
unit and the Base Rent and all other provisions, including, but not limited to,
the provisions concerning the Contingent Payment Advance, have been negotiated
and agreed to based on a lease of all of the Leased Property as a single,
composite, inseparable transaction and would have been materially different had
separate leases or a divisible lease been intended.  Except as expressly
provided herein for specific, isolated purposes (and then only to the extent
expressly otherwise stated), all provisions of this Lease shall apply equally
and uniformly to all the Leased Property as one unit and any Event of Default
under this Lease is an Event of Default as to the entire Leased Property.  The
parties intend that the provisions of this Lease shall at all times be
construed, interpreted and applied so as to carry out their mutual objective to
create a single indivisible lease of all the Leased Property and, in particular
but without limitation, that for purposes of any assumption, rejection or
assignment of this Lease under the Bankruptcy Code, this is one indivisible and
non-severable lease and executory contract dealing with one legal and economic
unit which must be assumed, rejected or assigned as a whole with respect to all
(and only all) the Leased Property covered hereby.  The parties agree that the
existence of more than one Landlord under this Lease does not affect the
indivisible, non-severable nature of this Lease. The parties may amend this
Lease from time to time to include one or more additional Facility Properties as
part of the Leased Property and such future addition to the Leased Property
shall not in any way change the indivisible and non-severable nature of this
Lease and all of the foregoing provisions shall continue to apply in full force.
 
1.3           Term.  The initial term (“Initial Term”) of this Lease commenced
on the Effective Date and expires at 12:00 Midnight Eastern Time on
September 30, 2018 (the
 

 
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“Expiration Date”); provided, however, that Tenant has an option to renew the
Lease pursuant to Article 12.
 
1.4           Definitions.  Except as otherwise expressly provided, [i] the
terms defined in this section have the meanings assigned to them in this section
and include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; and
[iii] the words “herein”, “hereof”, and “hereunder” and similar words refer to
this Lease as a whole and not to any particular section.
 
“ADA” means the federal statute entitled Americans with Disabilities Act,
42 U.S.C. §12101, et seq.
 
                      “Affiliate” means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Tenant.  “Control” (and the correlative meanings of the terms “controlled by”
and “under common control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity.  An Affiliate of Tenant shall specifically exclude [i] Saratoga
Partners IV, L.P. (“Saratoga”); [ii] Daniel R. Baty; [iii] Columbia Pacific
Management, Inc.; [iv] Apollo Advisors, Inc.; and [v] any Affiliate of any of
the entities listed in clauses [i] through [iv].
 
                      “Affiliate Lease” means each lease now or hereafter made
between Landlord or any Landlord Affiliate and Tenant or any Affiliate (except
this Lease), as amended, modified, extended or renewed from time to time.
 
“Affiliate Tenant” means each tenant under an Affiliate Lease.
 
                      “Amended Commencement Date” means the Amended Effective
Date if such date is the first day of a month, and if it is not, the first day
of the first month following the Amended Effective Date.
 
“Amended Effective Date” means the date of this Lease.
 
“Amended Effective Date Landlord” means individually or collectively HCRI,
HCRI-Cold Spring and HCRI-LA.
 
“Annual Company Budget” means Company’s projection of its financial statement
for the next fiscal year (or the 12-month rolling forward period, if
applicable), which shall include the balance sheet, statement of income,
statement of cash flows, statement of shareholders’ equity and statement of
capital expenditures for the applicable period.
 
“Annual Facility Budget” means Tenant’s projection of the Facility Financial
Statement for the next fiscal year (or the 12-month rolling forward period, if
applicable).
 
“Annual Financial Statements” means [i] for Tenant, an audited balance sheet,
statement of income, and statement of cash flows for the most recent fiscal year
on an individual
 

 
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facility and consolidated basis and [ii] for each Facility, an unaudited
Facility Financial Statement for the most recent fiscal year.
 
“Average Daily Census” means the number determined by dividing the total
resident days for a Facility during a specific month by the actual number of
days contained in that month.
 
“Bankruptcy Code” means the United States Bankruptcy Code set forth in 11 U.S.C.
§101 et. seq., as amended from time to time.
 
“Base Price” means an amount equal to the greater of [i] Total Investment
Amount; or [ii] the sum of [a] the Total Investment Amount plus [b] 50% of the
difference between the Fair Market Value at the time of the option exercise and
the sum of [I] the Investment Amount and [II] $25,800,000.00 less any Contingent
Payment Advance.
 
“Base Rent” has the meaning set forth in §2.1, as increased from time to time
pursuant to §2.2.
 
“Business Day” means any day other than a Saturday, Sunday, or national holiday.
 
“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.
 
“Closing” means the closing of the lease of the Leased Property to Tenant.
 
“Collateral” has the meaning set forth in §24.1.
 
“Commencement Date” means April 1, 2002.
 
“Commitment” means the Commitment Letter for the Lease dated August 15, 2003 as
modified by the Amended and Restated Project Approval Letter dated April 27,
2005.
 
“Company” means Tenant.
 
“Contingent Payment Advance” means any advance of funds by Landlord to Tenant
pursuant to Article 17.
 
“Contingent Payment Amount” means any payment by Landlord pursuant to the terms
of this Lease.
 
“CPI” means the United States Department of Labor, Bureau of Labor Statistics
Revised Consumer Price Index for All Urban Consumers (1982-1984=100), U.S. City
Average, All Items, or, if that index is not available at the time in question,
the index designated by such Department as the successor to such index, and if
there is no index so designated, an index for an area in the United States that
most closely corresponds to the entire United States, published by such
Department, or if none, by any other instrumentality of the United States.
 

 
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“Dayton Facility” means Summerville at Dayton in Dayton, Ohio.
 
“Default Rent” has the meaning set forth in §8.6.
 
“Disbursing Agreement” means any Construction Disbursing Agreement between
Landlord and Tenant setting forth the terms and conditions pursuant to which
Landlord shall make Contingent Payments to or for the benefit of Tenant for
certain Project Improvements and any amendments thereto or substitutions and
replacements therefore.
 
“Early Option” has the meaning set forth in §13.2.6.
 
“Early Option Price” has the meaning set forth in §13.2.6.
 
“Effective Date” means March 28, 2002.
 
“Environmental Laws” means all federal, state, and local laws, ordinances and
policies the purpose of which is to protect human health and the environment, as
amended from time to time, including, but not limited to, [i] CERCLA; [ii] the
Resource Conservation and Recovery Act; [iii] the Hazardous Materials
Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic
Substances Control Act; [vii] the Occupational Safety and Health Act; [viii] the
Safe Drinking Water Act; and [ix] analogous state laws and regulations.
 
“Event of Default” has the meaning set forth in §8.1.
 
“Expiration Date” has the meaning set forth in §1.3.
 
“Facility” means each facility located on a portion of the Land, including the
Facility Property associated with such Facility.  References in this Lease to
“the Facility” shall mean each Facility individually unless expressly stated
otherwise.
 
“Facility Financial Statement” means a financial statement for each Facility
which shall include the balance sheet, statement of income, statement of cash
flows, statement of shareholders’ equity, occupancy census data (including payor
mix), statement of capital expenditures and a comparison of the actual financial
data versus the Annual Facility Budget for the applicable period.
 
“Facility Name” means the name under which a Facility has done business during
the Term.  The Facility Name in use by each Facility on the Amended Effective
Date is set forth on the attached Exhibit C.
 
“Facility Property” means the portion of the Land on which a Facility is
located, the legal description of which is set forth beneath the applicable
Facility Name on Exhibit A, the Improvements on such portion of the Land, the
Related Rights with respect to such portion of the Land, and Landlord’s Personal
Property with respect to such Facility.
 
“Facility State” means the State in which a respective Facility is located.
 

 

 
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“Facility States” means, collectively, the States in which the Leased Property
is located.
 
“Facility Uses” means the uses relating to the operation of a Facility as a
facility of the type and operating the number of beds and units set forth on
Exhibit C with respect to such Facility.
 
“Fair Market Value” has the meaning set forth in §13.1.1.
 
“Financial Statements” means [i] the annual, quarterly and year to date
financial statements of Tenant; and [ii] any operating statements that were
submitted to Landlord prior to the Amended Effective Date.
 
“Fixtures” means all permanently affixed equipment, machinery, fixtures and
other items of real and/or personal property (excluding Landlord’s Personal
Property), including all components thereof, now and hereafter located in, on or
used in connection with, and permanently affixed to or incorporated into the
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, built-in oxygen and vacuum systems, towers and other
devices for the transmission of radio, television and other signals, all of
which, to the greatest extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto.
 
“General Additional Rent” has the meaning set forth in §2.3.1.
 
“Government Authorizations” means all permits, licenses, approvals, consents,
and authorizations required to comply with all Legal Requirements, including,
but not limited to, [i] zoning permits, variances, exceptions, special use
permits, conditional use permits, and consents; [ii] the permits, licenses,
provider agreements and approvals required for licensure and operation of each
Facility in accordance with its respective Facility Uses and, if applicable,
certified as a provider under the federal Medicare and state Medicaid programs;
[iii] environmental, ecological, coastal, wetlands, air, and water permits,
licenses, and consents; [iv] curb cut, subdivision, land use, and planning
permits, licenses, approvals and consents; [v] building, sign, fire, health, and
safety permits, licenses, approvals, and consents; and [vi] architectural
reviews, approvals, and consents required under restrictive covenants.
 
“Guarantor” means Summerville at Kenner, L.L.C., Summerville at Dayton LLC, and
Summerville at Outlook Manor LLC, individually and collectively.
 
“Guaranty” means the Unconditional and Continuing Lease Guaranty dated as of
October 17, 2008, executed by Summerville Senior Living, Inc., Summerville at
Kenner, L.L.C., Summerville at Dayton LLC, and Summerville at Outlook Manor LLC,
as guarantor, in favor of the Amended Effective Date Landlord, to guarantee
payment and performance of the Lease Obligations and any amendments thereto or
substitutions or replacements therefor.
 

 
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“Hazardous Materials” means any substance [i] the presence of which poses a
hazard to the health or safety of persons on or about the Land, including, but
not limited to, asbestos containing materials; [ii] which requires removal or
remediation under any Environmental Law, including, without limitation, any
substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic, including, but not limited to, any
substance within the meaning of “hazardous substance”, “hazardous material”,
“hazardous waste”, “toxic substance”, “regulated substance”, “solid waste”, or
“pollutant” as defined in any Environmental Law.
 
“HCRI” means Health Care REIT, Inc., a corporation organized under the laws of
the State of Delaware.
 
“HCRI Landlord” means HCRI-Cold Spring and HCRI-LA.
 
“HIPDB” means the Healthcare Integrity and Protection Data Bank maintained by
the Department of Health and Human Services.
 
“Impositions” has the meaning set forth in §3.2.
 
“Improvements” means all buildings, structures, Fixtures and other improvements
of every kind on any portion of the Land, including, but not limited to, alleys,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures, now or
hereafter situated upon any portion of the Land.
 
“Initial Term” has the meaning set forth in §1.3.
 
“Investment Advance” means any advance of funds by Landlord to Tenant pursuant
to the terms of this Lease.
 
“Investment Advance Amount” means the amount of any Investment Advance.
 
“Investment Amount” is an aggregate concept and means the sum of the Investment
Advance Amounts outstanding at the applicable time.  As of the Amended Effective
Date, the Investment Amount is as indicated on the Rent Schedule attached as
Schedule 1 hereto.
 
“Land” means the real property described in Exhibit A attached hereto.
 
“Landlord” means each Amended Effective Date Landlord during the time period
that such entity is the fee owner of any portion of the Land or, in the case of
the Rocky Hill Facility, during the time period that such entity is the tenant
under the Rocky Hill Ground Lease and is the fee owner of the improvements
located on the Rocky Hill Land.  If an Amended Effective Date Landlord is no
longer a fee owner of the Land or a tenant under the Rocky Hill Ground Lease, as
applicable, then from and after that date, that entity will no longer be a
Landlord under the terms hereof and its successor (whether by assignment or by
operation of law) will be a Landlord under the terms hereof without the need for
any amendment to this document.
 

 
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“Landlord Affiliate” means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with
Landlord.  “Control” (and the correlative meanings of the terms “controlled by”
and “under common control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity.
 
“Landlord’s Personal Property” means all Personal Property owned by Landlord on
the Amended Effective Date and located at the Facility, including, without
limitation, all personal property listed on the attached Exhibit D, together
with any and all replacements thereof, and all Personal Property that pursuant
to the terms of this Lease becomes the property of Landlord during the Term.
 
“Lease” means this Second Amended and Restated Master Lease Agreement, as
further amended and/or restated from time to time.
 
“Lease Documents” means this Lease and all documents executed by Landlord and
Tenant relating to this Lease or the Facility.
 
“Lease Payments” means the sum of the Base Rent payments (as increased from time
to time) for the applicable period.
 
“Lease Year” means each consecutive period of 365 or 366 days throughout the
Term.  The first Lease Year commences on the Commencement Date and expires on
the day before the first anniversary of the Commencement Date.
 
“Leased Property” means all of the Land, Improvements, Related Rights and
Landlord’s Personal Property.
 
“Legal Requirements” means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of the Facility by Tenant for the Facility
Uses, including, but not limited to, [i] zoning, building, fire, health, safety,
sign, and subdivision regulations and codes; [ii] certificate of need laws (if
applicable); [iii] licensure to operate as each Facility in accordance with its
respective Facility Uses; [iv] Medicare and Medicaid certification requirements
(if applicable); [v] the ADA; [vi] any Environmental Laws; and
[vii] requirements, conditions and standards for participation in third-party
payor insurance programs (if applicable).
 
“Louisiana Facility” means Summerville at Kenner in Kenner, Louisiana.
 
“Material Obligation” means [i] any indebtedness with respect to any critical
care equipment and for all other equipment any indebtedness in excess of
$250,000.00 at the Facility secured by a security interest in or a lien, deed of
trust or mortgage on any of the Leased Property (or any part thereof, including
any Personal Property) and any agreement relating thereto; [ii] any obligation
or agreement that is material to the construction or operation of the Facility
or that is material to Tenant’s business or financial condition and where a
breach
 

 
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thereunder, if not cured within any applicable cure period, would have a
material adverse affect on the financial condition of Tenant or the results of
operations at the Facility; [iii] any unsecured indebtedness or lease of Tenant
or Subtenant that has an outstanding principal balance or obligation of at least
$1,000,000.00 and any agreement relating thereto; and [iv] any indebtedness or
lease of Subtenant or of any other party that has been guaranteed by Subtenant,
other than this Lease, that has an outstanding principal balance or obligation
of at least $250,000.00.
 
“Modified Offer” has the meaning set forth in §13.1.
 
“Modified Opportunity Notice” has the meaning set forth in §13.1.
 
“Negotiation Period” has the meaning set forth in §13.1.1.1.
 
“Net Operating Income” means the pre-tax net income of Tenant or Subtenant plus
[i] the amount of the provision for depreciation and amortization; plus [ii] the
amount of the provision for interest and lease payments, if any; plus [iii] the
amount of the provision for Rent payments; plus [iv] the amount of the provision
for management fees.
 
“Obligor Group Obligations” means all payment and performance obligations of
Tenant and Subtenant to Landlord or any Landlord Affiliate, including, but not
limited to, all obligations under this Lease, any loans extended to Tenant or
Subtenant by Landlord or any Landlord Affiliate and all documents executed by
Tenant or Subtenant in favor of Landlord or any Landlord Affiliate in connection
with this Lease, any loan or any other obligation.
 
“Offer” has the meaning set forth in §13.1.
 
“Opportunity Notice” has the meaning set forth in §13.1.
 
“Opportunity Transaction” has the meaning set forth in §13.1.
 
“Option Price” has the meaning set forth in §13.2.1.
 
“Option to Purchase” has the meaning set forth in §13.2.
 
“Organization State” means the State in which an entity is organized.
 
“Organizational Documents” means [i] for a corporation, its Articles of
Incorporation certified by the Secretary of State of the Organization State, as
amended to date, and its Bylaws certified by such entity, as amended to date;
[ii] for a partnership, its Partnership Agreement certified by such entity, as
amended to date, and the Partnership Certificate, certified by the appropriate
authority (if applicable), as amended to date; and [iii] for a limited liability
company, its Articles of Organization certified by the Secretary of State of the
Organization State, as amended to date, and its Operating Agreement certified by
such entity, as amended to date.
 

 
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“Periodic Financial Statements” means [i] for Tenant, an unaudited balance sheet
and statement of income for the most recent quarter; and [ii] for the Facility,
an unaudited Facility Financial Statement for the most recent month.
 
“Permitted Exceptions” means all easements, liens, encumbrances, restrictions,
agreements and other title matters existing as of the Amended Effective Date,
including, without limitation, the exceptions to title set forth on Exhibit B
attached hereto, and any sublease of any portion of the Leased Property made in
complete accordance with Article 18.
 
“Permitted Liens” means [i] liens granted to Landlord; [ii] liens customarily
incurred by Tenant or Subtenant in the ordinary course of business for items not
delinquent, including mechanic’s liens and deposits and charges under worker’s
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Lease; [v] the Permitted Exceptions; and [vi] purchase
money financing and capitalized equipment leases for the acquisition of personal
property provided, however, that Landlord obtains a nondisturbance agreement
from the purchase money lender or equipment lessor in form and substance as may
be satisfactory to Landlord if the original cost of the equipment exceeds
$250,000.00 per Facility.
 
“Personal Property” means all machinery, equipment, furniture, furnishings,
movable walls or partitions, computers (and all associated software), trade
fixtures and other personal property (but excluding consumable inventory and
supplies owned by Tenant) used in connection with the Leased Property, together
with all replacements and alterations thereof and additions thereto, except
items, if any, included within the definition of Fixtures or Improvements.
 
“Portfolio Cash Flow” has the meaning set forth in §15.7.1.
 
“Portfolio Coverage Ratio” has the meaning set forth in §15.7.1.
 
“Pro Forma Statement” means a financial forecast for the Facility for the next
five-year period prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
 
“Purchase Notice” has the meaning set forth in §13.2.
 
“Qualified Capital Expenditures” means the expenditures capitalized on the books
of Tenant or Subtenant for any of the following:  replacement of furniture,
fixtures and equipment, including refrigerators, ranges, major appliances,
bathroom fixtures, doors (exterior and interior), central air conditioning and
heating systems (including cooling towers, water chilling units, furnaces,
boilers and fuel storage tanks) and replacement of siding; roof replacements,
including replacements of gutters, downspouts, eaves and soffits; repairs and
replacements of plumbing and sanitary systems; overhaul of elevator systems;
repaving, resurfacing and sealcoating of sidewalks, parking lots and driveways;
repainting of entire building exterior and normal maintenance and repairs needed
to maintain the quality and condition of the Facility in the market in which it
operates, but excluding Alterations.
 

 
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“Receivables” means [i] all of Tenant’s or Subtenant’s rights to receive payment
for providing resident care and services at the Facility as set forth in any
accounts, contract rights, and instruments, and [ii] those documents, chattel
paper, inventory proceeds, provider agreements, participation agreements, ledger
sheets, files, records, computer programs, tapes, and agreements relating to
Tenant’s or Subtenant’s rights to receive payment for providing resident care
services at the Facility.
 
“Related Rights” means all easements, rights (including bed operating rights)
and appurtenances relating to the Land and the Improvements.
 
“Renewal Date” means the first day of each Renewal Term.
 
“Renewal Option” has the meaning set forth in §12.1.
 
“Renewal Term” has the meaning set forth in §12.1.
 
“Rent” means Base Rent, General Additional Rent and Default Rent.
 
“Rent Schedule” means the schedule issued by Landlord to Tenant showing the Base
Rent to be paid by Tenant pursuant to the terms of this Lease, as such schedule
is amended from time to time by Landlord.  The Rent Schedule as of the Amended
Effective Date, reflecting the Base Rent that has been due and payable under the
Lease since the Commencement Date, is attached hereto as Schedule 1.
 
“Replacement Operator” has the meaning set forth in §15.9.1.
 
“Right of First Opportunity Event” has the meaning set forth in §13.1.
 
“Right of First Refusal Event” has the meaning set forth in §13.1.
 
“Right of First Refusal Notice” has the meaning set forth in §13.1.
 
“Rocky Hill Facility” means that certain facility located in Rocky Hill,
Connecticut.
 
“Rocky Hill Ground Lease” means that certain ground lease dated as of
February 26, 1996, for the Rocky Hill Land by and between LM Rocky Hill Land
Holding Limited Partnership, as landlord, and HCRI-Cold Spring, as tenant, as
successor in interest to Tenant, as successor in interest to LM Rocky Hill
Assisted Living Limited Partnership (“LM Assisted”), as amended pursuant to the
Addendum to Ground Lease dated as of December 31, 1997 and, as further amended
pursuant to the Amendment to Ground Lease dated as of June 30, 2003, and
identified as a “Permitted Exception” on Exhibit B-3 hereto.
 
“Rocky Hill Lease” means that certain Amended and Restated Lease Agreement dated
as of February 26, 1996, between HCRI-Cold Spring, as lessor/sublessor, as
successor in interest by assignment to LM Assisted, and Tenant, as
lessee/sublessee, as amended.
 

 
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“Rocky Hill Land” means the portion of the Land on which the Rocky Hill Facility
is located.
 
“Secured Party” has the meaning set forth in §24.1.
 
“Seller” means each person or entity that conveyed title to a Facility to
Landlord.
 
“Sublease” means, individually and collectively, the sublease with respect to
each Facility between Tenant and Subtenant, as the same may be amended or
modified from time to time with the consent of Landlord.  References in this
Lease to “Sublease” shall mean each sublease individually and shall relate to
the respective Facility to which such sublease relates unless expressly stated
otherwise.
 
“Subtenant” means the entity identified on Exhibit C that subleases the Facility
from Tenant and is the licensed operator of its respective Facility as shown on
Exhibit C, individually and collectively.  References in this Lease to
“Subtenant” shall mean each Subtenant individually and shall relate to such
Subtenant’s respective Facility unless expressly stated otherwise.
 
“Summerville Facilities” means [i] Summerville at Kenner in Kenner, Louisiana,
Summerville at Outlook Manor in Westerville, Ohio and Summerville at Dayton, in
Dayton, Ohio prior to the exercise of the Early Option and the closing of the
purchase of the Summerville at Dayton facility pursuant to the terms thereof and
[ii] Summerville at Kenner in Kenner, Louisiana and Summerville at Outlook Manor
in Westerville, Ohio after the exercise of the Early Option and the closing of
the purchase of the Summerville at Dayton facility pursuant to the terms
thereof.
 
“Summerville Fair Market Value” has the meaning set forth in §13.2.2.
 
“Summerville Investment Amount” is an aggregate concept and means the sum of the
Investment Advance Amounts based on the Summerville Facilities.  As of the
Amended Effective Date, the Summerville Investment Amount is $27,019,834.76.  If
Tenant exercises its Early Option, the Summerville Investment Amount will
decrease by the amount of the Early Option Price.
 
“Summerville Loan Amount” means $12,864,874.24.
 
“Tenant” has the meaning set forth in the introductory paragraph of this Lease.
 
“Term” means the Initial Term and each Renewal Term.
 
“Third-Party Sale” has the meaning set forth in §13.2.6.
 
“Total Investment Amount” means the Investment Amount plus any Contingent
Payment Advance.
 
“Transaction Documents” has the meaning set forth in §13.1.
 

 
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1.5           Landlord As Agent.  With respect to its respective Facility, each
HCRI Landlord appoints HCRI as the agent and lawful attorney-in-fact of such
HCRI Landlord to act for such HCRI Landlord for all purposes and actions of
Landlord under this Lease and the other Lease Documents.  All notices, consents,
waivers and all other documents and instruments executed by HCRI pursuant to the
Lease Documents from time to time and all other actions of HCRI as Landlord
under the Lease Documents shall be binding upon such HCRI Landlord.  All Rent
payable under this Lease shall be paid to HCRI.
 
1.6           Rocky Hill Ground Lease.
 
1.6.1                      General.  Notwithstanding any other provision hereof
to the contrary, Tenant acknowledges that Landlord does not possess a fee simple
interest in the Rocky Hill Land.  Instead, Landlord’s interest in the Rocky Hill
Land consists of a tenant’s interest under the Rocky Hill Ground
Lease.  Therefore, unless and until Landlord exercises the Option (as defined in
the Rocky Hill Ground Lease), Tenant’s interest in the Rocky Hill Land shall be
in the nature of a sublease, rather than a lease.  Except as expressly set forth
herein, the terms of this Lease shall apply to the sublease (or lease, in the
event of the exercise by Landlord of the Option) of the Rocky Hill Land to
Tenant.  Tenant acknowledges receipt of a copy of the Rocky Hill Ground
Lease.  Tenant acknowledges that Landlord has made no representation to Tenant
with respect to the terms of the Rocky Hill Ground Lease and that Tenant is
relying solely on its own review of the Rocky Hill Ground Lease with respect to
the terms, provisions and status of the Rocky Hill Ground Lease.
 
1.6.2                      Landlord Acceptance of Rocky Hill Ground Lease
Obligations.  Tenant acknowledges and agrees that Landlord previously accepted
an assignment of the Rocky Hill Ground Lease only as an accommodation to Tenant
and that, therefore, Tenant agrees to undertake the performance of all
obligations under the Rocky Hill Ground Lease other than those obligations, if
any, which are personal to Landlord and cannot be delegated to
Tenant.  Landlord’s agreement to continue to be obligated under the Rocky Hill
Ground Lease is being made in reliance upon the provisions hereof.
 
1.6.3                      Compliance with Rocky Hill Ground Lease; Rent
Payments Thereunder.
 
(a) Tenant’s Obligations.  In addition to its other obligations under this
Lease, Tenant hereby agrees to timely comply with each and every term applicable
to the tenant under the Rocky Hill Ground Lease without notice or demand
therefore by Landlord or the landlord under the Rocky Hill Ground Lease other
than those obligations, if any, which are personal to Landlord and cannot be
delegated to Tenant.  Without limiting the foregoing, Tenant acknowledges and
agrees that any and all amounts payable by the tenant under the terms of the
Rocky Hill Ground Lease, including rent, shall be the sole responsibility of
Tenant and shall be deemed included in the definition of “Impositions” as set
forth in this Lease.  Such amounts shall be in addition to all amounts payable
under this Lease.  Tenant shall deposit with Landlord the amount of the rent
required under the Rocky Hill Ground Lease.  Such sum shall be used by Landlord
for the timely payment of the rent due under the Rocky Hill Ground
Lease.  Tenant, on demand, shall pay to Landlord any additional funds necessary
to pay and discharge the obligations arising under the Rocky Hill Ground Lease,
except to the extent such obligations
 

 
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arise from a breach of the Rocky Hill Ground Lease which results from the acts
or omissions of Landlord.
 
(b) Landlord’s Obligations.  Landlord covenants, agrees and warrants to Tenant
that Landlord will [i] not take any actions or fail to take any actions that
Tenant is unable to take for Landlord, that would cause a default under the
Rocky Hill Ground Lease; and [ii] promptly deliver to Tenant copies of all
notices and other documents received or given by the lessor under the Rocky Hill
Ground Lease relating to a failure to comply with the terms of the Rocky Hill
Ground Lease.
 
1.6.4                      Termination or Expiration of Rocky Hill Ground
Lease.  If Landlord’s rights to the Rocky Hill Land are terminated under the
Rocky Hill Ground Lease, then the Rocky Hill Facility shall be deemed removed
from this Lease.  Nothing in this §1.6.4 shall cause the Base Rent payable
hereunder to be reduced nor the Investment Amount to be deemed reduced unless
either [i] the termination of the Rocky Hill Ground Lease is due to the acts or
omissions of Landlord, in which case the Base Rent shall be reduced by the
Investment Amount applicable to the Rocky Hill Facility multiplied by the then
applicable Rent Rate of Return as set forth in Schedule 1 or [ii] the
termination of the Rocky Hill Ground Lease is as a result of damage to or
destruction or a taking of the Rocky Hill Land and Landlord is compensated for
its investment in the Rocky Hill Facility as a result thereof, in which case the
Base Rent shall be reduced by the reduction in the Investment Amount resulting
therefrom multiplied by the then applicable Rent Rate of Return as set forth in
Schedule 1.
 
1.6.5                      Remedies.  In addition to the remedies provided for
in §8.2 hereof, Landlord shall have the right, upon the occurrence of an Event
of Default under this Lease or any Lease Document, to accelerate the payment of
any or all amounts then or thereafter payable by the tenant under the terms of
the Rocky Hill Ground Lease, including rent.
 
1.7           Termination of the Summerville Lease.  As of the Amended Effective
Date, the Summerville Lease shall be and hereby is terminated, and HCRI, HCRI-LA
and Senior Living Properties, LLC shall execute and record memoranda of
termination of the Summerville Lease to reflect the termination of the
Summerville Lease, and Tenant and the Amended Effective Date Landlord shall
execute and record memoranda of lease to evidence the lease of the Summerville
Facilities under this Lease.
 
ARTICLE 2:  RENT
 
2.1           Base Rent.  Tenant shall pay Landlord base rent (“Base Rent”) in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Amended Commencement Date.  If the
Amended Effective Date is not the first day of a month, Tenant shall pay
Landlord Base Rent on the Amended Effective Date for the partial month, i.e.,
for the period commencing on the Amended Effective Date and ending on the day
before the Amended Commencement Date.  The Base Rent payable for the Initial
Term is as shown on the Rent Schedule.  The Base Rent for each Renewal Term will
be determined in accordance with §12.2.
 

 
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2.2           Base Rent Adjustments.
 
2.2.1                      Base Rent Adjustments – Additional Investment
Advances.  If Landlord makes an Investment Advance after the Amended Effective
Date, the Base Rent will be increased effective on the Investment Advance Date
based upon the applicable rate of return in effect on the Investment Advance
Date as set forth on Schedule 1.  Until Tenant receives a revised Rent Schedule
from Landlord, Tenant shall for each month [i] continue to make installments of
Base Rent according to the Rent Schedule in effect on the day before the
Investment Advance Date; and [ii] within 10 days following Landlord’s issuance
of an invoice, pay the difference between the installment of Base Rent that
Tenant paid to Landlord for such month and the installment of Base Rent actually
due to Landlord for such month as a result of the Investment Advance.  On the
first day of the month following receipt of the revised Rent Schedule, Tenant
shall pay the monthly installment of Base Rent specified in the revised Rent
Schedule.
 
2.3           Additional Rent.
 
2.3.1                      General Additional Rent.  In addition to Base Rent,
Tenant shall pay all other amounts, liabilities, obligations and Impositions
which Tenant assumes or agrees to pay under this Lease including any fine,
penalty, interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the “General Additional Rent”).
 
2.4           Place of Payment of Rent.  Tenant shall make all payments of Rent
to Landlord by electronic wire transfer in accordance with the wiring
instructions set forth in Exhibit J attached hereto, subject to change in
accordance with other written instructions provided by Landlord from time to
time.
 
                      2.5           Net Lease.  This Lease shall be deemed and
construed to be an “absolute net lease”, and Tenant shall pay all Rent and other
charges and expenses in connection with the Leased Property throughout the Term,
without abatement, deduction, recoupment or set-off.  Landlord shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of nonpayment of the Rent.
 
                      2.6           No Termination, Abatement, Etc. Except as
otherwise specifically provided in this Lease, Tenant shall remain bound by this
Lease in accordance with its terms.  Tenant shall not, without the consent of
Landlord, modify, surrender or terminate the Lease, nor seek nor be entitled to
any abatement, deduction, deferment or reduction of Rent, or set-off or
recoupment against the Rent.  Except as expressly provided in this Lease, the
obligations of Landlord and Tenant shall not be affected by reason of [i] any
damage to, or destruction of, the Leased Property or any part thereof from
whatever cause or any Taking (as hereinafter defined) of the Leased Property or
any part thereof; [ii] the lawful or unlawful prohibition of, or restriction
upon, Tenant’s use of the Leased Property, or any part thereof, the interference
with such use by any person, corporation, partnership or other entity, or by
reason of eviction by paramount title; [iii] any claim which Tenant has or might
have against Landlord or by reason of any default or breach of any warranty by
Landlord under this Lease or any other agreement between Landlord and Tenant, or
to which Landlord and Tenant are parties; [iv] any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or
 

 
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other proceeding affecting Landlord or any assignee or transferee of Landlord;
or [v] any other cause, whether similar or dissimilar to any of the foregoing,
other than a discharge of Tenant from any such obligations as a matter of
law.  Except as otherwise specifically provided in this Lease, Tenant hereby
specifically waives all rights, arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law [a] to modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof; or [b] entitling Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Tenant hereunder.  The
obligations of Landlord and Tenant hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.  Nothing in this §2.6 shall be construed to limit any right which
Tenant may have to bring a separate action against Landlord for any claim which
Tenant may have or allege to have against Landlord.
 
2.7           Transaction Fee.  Tenant has paid transaction fees as required by
Landlord prior to the Amended Effective Date.  There is no transaction fee
payable as of the Amended Effective Date.
 
ARTICLE 3:  IMPOSITIONS AND UTILITIES
 
3.1           Payment of Impositions.  Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with §3.7.  Tenant shall deliver to Landlord [i] not more than five
days after the due date of each Imposition, copies of the invoice for such
Imposition and the check delivered for payment thereof; and [ii] not more than
30 days after the due date of each Imposition, a copy of the official receipt
evidencing such payment or other proof of payment satisfactory to
Landlord.  Tenant’s obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof.  Tenant, at its expense, shall prepare and file
all tax returns and reports in respect of any Imposition as may be required by
governmental authorities.  Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default shall have occurred hereunder and be
continuing and if Tenant shall have paid all Impositions due and payable as of
the date of the refund.  Landlord shall be entitled to any refund from any
taxing authority if an Event of Default has occurred and is continuing.  Any
refunds retained by Landlord due to an Event of Default shall be applied as
provided in §8.8.  Landlord and Tenant shall, upon request of the other, provide
such data as is maintained by the party to whom the request is made with respect
to the Leased Property as may be necessary to prepare any required returns and
reports.  In the event governmental authorities classify any property covered by
this Lease as personal property, Tenant shall file all personal property tax
returns in such jurisdictions where it may legally so file.  Landlord, to the
extent it possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property.  Where Landlord is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
 

 
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protest.  Tenant may, at Tenant’s option and at Tenant’s sole cost and expense,
protest, appeal or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant’s expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action.  Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within
30 days after receipt of billings accompanied by copies of a bill therefore and
payments thereof which identify the personal property with respect to which such
payments are made.  Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant as of the termination date, whether or not such Imposition is imposed
before or after such termination, and Tenant’s obligation to pay its prorated
share thereof shall survive such termination.
 
3.2           Definition of Impositions.  “Impositions” means, collectively,
[i] taxes (including, without limitation, all capital stock and franchise taxes
of Landlord imposed by the Facility State or any governmental entity in the
Facility State due to this lease transaction or Landlord’s ownership of the
Leased Property and the income arising therefrom, or due to Landlord being
considered as doing business in the Facility State because of Landlord’s
ownership of the Leased Property or lease thereof to Tenant), all real estate
and personal property ad valorem, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes;
[ii] assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed with the Term); [iii] ground
rents, water, sewer or other rents and charges, excises, tax levies, and fees
(including, without limitation, license, permit, inspection, authorization and
similar fees); [iv] all taxes imposed on Tenant’s operations of the Leased
Property, including, without limitation, employee withholding taxes, income
taxes and intangible taxes; [v] all taxes imposed by the Facility State or any
governmental entity in the Facility State with respect to the conveyance of the
Leased Property by Landlord to Tenant or Tenant’s designee, including, without
limitation, conveyance taxes; and [vi] all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon [a] Landlord or Landlord’s interest in the Leased Property or any part
thereof; [b] the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use by Tenant of the Leased Property
or any part thereof.  Tenant shall not, however, be required to pay any capital
gains tax or any tax based on net income imposed on Landlord by any governmental
entity other than the capital stock and franchise taxes described in clause [i]
above.
 
3.3           Escrow of Impositions.  Tenant shall deposit with Landlord on the
first day of each month a sum equal to 1/12th of the Impositions assessed
against the Leased Property for the preceding tax year for real estate taxes,
which sums shall be used by Landlord toward payment of such Impositions.  In
addition, if an Event of Default occurs and while it remains uncured, Tenant
shall, at Landlord’s election, deposit with Landlord on the first day of each
month a sum equal to 1/12th of the Impositions assessed against the Leased
Property for the
 

 
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preceding tax year other than real estate taxes, which sums shall be used by
Landlord toward payment of such Impositions.  Tenant, on demand, shall pay to
Landlord any additional funds necessary to pay and discharge the obligations of
Tenant pursuant to the provisions of this section.  The receipt by Landlord of
the payment of such Impositions by and from Tenant shall only be as an
accommodation to Tenant, the mortgagees, and the taxing authorities, and shall
not be construed as rent or income to Landlord, Landlord serving, if at all,
only as a conduit for delivery purposes.
 
3.4           Utilities.  Tenant shall pay, as Additional Rent, all taxes,
assessments, charges, deposits, and bills for utilities, including, without
limitation, charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term.  If an Event of Default occurs and
while it remains uncured, Tenant shall, at Landlord’s election, deposit with
Landlord on the first day of each month a sum equal to 1/12th of the amount of
the annual utility expenses for the preceding Lease Year, which sums shall be
used by Landlord to pay such utilities.  Tenant shall, on demand, pay to
Landlord any additional amount needed to pay such utilities.  Landlord’s receipt
of such payments shall only be an accommodation to Tenant and the utility
companies and shall not constitute rent or income to Landlord.  Absent
circumstances beyond Tenant’s reasonable control, Tenant shall at all times
maintain that amount of heat necessary to ensure against the freezing of water
lines.  Tenant hereby agrees to indemnify and hold Landlord harmless from and
against any liability or damages to the utility systems and the Leased Property
that may result from Tenant’s failure to maintain sufficient heat in the
Improvements absent circumstances beyond Tenant’s reasonable control.
 
3.5           Discontinuance of Utilities.  Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant’s obligations under this Lease.
 
3.6           Business Expenses.  Tenant shall promptly pay all expenses and
costs incurred in connection with the operation of the Facility on the Leased
Property, including, without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and supplies.
 
3.7           Permitted Contests.  Tenant, on its own or on Landlord’s behalf
(or in Landlord’s name), but at Tenant’s expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a Legal Requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of $50,000.00, Tenant shall deliver to
Landlord and its counsel an opinion of Tenant’s counsel to
 

 
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the effect set forth in clauses [i], [ii] and [iii], to the extent applicable;
[v] in the case of a Legal Requirement and/or an Imposition, lien, encumbrance
or charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture of the affected Leased Property or the Rent by reason of such
nonpayment or noncompliance; provided, however, the provisions of this section
shall not be construed to permit Tenant to contest the payment of Rent (except
as to contests concerning the method of computation or the basis of levy of any
Imposition or the basis for the assertion of any other claim) or any other sums
payable by Tenant to Landlord hereunder; [vi] in the case of an insurance
requirement, the coverage required by Article 4 shall be maintained; and
[vii] if such contest be finally resolved against Landlord or Tenant, Tenant
shall, as Additional Rent due hereunder, promptly pay the amount required to be
paid, together with all interest and penalties accrued thereon, or comply with
the applicable Legal Requirement or insurance requirement.  Landlord, at
Tenant’s expense, shall execute and deliver to Tenant such authorizations and
other documents as may be reasonably required in any such contest, and, if
reasonably requested by Tenant or if Landlord so desires, Landlord shall join as
a party therein.  Tenant hereby agrees to indemnify and save Landlord harmless
from and against any liability, cost or expense of any kind that may be imposed
upon Landlord in connection with any such contest and any loss resulting
therefrom.
 
ARTICLE 4:  INSURANCE
 
4.1           Property Insurance.  At Tenant’s expense, Tenant shall maintain in
full force and effect a property insurance policy or policies insuring the
Leased Property against the following:
 
(a) Loss or damage commonly covered by a “Special Form” or “All Risk” policy
insuring against physical loss or damage to the Improvements and Personal
Property, including, but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2) and sinkholes
(if usually recommended in the area of the Leased Property).  The policy shall
be in the amount of the full replacement value (as defined in §4.5) of the
Improvements and Personal Property and shall contain a deductible amount
acceptable to Landlord.  Landlord shall be named as an additional insured.  The
policy shall include a stipulated value endorsement or agreed amount endorsement
and endorsements for contingent liability for operations of building laws,
demolition costs, and increased cost of construction.
 
(b) If applicable, loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
 
(c) Consequential loss of rents and income coverage insuring against all “All
Risk” or “Special Form” risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the first
nine months of reconstruction, and containing an endorsement for extended period
of indemnity of at least 90 days, and shall be written with a stipulated amount
of coverage if available at a reasonable premium.
 

 
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(d) If the Leased Property is located, in whole or in part, in a federally
designated 100-year flood plain area, flood insurance for the Improvements in an
amount equal to the lesser of [i] the full replacement value of the
Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.
 
(e) Loss or damage caused by the breakage of plate glass in commercially
reasonable amounts acceptable to Landlord.
 
(f) Loss or damage commonly covered by blanket crime insurance, including
employee dishonesty, loss of money orders or paper currency, depositor’s
forgery, and loss of property of patients accepted by Tenant for safekeeping, in
commercially reasonable amounts acceptable to Landlord.
 
4.2           Liability Insurance.  At Tenant’s expense, Tenant shall maintain
liability insurance against the following:
 
(a) Claims for personal injury or property damage commonly covered by
comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner’s protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.
 
(b) Claims for personal injury and property damage commonly covered by
comprehensive automobile liability insurance, covering all owned and non-owned
automobiles, with commercially reasonable amounts for bodily injury, property
damage, and for automobile medical payments acceptable to Landlord, but with a
combined single limit of not less than $5,000,000.00 per occurrence.
 
(c) Claims for personal injury commonly covered by medical malpractice insurance
in commercially reasonable amounts acceptable to Landlord.
 
(d) Claims commonly covered by worker’s compensation insurance for all persons
employed by Tenant on the Leased Property.  Such worker’s compensation insurance
shall be in accordance with the requirements of all applicable local, state, and
federal law.
 
4.3           Builder’s Risk Insurance.  In connection with any construction,
Tenant shall maintain in full force and effect a builder’s completed value risk
coverage (“Builder’s Risk Coverage”) of insurance in a nonreporting form
insuring against all “All Risk” or “Special Form” risk of physical loss or
damage to the Improvements, including, but not limited to, risk of loss from
fire and other hazards, collapse, transit coverage, vandalism, malicious
mischief, theft, earthquake (if Leased Property is in earthquake zone 1 or 2)
and sinkholes (if usually recommended in the area of the Leased Property).  The
Builder’s Risk Coverage shall include endorsements providing coverage for
building materials and supplies and temporary premises.  The Builder’s Risk
Coverage shall be in the amount of the full replacement value of the
Improvements and shall contain a deductible amount acceptable to
Landlord.  Landlord shall be
 

 
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named as an additional insured.  The Builder’s Risk Coverage shall include an
endorsement permitting initial occupancy.
 
4.4           Insurance Requirements.  The following provisions shall apply to
all insurance coverages required hereunder:
 
(a) The form and substance of all policies shall be subject to the approval of
Landlord, which approval will not be unreasonably withheld.
 
(b) The carriers of all policies shall have a Best’s Rating of “A” or better and
a Best’s Financial Category of XII or higher and shall be authorized to do
insurance business in the Facility State.
 
(c) Tenant shall be the “named insured” and Landlord shall be an “additional
insured” on each policy.
 
(d) Tenant shall deliver to Landlord certificates or policies showing the
required coverages and endorsements.  The policies of insurance shall provide
that the policy may not be canceled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days’ prior written
notice to Landlord.
 
(e) The policies shall contain a severability of interest and/or cross-liability
endorsement, provide that the acts or omissions of Tenant or Landlord will not
invalidate the coverage of the other party, and provide that Landlord shall not
be responsible for payment of premiums.
 
(f) All loss adjustment shall require the written consent of Landlord and
Tenant, as their interests may appear.
 
(g) At least 30 days prior to the expiration of each insurance policy, Tenant
shall deliver to Landlord a certificate showing renewal of such policy and
payment of the annual premium therefor and a current Certificate of Compliance
(in the form delivered at the time of Closing) completed and signed by Tenant’s
insurance agent.
 
4.5           Replacement Value.  The term “full replacement value” means the
actual replacement cost thereof from time to time, including increased cost of
construction endorsement, with no reductions or deductions.  Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement
value.  If Tenant makes any Permitted Alterations (as hereinafter defined) to
the Leased Property, Landlord may have such full replacement value redetermined
at any time after such Permitted Alterations are made, regardless of when the
full replacement value was last determined.
 
4.6           Blanket Policy.  Notwithstanding anything to the contrary
contained in this Article 4, Tenant may carry the insurance required by this
Article under a blanket policy of insurance, provided that the coverage afforded
Tenant will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all of the requirements of
this Lease.
 

 
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4.7           No Separate Insurance.  Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such additional insurance is
not prohibited by the existing policies of insurance.  Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional policy
or additional policies.
 
4.8           Waiver of Subrogation.  Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased Property,
which loss or damage is covered by valid and collectible insurance policies, to
the extent that such loss or damage is recoverable under such policies.  Said
mutual waiver shall be in addition to, and not in limitation or derogation of,
any other waiver or release contained in this Lease with respect to any loss or
damage to property of the parties hereto.  Inasmuch as the said waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of said mutual waivers, and
to have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said waivers, so long as
such endorsement is available at a reasonable cost.
 
4.9           Mortgages.  The following provisions shall apply if Landlord now
or hereafter places a mortgage on the Leased Property or any part
thereof:  [i] Tenant shall obtain a standard form of lender’s loss payable
clause insuring the interest of the mortgagee; [ii] Tenant shall deliver
evidence of insurance to such mortgagee; [iii] loss adjustment shall require the
consent of the mortgagee; and [iv] Tenant shall provide such other information
and documents as may be required by the mortgagee.
 
4.10           Escrows.  After an Event of Default occurs hereunder, Tenant
shall make such periodic payments of insurance premiums in accordance with
Landlord’s requirements after receipt of notice thereof from Landlord.
 
ARTICLE 5:  INDEMNITY
 
5.1           Tenant’s Indemnification.  Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord’s
and such successor’s and assign’s directors, officers, employees and agents from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys’ fees, court costs, and the costs set forth in §8.7) incurred in
connection with or arising from:  [i] the use or occupancy of the Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
 

 
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claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind, including, without limitation, any failure
to comply with any applicable requirements under the ADA; [v] any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; [vi] any construction, alterations, changes or demolition of the
Facility performed by or contracted for by Tenant or its employees, agents or
contractors; and [vii] any obligations, costs or expenses arising under any
Permitted Exceptions.  If any action or proceeding is brought against Landlord,
its employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant’s expense with counsel reasonably
satisfactory to Landlord.  All amounts payable to Landlord under this section
shall be payable on written demand and any such amounts which are not paid
within 10 days after demand therefor by Landlord shall bear interest at
Landlord’s rate of return as provided in the Commitment.  In case any action,
suit or proceeding is brought against Tenant by reason of any such occurrence,
Tenant shall use its commercially reasonable efforts to defend such action, suit
or proceeding.  Nothing in this §5.1 shall be construed as requiring Tenant to
indemnify Landlord with respect to Landlord’s own gross negligence or willful
misconduct.
 
5.1.1                      Notice of Claim.  Landlord shall notify Tenant in
writing of any claim or action brought against Landlord in which indemnity may
be sought against Tenant pursuant to this section.  Such notice shall be given
in sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes Tenant’s
defense of any such action.
 
5.1.2                      Survival of Covenants.  The covenants of Tenant
contained in this section shall remain in full force and effect after the
termination of this Lease until the expiration of the period stated in the
applicable statute of limitations during which a claim or cause of action may be
brought and payment in full or the satisfaction of such claim or cause of action
and of all expenses and charges incurred by Landlord relating to the enforcement
of the provisions herein specified.
 
5.1.3                      Reimbursement of Expenses.  Unless prohibited by law,
Tenant hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Lease.
 
5.2           Environmental Indemnity; Audits.  Tenant hereby indemnifies and
agrees to hold harmless Landlord, any successors to Landlord’s interest in this
Lease, and Landlord’s and such successors’ directors, officers, employees and
agents from and against any losses, claims, damages (including consequential
damages), penalties, fines, liabilities (including strict liability), costs
(including cleanup and recovery costs), and expenses (including expenses of
litigation and reasonable consultants’ and attorneys’ fees) incurred by Landlord
or any other indemnitee or assessed against any portion of the Leased Property
by virtue of any claim or lien by any governmental or quasi-governmental unit,
body, or agency, or any third party, for cleanup
 

 
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costs or other costs pursuant to any Environmental Law.  Tenant’s indemnity
shall survive the termination of this Lease.  Provided, however, Tenant shall
have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant’s occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns.  If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of such portion of the
Leased Property, in such form, scope and substance as specified by Landlord, at
Tenant’s expense.  Tenant shall, within 30 days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
any environmental audit, including, without limitation, reasonable attorneys’
fees and costs.
 
5.3           Limitation of Landlord’s Liability.  Landlord, its agents, and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant’s business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord’s control.
 
ARTICLE 6:  USE AND ACCEPTANCE OF PREMISES
 
6.1           Use of Leased Property.  Tenant shall use and occupy the Leased
Property exclusively for the Facility Uses specified for each Facility and for
all lawful and licensed ancillary uses, including the operation of an
Alzheimer’s Memory Loss Unit, provided Tenant complies with all applicable Legal
Requirements, and for no other purpose without the prior written consent of
Landlord.  Tenant or Subtenant, as the case may be, shall obtain and maintain
all approvals, licenses, and consents needed to use and operate the Leased
Property as herein permitted.  Landlord agrees that in the event Tenant or
Subtenant, as the case may be, has not obtained a license to operate the
Facility on the Amended Effective Date, Tenant shall be in compliance with this
section provided (i) Tenant has entered into a contractual arrangement with the
licenseholder, which contractual arrangement is in compliance with all Legal
Requirements, authorizing Tenant to operate the Facility; and (ii) Tenant
proceeds in a diligent manner to obtain a license to operate the
Facility.  Tenant shall deliver to Landlord complete copies of surveys,
examinations, certification and licensure inspections, compliance certificates,
and other similar reports issued to Tenant by any governmental agency within
10 Business Days after Tenant’s receipt of each item.
 
6.2           Acceptance of Leased Property.  Tenant acknowledges that
[i] Tenant and its agents have had an opportunity to inspect the Leased
Property; [ii] Tenant has found the Leased Property fit for Tenant’s use;
[iii] Landlord will deliver the Leased Property to Tenant in
 

 
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“as-is” condition; [iv] Landlord is not obligated to make any improvements or
repairs to the Leased Property; and [v] the roof, walls, foundation, heating,
ventilating, air conditioning, telephone, sewer, electrical, mechanical,
elevator, utility, plumbing, and other portions of the Leased Property are in
good working order.  Tenant waives any claim or action against Landlord with
respect to the condition of the Leased Property.  LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE
TO BE BORNE BY TENANT.
 
6.3           Conditions of Use and Occupancy.  Tenant agrees that during the
Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed
extrahazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the Board of Health, or other city,
state or federal authorities, free of all cost to Landlord; not permit any acts
to be done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof.  Landlord
shall have the right to have an annual inspection of the Leased Property
performed and Tenant shall pay an inspection fee of the lesser of $1,500.00 per
Facility or Landlord’s reasonable out-of-pocket expenses within 30 days after
receipt of Landlord’s invoice.
 
6.4           Tenant Solely Responsible.  Tenant specifically acknowledges that
it is solely responsible for the operation and maintenance of the Louisiana
Facility, and that Landlord, its agents and employees, have no responsibility
therefor.
 
6.5           Opportunity to Inspect.  TENANT ACKNOWLEDGES THAT IT HAS HAD THE
OPPORTUNITY TO INSPECT THE PREMISES OF THE LOUISIANA FACILITY AND, IN ACCORDANCE
WITH THE PROVISIONS OF LA. C.C. ARTICLE 2699, HEREBY SPECIFICALLY WAIVES ANY AND
ALL WARRANTIES PROVIDED BY THE PROVISIONS OF THE LOUISIANA CIVIL CODE TO THE
FULLEST EXTENT PERMITTED BY LAW.
 
ARTICLE 7:  MAINTENANCE AND MECHANICS’ LIENS
 
7.1           Maintenance.  Tenant shall maintain, repair, and replace the
Leased Property, including, without limitation, all structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, HVAC systems,
equipment, parking areas, sidewalks, water, sewer and gas connections, pipes and
mains.  Tenant shall pay, as Additional Rent, the full cost of maintenance,
repairs, and replacements.  Tenant shall maintain all drives, sidewalks, parking
areas, and lawns on or about the Leased Property in a clean and orderly
condition, free of accumulations of dirt, rubbish, snow and ice.  Tenant shall
at all times maintain, operate and otherwise manage the Leased Property on a
basis and in a manner consistent with the standards currently maintained by
Tenant at the Leased Property.  All repairs shall, to the extent reasonably
 

 
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achievable, be at least equivalent in quality to the original work or the
property to be repaired shall be replaced.  Tenant will not take or omit to take
any action the taking or omission of which might materially impair the value or
the usefulness of the Leased Property or any parts thereof for the Facility
Uses.  Tenant shall permit Landlord to inspect the Leased Property at all
reasonable times and on reasonable advance notice, and if Landlord has a
reasonable basis to believe that there are maintenance problem areas and gives
Tenant written notice thereof setting forth its concerns in reasonable detail,
Tenant shall deliver to Landlord a plan of correction within 10 Business Days
after receipt of the notice.  Tenant shall diligently pursue correction of all
problem areas within 60 days after receipt of the notice or such longer period
as may be necessary for reasons beyond its reasonable control such as shortage
of materials or delays in securing necessary permits, but not caused by lack of
diligence by Tenant, and, upon expiration of the 60-day period, shall deliver
evidence of completion to Landlord or an interim report evidencing Tenant’s
diligent progress towards completion and, at the end of the next 60-day period,
evidence of satisfactory completion.  Upon completion, Landlord shall have the
right to re-inspect the Facility and Tenant shall pay a re-inspection fee of
$750.00 per Facility plus Landlord’s reasonable out-of-pocket expenses within
30 days after receipt of Landlord’s invoice.  At each inspection of the Leased
Property by Landlord, the Facility employee in charge of maintenance shall be
available to tour the Facility with Landlord and answer questions.
 
7.2           Required Alterations.  Tenant shall, at Tenant’s sole cost and
expense, make any additions, changes, improvements or alterations to the Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant’s use, changes in the law,
ordinances, or governmental regulations, defects existing as of the date of this
Lease, or any other cause whatsoever.  All such additions, changes, improvements
or alterations shall be deemed to be Permitted Alterations and shall comply with
all laws requiring such alterations and with the provisions of §16.4.
 
7.3           Mechanic’s Liens.  Tenant shall have no authority to permit or
create a lien against Landlord’s interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord’s interest in the Leased Property against liens.  Tenant hereby agrees
to defend, indemnify, and hold Landlord harmless from and against any mechanic’s
liens against the Leased Property by reason of work, labor, services or
materials supplied or claimed to have been supplied on or to the Leased
Property.  Subject to Tenant’s right to contest the same in accordance with the
terms of this Lease, Tenant shall remove, bond-off, or otherwise obtain the
release of any mechanic’s lien filed against the Leased Property within 10 days
after notice of the filing thereof.  Tenant shall pay all expenses in connection
therewith, including, without limitation, damages, interest, court costs and
reasonable attorneys’ fees.
 
7.4           Replacements of Fixtures and Landlord’s Personal Property.  Tenant
shall not remove Fixtures and Landlord’s Personal Property from the Leased
Property except to replace the Fixtures and Landlord’s Personal Property with
other similar items of equal quality and value.  Items being replaced by Tenant
may be removed and shall become the property of Tenant and items replacing the
same shall be and remain the property of Landlord.  Tenant shall execute, upon
written request from Landlord, any and all documents necessary to evidence
 

 
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Landlord’s ownership of Landlord’s Personal Property and replacements
therefor.  Tenant may finance replacements for the Fixtures and Landlord’s
Personal Property by equipment lease or by a security agreement and financing
statement if, with respect to any financing of critical care equipment and with
respect to any other Personal Property having a value per Facility in excess of
$250,000.00, [i] Landlord has consented to the terms and conditions of the
equipment lease or security agreement; and [ii] the equipment lessor or lender
has entered into a nondisturbance agreement with Landlord upon terms and
conditions reasonably acceptable to Landlord, including, without limitation, the
following:  [a] Landlord shall have the right (but not the obligation) to assume
such security agreement or equipment lease upon the occurrence of an Event of
Default under this Lease; [b] the equipment lessor or lender shall notify
Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[c] Landlord shall have the right to assign its rights under the equipment
lease, security agreement, or nondisturbance agreement.  Tenant shall, within
30 days after receipt of an invoice from Landlord, reimburse Landlord for all
costs and expenses incurred in reviewing and approving the equipment lease,
security agreement, and nondisturbance agreement, including, without limitation,
reasonable attorneys’ fees and costs.
 
ARTICLE 8:  DEFAULTS AND REMEDIES
 
8.1           Events of Default.  The occurrence of any one or more of the
following shall be an event of default (“Event of Default”) hereunder without
any advance notice to Tenant unless specified herein:
 
(a) Tenant fails to pay in full any installment of Base Rent, any Additional
Rent or any other monetary obligation payable by Tenant under this Lease within
10 days after such payment is due.
 
(b) Tenant, Subtenant or Guarantor (where applicable) fails to comply with any
covenant set forth in Article 14, §§15.6, 15.7 or 15.8 of this Lease.
 
(c) Tenant fails to observe and perform any other covenant, condition or
agreement under this Lease to be performed by Tenant and [i] such failure
continues for a period of 30 days after written notice thereof is given to
Tenant by Landlord; or [ii] if, by reason of the nature of such default it
cannot be remedied within 30 days, Tenant fails to proceed with diligence
reasonably satisfactory to Landlord after receipt of the notice to cure the
default or, in any event, fails to cure such default within 60 days after
receipt of the notice.  The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection of
§8.1.
 
(d) Tenant or Subtenant abandons or vacates (except during a period of repair or
reconstruction after damage, destruction or a Taking) any Facility Property or
any material part thereof, ceases to operate any Facility, ceases to do business
or ceases to exist for any reason for any one or more days.
 
(e) [i] The filing by Tenant or Subtenant of a petition under the Bankruptcy
Code or the commencement of a bankruptcy or similar proceeding by Tenant,
Subtenant or Guarantor; [ii] the failure by Tenant, Subtenant or Guarantor
within 60 days to
 

 
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dismiss an involuntary bankruptcy petition or other commencement of a
bankruptcy, reorganization or similar proceeding against such party, or to lift
or stay any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operation at the Leased Property; [iii] the
entry of an order for relief under the Bankruptcy Code in respect of Tenant,
Subtenant or Guarantor; [iv] any assignment by Tenant, Subtenant or Guarantor
for the benefit of its creditors; [v] the entry by Tenant, Subtenant or
Guarantor into an agreement of composition with its creditors; [vi] the approval
by a court of competent jurisdiction of a petition applicable to Tenant,
Subtenant or Guarantor in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
[vii] appointment by final order, judgment, or decree of a court of competent
jurisdiction of a receiver of the whole or any substantial part of the
properties of Tenant, Subtenant or Guarantor (provided such receiver shall not
have been removed or discharged within 60 days of the date of his
qualification).
 
(f) [i] Any receiver, administrator, custodian or other person takes possession
or control of any of the Leased Property and continues in possession for
60 days; [ii] any writ against any of the Leased Property is not released within
60 days; [iii] any judgment is rendered or proceedings are instituted against
the Leased Property, Tenant or Subtenant which adversely affect the Leased
Property or any part thereof, which is not dismissed for 60 days (except as
otherwise provided in this section); [iv] all or a substantial part of the
assets of Tenant, Subtenant or Guarantor are attached, seized, subjected to a
writ or distress warrant, or are levied upon, or come into the possession of any
receiver, trustee, custodian, or assignee for the benefit of creditors;
[v] Tenant or Subtenant is enjoined, restrained, or in any way prevented by
court order, or any proceeding is filed or commenced seeking to enjoin, restrain
or in any way prevent Tenant, Subtenant or Guarantor from conducting all or a
substantial part of its business or affairs; or [vi] except as otherwise
permitted hereunder, a final notice of lien, levy or assessment is filed of
record with respect to all or any part of the Leased Property or any property of
Tenant or Subtenant located at the Leased Property and is not dismissed,
discharged, or bonded-off within 30 days.
 
(g) Any representation or warranty made by Tenant, Subtenant or Guarantor in
this Lease or any other document executed in connection with this Lease, any
guaranty of or other security for this Lease, or any report, certificate,
application, financial statement or other instrument furnished by Tenant,
Subtenant or Guarantor pursuant hereto or thereto shall prove to be false,
misleading or incorrect in any material respect as of the date made.
 
(h) Tenant, any Subtenant or any Affiliate defaults on any indebtedness or
obligation to Landlord or any Landlord Affiliate, any Obligor Group or any
agreement with Landlord or any Landlord Affiliate, including, without
limitation, any lease with Landlord or any Landlord Affiliate, or the occurrence
of a default under any Material Obligation and any applicable grace or cure
period with respect to default under such indebtedness or obligation expires
without such default having been cured.  This provision applies to all such
indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time.
 

 
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(i) Any guarantor of this Lease dissolves, terminates, is adjudicated
incompetent, files a petition in bankruptcy, or is adjudicated insolvent under
the Bankruptcy Code or any other insolvency law, or fails to comply with any
covenant or requirement of such guarantor set forth in this Lease or in the
guaranty of such guarantor, which is not cured within any applicable cure
period.
 
(j) The license for the Facility or any other Government Authorization is
canceled, suspended, reduced to provisional or temporary, or otherwise
invalidated, or license revocation or decertification proceedings are commenced
against Tenant or Subtenant and, in each instance, such action is not stayed
pending appeal, or, as a result of the acts or omissions of Tenant or Subtenant,
any reduction of more than 5% occurs in the number of licensed beds or units at
the Facility, or an admissions ban is issued for the Facility and remains in
effect for a period of more than 45 days.
 
8.2           Remedies.  Upon the occurrence of an Event of Default under this
Lease or any Lease Document, and at any time thereafter until Landlord waives
the default in writing or acknowledges cure of the default in writing, at
Landlord’s option, without declaration, notice of nonperformance, protest,
notice of protest, notice of default, notice to quit or any other notice or
demand of any kind, Landlord may exercise any and all rights and remedies
provided in this Lease or any Lease Document or otherwise provided under law or
in equity, including, without limitation, any one or more of the following
remedies:
 
(a) Landlord may re-enter and take possession of the Leased Property or any
portion thereof without terminating this Lease, and lease such Leased Property
for the account of Tenant, holding Tenant liable for all costs of Landlord in
reletting such Leased Property and for the difference in the amount received by
such reletting and the amounts payable by Tenant under the Lease.
 
(b) Landlord may terminate this Lease with respect to all or any portion of the
Leased Property by written notice to Tenant, exclude Tenant from possession of
such Leased Property and use commercially reasonable efforts to lease such
Leased Property to others, holding Tenant liable for the difference in the
amounts received from such reletting and the amounts payable by Tenant under
this Lease.
 
(c) Landlord may re-enter the Leased Property or any portion thereof and have,
repossess and enjoy such Leased Property as if this Lease had not been made, and
in such event, Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of such
repossession.
 
(d) Landlord may have access to and inspect, examine and make copies of the
books and records and any and all accounts, data and income tax and other
returns of Tenant insofar as they pertain to the Leased Property subject to
Landlord’s obligation to maintain the confidentiality of any patient or employee
information in accordance with the requirements of applicable State or federal
law.
 

 
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(e) Landlord may accelerate all of the unpaid Rent hereunder based on the then
current Rent Schedule so that the aggregate Rent for the unexpired term of this
Lease becomes immediately due and payable.
 
(f) Landlord may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under this
Lease then due and thereafter to become due, or to enforce performance and
observance of any obligations, agreements or covenants of Tenant under this
Lease.
 
(g) With respect to the Collateral or any portion thereof and Secured Party’s
security interest therein, Secured Party may exercise all of its rights as
secured party under Article 9 of the Uniform Commercial Code.  Secured Party may
sell the Collateral by public or private sale upon five days notice to Tenant or
Subtenant.  Tenant and Subtenant agree that a commercially reasonable manner of
disposition of the Collateral shall include, without limitation and at the
option of Secured Party, a sale of the Collateral, in whole or in part,
concurrently with the sale of the Leased Property.
 
(h) Secured Party may obtain control over and collect the Receivables and apply
the proceeds of the collections to satisfaction of the Obligor Group Obligations
unless prohibited by law.  Tenant and Subtenant appoint HCRI or its designee as
attorney for Tenant and Subtenant, respectively, with powers [i] to receive, to
endorse, to sign and/or to deliver, in Tenant’s or Subtenant’s name or Secured
Party’s name, any and all checks, drafts, and other instruments for the payment
of money relating to the Receivables, and to waive demand, presentment, notice
of dishonor, protest, and any other notice with respect to any such instrument;
[ii] to sign Tenant’s or Subtenant’s name on any invoice or bill of lading
relating to any Receivable, drafts against account debtors, assignments and
verifications of Receivables, and notices to account debtors; [iii] to send
verifications of Receivables to any account debtor; and [iv] to do all other
acts and things necessary to carry out this Lease.  Absent gross negligence or
willful misconduct of Secured Party, Secured Party shall not be liable for any
omissions, commissions, errors of judgment, or mistakes in fact or law made in
the exercise of any such powers.  At Secured Party’s option, Tenant and
Subtenant shall [i] provide Secured Party a full accounting of all amounts
received on account of Receivables with such frequency and in such form as
Secured Party may require, either with or without applying all collections on
Receivables in payment of the Obligor Group Obligations or [ii] deliver to
Secured Party on the day of receipt all such collections in the form received
and duly endorsed by Tenant or Subtenant, as applicable.  At Secured Party’s
request, Tenant and Subtenant shall institute any action or enter into any
settlement determined by Secured Party to be necessary to obtain recovery or
redress from any account debtor in default of Receivables.  Secured Party may
give notice of its security interest in the Receivables to any or all account
debtors with instructions to make all payments on Receivables directly to
Secured Party, thereby terminating Tenant’s and Subtenant’s authority to collect
Receivables.  After terminating Tenant’s and Subtenant’s authority to enforce or
collect Receivables, Secured Party shall have the right to take possession of
any or all Receivables and records thereof and is hereby authorized to do so,
and only Secured Party shall have the right to collect and enforce the
Receivables.  Prior to the occurrence and during the continuance of an Event of
Default, at Tenant’s and Subtenant’s cost and expense, but on behalf of Secured
Party and for Secured Party’s account, Tenant and Subtenant shall collect or
otherwise enforce all amounts unpaid on Receivables and hold all such
collections in trust for
 

 
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Secured Party, but Tenant and Subtenant may commingle such collections with
Tenant’s and Subtenant’s own funds, until Tenant’s and Subtenant’s authority to
do so has been terminated, which may be done only after an Event of
Default.  Notwithstanding any other provision hereof, Secured Party does not
assume any of Tenant’s or Subtenant’s obligations under any Receivable, and
Secured Party shall not be responsible in any way for the performance of any of
the terms and conditions thereof by Tenant or Subtenant.
 
(i) Without waiving any prior or subsequent Event of Default, Landlord may waive
any Event of Default or, with or without waiving any Event of Default, remedy
any default.
 
(j) Landlord may terminate its obligation, if any, to disburse Investment
Advances.
 
(k) Landlord may enter and take possession of the Land or any portion thereof
and any one or more Facilities without terminating this Lease and complete
construction and renovation of the Improvements (or any part thereof) and
perform the obligations of Tenant under the Lease Documents.  Without limiting
the generality of the foregoing and for the purposes aforesaid, Tenant hereby
appoints HCRI its lawful attorney-in-fact with full power to do any of the
following:  [i] complete construction, renovation and equipping of the
Improvements in the name of Tenant; [ii] use unadvanced funds remaining under
the Investment Amount, or funds that may be reserved, escrowed, or set aside for
any purposes hereunder at any time, or to advance funds in excess of the
Investment Amount, to complete the Improvements; [iii] make changes in the plans
and specifications that shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the plans and
specifications; [iv] retain or employ new general contractors, subcontractors,
architects, engineers, and inspectors as shall be required for said purposes;
[v] pay, settle, or compromise all existing bills and claims, which may be liens
or security interests, or to avoid such bills and claims becoming liens against
the Facility or security interest against fixtures or equipment, or as may be
necessary or desirable for the completion of the construction and equipping of
the Improvements or for the clearance of title; [vi] execute all applications
and certificates, in the name of Tenant, that may be required in connection with
any construction; [vii] do any and every act that Tenant might do in its own
behalf, to prosecute and defend all actions or proceedings in connection with
the Improvements; and [viii] to execute, deliver and file all applications and
other documents and take any and all actions necessary to transfer the
operations of the Facility to Secured Party or Secured Party’s designee.  This
power of attorney is a power coupled with an interest and cannot be revoked.
 
(l) Landlord may apply, with or without notice to Tenant, for the appointment of
a receiver (“Receiver”) for Tenant or Tenant’s business or for the Leased
Property; provided, however, in the case of an Event of Default which relates to
less than all of the Leased Property, such Receiver’s power and authority shall
be limited to the affected Facility.  Unless prohibited by law, such appointment
may be made either before or after termination of Tenant’s possession of the
Leased Property, without notice, without regard to the solvency or insolvency of
Tenant at the time of application for such Receiver and without regard to the
then value of the Leased Property, and Secured Party may be appointed as
Receiver.  After the occurrence and during the continuance of an Event of
Default, Landlord shall be entitled to
 

 
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appointment of a receiver as a matter of right and without the need to make any
showing other than the existence of an Event of Default.  The Receiver shall
have the power to collect the rents, income, profits and Receivables of the
Leased Property during the pendency of the receivership and all other powers
which may be necessary or are usual in such cases for the protection,
possession, control, management and operation of the Leased Property during the
whole of said proceeding.  All sums of money received by the Receiver from such
rents and income, after deducting therefrom the reasonable charges and expenses
paid or incurred in connection with the collection and disbursement thereof,
shall be applied to the payment of the Rent or any other monetary obligation of
Tenant under this Lease, including, without limitation, any losses or damages
incurred by Landlord under this Lease.  Tenant, if requested to do so, will
consent to the appointment of any such Receiver as aforesaid.
 
(m) Landlord may terminate any management agreement with respect to any of the
Leased Property and shall have the right to retain one or more managers for the
Leased Property at the expense of Tenant, such manager(s) to serve for such term
and at such compensation as Landlord reasonably determines is necessary under
the circumstances.
 
8.3           Right of Set-Off.  Landlord may, and is hereby authorized by
Tenant to, at any time and from time to time without advance notice to Tenant
(any such notice being expressly waived by Tenant), set-off or recoup and apply
any and all sums held by Landlord, any indebtedness of Landlord to Tenant, and
any claims by Tenant against Landlord, against any obligations of Tenant
hereunder and against any claims by Landlord against Tenant, whether or not such
obligations or claims of Tenant are matured and whether or not Landlord has
exercised any other remedies hereunder.  The rights of Landlord under this
section are in addition to any other rights and remedies Landlord may have
against Tenant.
 
8.4           Performance of Tenant’s Covenants.  Landlord may perform any
obligation of Tenant which Tenant has failed to perform within five days after
Landlord has sent a written notice to Tenant informing it of its specific
failure.  Tenant shall reimburse Landlord on demand, as General Additional Rent,
for any expenditures thus incurred by Landlord and shall pay interest thereon at
Landlord’s rate of return as provided in the Commitment.
 
8.5           Late Payment Charge.
 
(a) Rent.  Tenant acknowledges that any default in the payment of any
installment of Rent payable hereunder will result in loss and additional expense
to Landlord in servicing any indebtedness of Landlord secured by the Leased
Property, handling such delinquent payments, and meeting its other financial
obligations, and because such loss and additional expense is extremely difficult
and impractical to ascertain, Tenant agrees that in the event any Rent payable
to Landlord hereunder is not paid within 10 days after the due date, Tenant
shall pay a late charge of 5% of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord.  The 10-day period set forth in this section shall run
concurrently with the 10-day period contemplated under §8.1(a) and shall not
otherwise extend the time for payment of Rent or the period for curing any
default or constitute a waiver of such default.
 

 
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(b) Non-Rent Obligations.  With respect to Non-Rent obligations, Tenant
acknowledges that any default in the payment of any amount payable by Tenant to
Landlord under this Lease will result in loss and additional expense to Landlord
in servicing any indebtedness of Landlord secured by the Leased Property,
handling such delinquent payments, and meeting its other financial obligations,
and because such loss and additional expense is extremely difficult and
impractical to ascertain, Tenant agrees that in the event such amount is not
paid within 10 days after the due date or within 10 days after receipt of any
invoice from Landlord (if Landlord is obligated under the terms of the Lease to
provide an invoice), Tenant shall pay a late charge of 5% of the amount of the
overdue payment as a reasonable estimate of such loss and expenses, unless
applicable law requires a lesser charge, in which event the maximum rate
permitted by such law may be charged by Landlord.  The 10-day period set forth
in this section shall run concurrently with the 10-day period contemplated under
§8.1(a) and shall not otherwise extend the time for payment of the invoice or
the period for curing any default or constitute a waiver of such default.
 
8.6           Default Rent.  At Landlord’s option at any time after the
occurrence of an Event of Default and while such Event of Default remains
uncured, the Base Rent payable under this Lease shall be increased to reflect
Landlord’s rate of return of 18.5% per annum on the Investment Amount (“Default
Rent”); provided, however, that if a court of competent jurisdiction determines
that any other amounts payable under this Lease are deemed to be interest, the
Default Rent shall be adjusted to ensure that the aggregate interest payable
under this Lease does not accrue at a rate in excess of the maximum legal rate.
 
8.7           Attorneys’ Fees.  Tenant shall pay all reasonable costs and
expenses incurred by Landlord in enforcing or preserving Landlord’s rights under
this Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, without limitation, [i] the fees,
expenses, and costs of any litigation, appellate, receivership, administrative,
bankruptcy, insolvency or other similar proceeding; [ii] reasonable attorney,
paralegal, consulting and witness fees and disbursements; and [iii] the
expenses, including, without limitation, lodging, meals, and transportation, of
Landlord and its employees, agents, attorneys, and witnesses in preparing for
litigation, administrative, bankruptcy, insolvency or other similar proceedings
and attendance at hearings, depositions, and trials in connection
therewith.  All such reasonable costs, expenses, charges and fees payable by
Tenant shall be deemed to be General Additional Rent under this Lease.
 
8.8           Escrows and Application of Payments.  As security for the
performance of the Obligor Group Obligations, Tenant hereby assigns to Landlord
all its right, title, and interest in and to all monies escrowed with Landlord
under this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred.  Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to the Obligor Group
Obligations in the order which Landlord may determine.
 
8.9           Remedies Cumulative.  The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity.  The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
 

 
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8.10           Waivers.  Tenant waives [i] any notice required by statute or
other law as a condition to bringing an action for possession of, or eviction
from, any of the Leased Property, [ii] any right of re-entry or repossession,
[iii] any right to a trial by jury in any action or proceeding arising out of or
relating to this Lease, [iv] any right of redemption whether pursuant to
statute, at law or in equity, [v] all presentments, demands for performance,
notices of nonperformance, protest, notices of protest, notices of dishonor,
notices to quit and any other notice or demand of any kind (other than those
specifically provided for in this Lease, and [vi] all notices of the existence,
creation or incurring of any obligation or advance under this Lease before or
after this date.
 
8.11           Obligations Under the Bankruptcy Code.  Upon filing of a petition
by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as
debtor-in-possession, and any trustee who may be appointed with respect to the
assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance on
the first day of each month, as reasonable compensation for the use and
occupancy of the Leased Property, an amount equal to all Rent due pursuant to
this Lease.  Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of the assumption
and/or assignment of this Lease are the following:  [i] the cure of any monetary
defaults and reimbursement of pecuniary loss within not more than five Business
Days of assumption and/or assignment; [ii] the deposit of an additional amount
equal to not less than three months’ Base Rent, which amount is agreed to be a
necessary and appropriate deposit to adequately assure the future performance
under this Lease of the Tenant or its assignee; and [iii] the continued use of
the Leased Property for the Facility Uses.  Nothing herein shall be construed as
an agreement by Landlord to any assignment of this Lease or a waiver of
Landlord’s right to seek adequate assurance of future performance in addition to
that set forth hereinabove in connection with any proposed assumption and/or
assignment of this Lease.
 
8.12           California Remedies.  In addition to the provisions set forth
above, for each Facility located in the State of California, the following
provisions shall apply and shall supersede any provision in violation of the
laws of the State of California:
 
8.12.1                      Remedies.  On the occurrence of an Event of Default,
Landlord may at any time thereafter and prior to the cure of such Event of
Default, upon giving written notice to Tenant but without limiting Landlord in
the exercise of a right or remedy which Landlord may have by reason of an Event
of Default, do any of the following:
 
(a) Landlord may elect to continue the term of this Lease in full force and
effect and not terminate Tenant’s right to possession of the Leased Property, in
which event Landlord shall have the right to enforce any rights and remedies
granted by this Lease or by law against Tenant, including, without limitation,
the right to collect when due Rent and other sums payable hereunder.  Landlord
shall not be deemed to have elected to terminate this Lease unless Landlord
gives Tenant written notice of such election to terminate.  Landlord’s acts of
maintenance or preservation of the Leased Property or efforts to relet the
Leased Property shall not terminate this Lease.
 
(b) Landlord may elect immediately upon written notice to Tenant to terminate
this Lease at any time prior to Tenant’s cure of an Event of Default and in such
event
 

 
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Landlord may, at Landlord’s option, declare this Lease and Tenant’s right to
possession of the Leased Property terminated, reenter the Leased Property,
remove Tenant’s Property therefrom and dispose of it in any manner whatsoever
allowed by law at Tenant’s expense or store it for Tenant’s account and at
Tenant’s risk and expense (but Landlord shall not be required to effect such
removal), eject all persons from the Leased Property and recover damages from
Tenant as hereinafter provided.  Any such reentry shall be permitted by Tenant
without hindrance.  Landlord shall not thereby be liable in damages for such
reentry or be guilty of trespass, forcible entry or unlawful detainer.  If
Landlord so terminates this Lease and Tenant’s right to possession, such
termination shall cancel all Tenant’s options, if any, to extend or renew the
term of this Lease.
 
(c) Landlord may at its sole discretion elect to notify any Subtenant (or
assignee) of the Leased Property of the existence of an Event of Default by
Tenant in writing and thereafter all Rent and other amounts due from any
Subtenant of the Leased Property shall be paid to Landlord and Landlord shall
apply such Rent and other amounts in payment of the amounts due from Tenant
under this Lease.  The delivery of such notice to any Subtenant and the
collection of such Rent and other amounts by Landlord shall not terminate this
Lease.  Upon Tenant’s cure of the Event of Default and receipt by Landlord of
all Rent and other amounts due from Tenant, Landlord shall notify Subtenant (or
assignee) to make payments as provided in its sublease or lease.
 
8.12.2                      Damages.  In the event Landlord elects to terminate
this Lease and Tenant’s right to possession in accordance with §8.12.1(b), or
the same are terminated by operation of law due to an Event of Default, Landlord
may recover as damages from Tenant the following:
 
(a) The worth at the time of award of the unpaid Rent and other sums due
hereunder which had been earned at the time of termination of the Lease;
 
(b) The worth at the time of award of the amount by which the unpaid Rent and
other sums due hereunder which would have been earned after the date of
termination of this Lease until the time of award exceeds the amount of such
loss of Rent and other sums due that Tenant proves could have been reasonably
avoided;
 
(c) The worth at the time of the award of the amount by which the unpaid Rent
and other sums due hereunder for the balance of the term after the time of award
exceeds the amount of the loss of such Rent and other sums that Tenant proves
could be reasonably avoided;
 
(d) Any other amount, including but not limited to reasonable attorneys’ fees
and court costs, leasing commissions and all costs and expenses incurred by
Landlord in reletting the Leased Property or preparing, altering or remodeling
the Leased Property for such reletting.  Landlord shall also recover any amount
which is necessary to compensate Landlord for all detriment proximately caused
by Tenant’s act of default or which in the ordinary course of things would be
likely to result therefrom; and
 

 
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(e) At Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
 
The “worth at the time of award” of the amounts referred to in §8.12.2(a) and
(b) above, is computed by allowing interest at the maximum legal rate of
interest.  The “worth at the time of award” of the amount referred to in
§8.12.2(c) above, is computed by discounting such amount at the discount rate of
Federal Reserve Bank of San Francisco at the time of award plus 1%.
 
ARTICLE 9:  DAMAGE AND DESTRUCTION
 
9.1           Notice of Casualty.  If the Leased Property shall be destroyed, in
whole or in part, or damaged by fire, flood, windstorm or other casualty in
excess of $150,000.00 (a “Casualty”), Tenant shall give written notice thereof
to Landlord within two Business Days after the occurrence of the
Casualty.  Within 15 days after the occurrence of the Casualty or as soon
thereafter as such information is reasonably available to Tenant, Tenant shall
provide the following information to Landlord:  [i] the date of the Casualty;
[ii] the nature of the Casualty; [iii] a description of the damage or
destruction caused by the Casualty, including the type of Leased Property
damaged and the area of the Improvements damaged; [iv] a preliminary estimate of
the cost to repair, rebuild, restore or replace the Leased Property; [v] a
preliminary estimate of the schedule to complete the repair, rebuilding,
restoration or replacement of the Leased Property; [vi] a description of the
anticipated property insurance claim, including the name of the insurer, the
insurance coverage limits, the deductible amount, the expected settlement
amount, and the expected settlement date; and [vii] a description of the
business interruption claim, including the name of the insurer, the insurance
coverage limits, the deductible amount, the expected settlement amount, and the
expected settlement date.  Within five days after request from Landlord, Tenant
will provide Landlord with copies of all correspondence to the insurer and any
other information reasonably requested by Landlord.
 
9.2           Substantial Destruction.
 
9.2.1                      If any Facility’s Improvements are substantially
destroyed at any time other than during the final 18 months of the Initial Term
or any Renewal Term, Tenant shall promptly rebuild and restore such Improvements
in accordance with §9.4 and Landlord shall make the insurance proceeds available
to Tenant for such restoration.  The term “substantially destroyed” means any
casualty resulting in the loss of use of 50% or more of the licensed beds at any
one Facility.
 
9.2.2                      If any Facility’s Improvements are substantially
destroyed during the final 18 months of the Initial Term or any Renewal Term,
Landlord may elect to terminate this Lease with respect to the entire Leased
Property and retain the insurance proceeds unless Tenant exercises its option to
renew as set forth in §9.2.3.  If Landlord elects to terminate, Landlord shall
give notice (“Termination Notice”) of its election to terminate this Lease
within 30 days after receipt of Tenant’s notice of the damage.  If Tenant does
not exercise its option to renew under §9.2.3 within 15 days after delivery of
the Termination Notice, this Lease shall terminate on the 15th day after
delivery of the Termination Notice.  If this Lease is so terminated, Tenant
shall be liable to Landlord for all Rent and all other obligations accrued under
this Lease through the effective date of termination.
 

 
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9.2.3                      If any Facility’s Improvements are substantially
destroyed during the final 18 months of the Initial Term or the Renewal Term and
Landlord gives the Termination Notice, Tenant shall have the option to renew
this Lease with respect to the entire Leased Property (but not any part
thereof).  Tenant shall give Landlord irrevocable notice of Tenant’s election to
renew within 15 days after delivery of the Termination Notice.  If Tenant elects
to renew, the Renewal Term will be in effect for the balance of the then current
Term plus a 15-year period.  The Renewal Term will commence on the third day
following Landlord’s receipt of Tenant’s notice of renewal.  All other terms of
this Lease for the Renewal Term shall be in accordance with Article 12.  The
Improvements will be restored by Tenant in accordance with the provisions of
this Article 9 regarding partial destruction.
 
9.3           Partial Destruction.  If any Facility’s Improvements are not
substantially destroyed, then Tenant shall comply with the provisions of §9.4
and Landlord shall make the insurance proceeds available to Tenant for such
restoration.
 
9.4           Restoration.  Subject to any limitations imposed by law with
respect to the rebuilding of the Leased Premises, Tenant shall promptly repair,
rebuild, or restore the damaged Leased Property, at Tenant’s expense, so as to
make the Leased Property at least equal in value to the Leased Property existing
immediately prior to such occurrence and as nearly similar to it in character as
is practicable and reasonable.  Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding with respect
to any Casualty, Tenant will submit for Landlord’s approval, which approval
Landlord will not unreasonably withhold or delay, plans and specifications
meeting the requirements of §16.2 for such repairs or rebuilding.  Promptly
after receiving Landlord’s approval of the plans and specifications, Tenant will
begin such repairs or rebuilding and will prosecute the repairs and rebuilding
to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant’s
reasonable control.  Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including reasonable attorneys’ fees.  Payments will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord.  Payments for deposits for the repairing or rebuilding or delivery
of materials to the Facility will be made upon Landlord’s receipt of evidence
satisfactory to Landlord that such payments are required in advance.  With
respect to any Casualty, prior to commencing the repairing or rebuilding, Tenant
shall deliver to Landlord for Landlord’s approval a schedule setting forth the
estimated monthly draws for such work.  Landlord will contribute to such
payments out of the insurance proceeds an amount equal to the proportion that
the total net amount received by Landlord from insurers bears to the total
estimated cost of the rebuilding or repairing, multiplied by the payment by
Tenant on account of such work.  Landlord may, however, withhold 10% from each
payment until the work is completed and proof has been furnished to Landlord
that no lien or liability has attached or will attach to the Leased Property or
to Landlord in connection with such repairing or rebuilding.  Upon the
completion of rebuilding and the furnishing of such proof, the balance of the
net proceeds of such insurance payable to Tenant on account of such repairing or
rebuilding will be paid to Tenant.  If required by law as a result of the nature
or extent of the damage, Tenant will obtain and deliver to Landlord a temporary
or final certificate of occupancy before the damaged Leased Property is
reoccupied for any purpose.  Tenant shall complete such repairs or rebuilding
free and clear of mechanic’s or other liens, and in accordance with the building
codes and all
 

 
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applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating organization, or
similar body.  Any remaining proceeds of insurance after such restoration will
be Tenant’s property.
 
9.5           Insufficient Proceeds.  If the proceeds of any insurance
settlement are not sufficient to pay the costs of Tenant’s repair, rebuilding or
restoration under §9.4 in full, Tenant shall deposit with Landlord at Landlord’s
option, and within 10 days of Landlord’s request, an amount sufficient in
Landlord’s reasonable judgment to complete such repair, rebuilding or
restoration or shall provide Landlord with evidence reasonably satisfactory to
Landlord that Tenant has available the funds needed to complete such repair,
rebuilding or restoration.  Tenant shall not, by reason of the deposit or
payment, be entitled to any reimbursement from Landlord or diminution in or
postponement of the payment of the Rent.
 
9.6           Not Trust Funds.  Notwithstanding anything herein or at law or
equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9.  Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment or value,
of the Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
 
9.7           Landlord’s Inspection.  During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding.  Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times and on reasonable notice.  If, during such repairs or
rebuilding, Landlord and its architects and engineers determine that the repairs
or rebuilding are not being done in accordance with the approved plans and
specifications, Landlord will give prompt notice in writing to Tenant,
specifying in detail the particular deficiency, omission, or other respect in
which Landlord claims such repairs or rebuilding do not accord with the approved
plans and specifications.  Upon the receipt of any such notice, Tenant will
cause corrections to be made to any deficiencies, omissions, or such other
respect.  Tenant’s obligations to supply insurance, according to Article 4, will
be applicable to any repairs or rebuilding under this section.
 
9.8           Landlord’s Costs.  Tenant shall, within 30 days after receipt of
an invoice from Landlord, pay the costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord’s attorneys in connection
therewith.
 
9.9           No Rent Abatement.  Rent will not abate pending the repairs or
rebuilding of the Leased Property.
 

 
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ARTICLE 10:  CONDEMNATION
 
10.1           Total Taking.  If, by exercise of the right of eminent domain or
by conveyance made in response to the threat of the exercise of such right
(“Taking”), any entire Facility Property is taken, or so much of any Facility
Property is taken that the number of licensed beds/units at the Facility
Property is reduced by more than 25% as a result of such Taking, then this Lease
will end with respect to such Facility Property only on the earlier of the
vesting of title to the Facility Property in the condemning authority or the
taking of possession of the Facility Property by the condemning authority.  Upon
such termination, the Investment Amount shall be reduced by the amount received
by Landlord as a result of the Taking unless there is only one Facility Property
subject to this Lease in which case the Lease will terminate.  The removal from
this Lease of one Facility Property due to a taking is the result of
circumstances beyond the control of Landlord and Tenant and the parties affirm
that, except for such isolated situation or as otherwise specifically provided
elsewhere in this Lease for the removal of one or more of the Facility under
certain defined circumstances, this Lease is intended to be a single indivisible
Lease.  All damages awarded for such Taking under the power of eminent domain
shall be the property of Landlord, whether such damages shall be awarded as
compensation for diminution in value of the leasehold or the fee of the Facility
Property; provided, however, nothing herein shall preclude Tenant from pursuing
a separate award for the Taking of its Tenant’s Property (as defined below) or
for relocation costs or expenses.
 
10.2           Partial Taking.  If, after a Taking, so much of the Facility
Property remains that the Facility Property can be used for substantially the
same purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
such Leased Property in the condemning authority or the taking of possession of
such Leased Property by the condemning authority and the Rent will be adjusted
accordingly; [ii] at its cost, Tenant shall restore so much of the Facility
Property as remains to a sound architectural unit substantially suitable for the
purposes for which it was used immediately before the Taking, using good
workmanship and new, first-class materials; [iii] upon completion of the
restoration, Landlord will pay Tenant the lesser of the net award made to
Landlord on the account of the Taking (after deducting from the total award,
reasonable attorneys’, appraisers’, and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Facility Property), or Tenant’s actual out-of-pocket
costs of restoring the Facility Property; and [iv] Landlord shall be entitled to
the balance of the net award except to the extent specifically allocated to the
value of Tenant’s Property or any relocation costs or expenses incurred by
Tenant as a result of such Partial Taking.  The restoration shall be completed
in accordance with §§9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed to
apply to condemnation instead of casualty.
 
10.3           Condemnation Proceeds Not Trust Funds.  Notwithstanding anything
in this Lease or at law or equity to the contrary, none of the condemnation
award paid to Landlord shall be deemed trust funds, and Landlord shall be
entitled to dispose of such proceeds as provided in this Article 10.  Tenant
expressly assumes all risk of loss, including a decrease in the use, enjoyment,
or value, of the Leased Property from any Condemnation.
 

 
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ARTICLE 11:  TENANT’S PROPERTY
 
11.1           Tenant’s Property.  Tenant shall have the right to install,
place, and use on the Leased Property such fixtures, furniture, equipment,
inventory and other personal property in addition to Landlord’s Personal
Property as may be required or as Tenant may, from time to time, deem necessary
or useful to operate the Leased Property for its permitted purposes.  All
fixtures, furniture, equipment, inventory, and other personal property
installed, placed, or used on the Leased Property which is owned by Tenant or
leased by Tenant from third parties is hereinafter referred to as “Tenant’s
Property”.
 
11.2           Requirements for Tenant’s Property.  Tenant shall comply with all
of the following requirements in connection with Tenant’s Property:
 
(a) Tenant shall, at Tenant’s sole cost and expense, maintain, repair, and
replace Tenant’s Property.
 
(b) Tenant shall, at Tenant’s sole cost and expense, keep Tenant’s Property
insured against loss or damage by fire, vandalism and malicious mischief,
sprinkler leakage, earthquake, and other physical loss perils commonly covered
by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than 90% of the then full replacement
cost thereof.  Tenant shall use the proceeds from any such policy for the repair
and replacement of Tenant’s Property.  The insurance shall meet the requirements
of §4.3.
 
(c) Tenant shall pay all taxes applicable to Tenant’s Property.
 
(d) If Tenant’s Property is damaged or destroyed by fire or any other cause,
Tenant shall have the right, but not the obligation, to repair or replace
Tenant’s Property (unless the same is required for the operation of the Leased
Property in compliance with applicable Legal Requirements, in which case Tenant
shall be required to promptly repair or replace the same) unless Landlord elects
to terminate this Lease pursuant to §9.2.2.
 
(e) Unless an Event of Default or any event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default has occurred,
Tenant may remove Tenant’s Property from the Leased Property from time to time
provided that [i] the items removed are not required to operate the Leased
Property for the Facility Uses (unless such items are being replaced by Tenant);
and [ii] Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant’s Property.
 
(f) Tenant shall not, without the prior written consent of Landlord or as
otherwise provided in this Lease, remove any Tenant’s Property or Leased
Property.  Tenant shall, at Landlord’s option, remove Tenant’s Property upon the
termination or expiration of this Lease and shall repair any damage to the
Leased Property resulting from the removal of Tenant’s Property.  If Tenant
fails to remove Tenant’s Property within 30 days after request by Landlord, then
Tenant shall be deemed to have abandoned Tenant’s Property, Tenant’s Property
shall become the property of Landlord, and Landlord may remove, store and
dispose of Tenant’s Property.  In such event, Tenant shall have no claim or
right against Landlord for such property or the value thereof regardless of the
disposition thereof by Landlord.  Tenant shall pay
 

 
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Landlord, upon demand, all expenses incurred by Landlord in removing, storing,
and disposing of Tenant’s Property and repairing any damage caused by such
removal.  Tenant’s obligations hereunder shall survive the termination or
expiration of this Lease.
 
(g) Tenant shall perform its obligations under any equipment lease or security
agreement for Tenant’s Property.  For equipment loans or leases for critical
care equipment and for all other equipment having an original cost in excess of
$250,000.00 per Facility, Tenant shall cause such equipment lessor or lender to
enter into a nondisturbance agreement with Landlord upon terms and conditions
acceptable to Landlord, including, without limitation, the
following:  [i] Landlord shall have the right (but not the obligation) to assume
such equipment lease or security agreement upon the occurrence of an Event of
Default by Tenant hereunder; [ii] such equipment lessor or lender shall notify
Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[iii] Landlord shall have the right to assign its interest in the equipment
lease or security agreement and nondisturbance agreement.  Tenant shall, within
30 days after receipt of an invoice from Landlord, reimburse Landlord for all
costs and expenses incurred in reviewing and approving the equipment lease,
security agreement and nondisturbance agreement, including, without limitation,
reasonable attorneys’ fees and costs.
 
ARTICLE 12:  RENEWAL OPTIONS
 
12.1           Renewal Options.  Tenant has the option to renew (“Renewal
Option”) this Lease for one 15-year renewal term (“Renewal Term”).  Tenant can
exercise the Renewal Option only upon satisfaction of the following conditions:
 
(a) There shall be no uncured Event of Default, or any event which with the
passage of time or giving of notice would constitute an Event of Default, at the
time Tenant exercises its Renewal Option nor on the date the Renewal Term is to
commence.
 
(b) Tenant shall give Landlord irrevocable written notice of renewal no later
than the date which is [i] 90 days prior to the expiration date of the then
current Term; or [ii] 15 days after Landlord’s delivery of the Termination
Notice as set forth in §9.2.3.
 
12.2           Effect of Renewal.  The following terms and conditions will be
applicable if Tenant renews the Lease:
 
(a) Effective Date.  Except as otherwise provided in §9.2.3, the effective date
of any Renewal Term will be the first day after the expiration date of the then
current Term.  The first day of each Renewal Term is also referred to as the
Renewal Date.
 
(b) Investment Amount.  Effective as of the Renewal Date, a single Investment
Amount will be computed by summing all Investment Advance Amounts.
 
(c) Rent Adjustment.  Effective as of the Renewal Date, Landlord shall calculate
Base Rent for the Renewal Term in accordance with §2.1(c)(2) of the Commitment
and shall issue a new Rent Schedule reflecting the Base Rent.  Until Tenant
receives a revised Rent Schedule from Landlord, Tenant shall for each month
[i] continue to make installments of Base Rent according to the Rent Schedule in
effect on the day before the Renewal Date; and
 

 
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[ii] within 10 days following Landlord’s issuance of an invoice, pay the
difference between the installment of Base Rent paid to Landlord for such month
and the installment of Base Rent actually due for such month as a result of the
renewal of the Lease.
 
(d) Other Terms and Conditions.  Except for the modifications set forth in this
§12.2, all other terms and conditions of the Lease will remain the same for the
Renewal Term.
 
ARTICLE 13:  RIGHT OF FIRST OPPORTUNITY AND OPTION TO PURCHASE
 
13.1           Right of First Opportunity.  In the event at any time during the
Term either [i] Landlord elects to seek a purchaser of the Leased Property (the
“Right of First Opportunity Event”) or [ii] Landlord receives a bona fide offer
from a third party (the “Offer”) setting forth the terms and conditions upon
which it proposes to purchase the Leased Property which it is interested in
accepting, but in no event shall Landlord be obligated to accept (the “Right of
First Refusal Event”), the following provisions shall apply:
 
(a) In the event of the occurrence of the Right of First Opportunity Event,
Landlord shall provide Tenant with written notice of its intent to sell the
Leased Property and its proposed terms with respect thereto (the “Opportunity
Notice”).  Landlord and Tenant shall have a period of 30 days after Tenant’s
receipt of the Opportunity Notice (the “Protected Period”) to negotiate in good
faith with respect to the terms and conditions under which such transaction
shall occur provided that in no event shall the purchase price be less than the
Base Price and shall occur on the terms and conditions set forth in the
Transaction Documents (as defined below) (the “Opportunity Transaction”).  In
the event Landlord and Tenant are unable to reach agreement within the Protected
Period with respect to the terms of the Opportunity Transaction, then Landlord
shall be free to enter into negotiations with respect to the Opportunity
Transaction with any other person or entity; provided, however, that Landlord
shall not be permitted to consummate a transaction with any other person or
entity on terms which are less favorable to Landlord than those offered to
Tenant during the Protected Period without first offering Tenant the opportunity
on written notice setting forth such terms to consummate the Opportunity
Transaction on such alternative terms and conditions (the “Modified Opportunity
Notice”); provided, however, that Tenant shall be deemed to have waived its
right to proceed with such revised Opportunity Transaction in the event it does
not advise Landlord of its election to proceed within 10 days after its receipt
of the Modified Opportunity Notice.
 
(b) In the event of the occurrence of a Right of First Refusal Event, Landlord
shall provide Tenant with a true and correct copy of the Offer (the “Right of
First Refusal Notice”).  Tenant shall have 20 days from its receipt of the Right
of First Refusal Notice to advise Landlord in writing whether it is prepared to
purchase the Leased Property on the same terms and conditions as set forth in
the Offer.  Tenant’s failure to so advise Landlord within such 20 day period
shall be deemed to be a determination by Tenant not to exercise the right of
first refusal provided for herein, at which time Landlord shall be free to
consummate the transaction which was the subject of the Offer; provided,
however, that Landlord shall not be permitted to modify the terms specified in
the Offer in an manner more favorable to the third party than those reflected in
the original Offer (the “Modified Offer”) without first again offering Tenant
the opportunity to consummate a transaction on the terms set forth in the
Modified Offer; provided,
 

 
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however, that Tenant shall be deemed to have waived its right to proceed with
such a transaction in the event it does not advise Landlord of its election to
proceed within 10 days after its receipt of the Modified Offer.
 
(c) In the event Landlord does not consummate a transaction on the terms
provided for in the Offer or the Modified Offer, as applicable, within 90 days
after the date thereof, Landlord shall not be permitted to sell the Leased
Property to the Offeror or to any other party, whether on the terms set forth in
the Offer or the Modified Offer, as applicable, or pursuant to a new Offer
without again first offering Tenant an option to consummate a transaction on the
terms specified in the Offer, the Modified Offer or any new Offer, as
applicable; provided, however, that Tenant shall be deemed to have waived its
rights hereunder in the event it does not advise Landlord of its election to
proceed within 10 days after its receipt of another copy of the Offer or of the
Modified Offer or the new Offer, as applicable.
 
(d) In the event Tenant exercises its right of first refusal or right of first
opportunity provided for herein, Tenant and Landlord shall have a period of
30 days in which to enter into one or more written agreements outlining the
terms and conditions, in addition to those set forth in the Offer or Modified
Offer, if applicable, on which the sale will occur (the “Transaction
Documents”).  In the event Landlord and Tenant fail to execute the Transaction
Documents within said 30 day period, then Tenant shall be deemed to have
forfeited its rights hereunder with respect to such transaction; provided,
however, that Landlord shall not be permitted to sell the Leased Property to any
other person or entity on terms which are less favorable to Landlord than those
offered to Tenant during the Protected Period or beyond the expiration of the
90 day period provided for in clause (c), without first complying with the terms
of this §13.1 unless Landlord and Tenant failed to execute the Transaction
Documents as a result of Tenant’s bad faith in the negotiation of the terms of
such Transaction Documents, in which case Landlord shall be permitted to sell
the Leased Property to any other person or entity regardless of the terms of
such transaction.
 
(e) Any sale of the Leased Property by Landlord pursuant to this §13, other than
to Tenant, shall be subject to the rights of Tenant under this Lease, including,
but not limited to, its rights under this §13.
 
(f) Any closing pursuant to, and the consequences to Tenant of failing to close
after exercising its rights under §13.1 shall be in accordance with the terms
set forth in the Offer or Modified Offer and in the Transaction Documents
executed pursuant to the terms of this Article 13.
 
13.1.1                      Fair Market Value.  The fair market value (the “Fair
Market Value”) of the Leased Property shall be determined as follows.
 
13.1.1.1                      The parties shall attempt to determine the Fair
Market Value by mutual agreement within 15 days after giving the purchase notice
(the “Negotiation Period”).  However, if the parties do not agree on the Fair
Market Value during the Negotiation Period, the following provisions shall
apply.
 

 
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13.1.1.2                      Landlord and Tenant shall each give the other
party notice of the name of an acceptable appraiser five Business Days after the
end of the Negotiation Period.  The two appraisers will then select a third
appraiser within an additional five days.  Each appraiser must demonstrate to
the reasonable satisfaction of both Landlord and Tenant that it has significant
experience in appraising properties similar to the Leased Property.  Within five
days after designation, each appraiser shall submit a resume to Landlord and
Tenant setting forth such appraiser’s qualifications, including education and
experience with similar properties.  A notice of objections to the
qualifications of any appraiser shall be given within 10 days after receipt of
such resume.  If a party fails to timely object to the qualifications of an
appraiser, then the appraiser shall be conclusively deemed satisfactory.  If a
party gives a timely notice of objection to the qualifications of an appraiser,
then the disqualified appraiser shall be replaced by an appraiser selected by
the qualified appraisers or, if all appraisers are disqualified, then by an
appraiser selected by a commercial arbitrator acceptable to Landlord and Tenant.
 
13.1.1.3                      The Fair Market Value shall be determined by the
appraisers within 60 days thereafter as follows.  Each of the appraisers shall
be instructed to prepare an appraisal of the Leased Property in accordance with
the following instructions:
 
The Leased Property is to be valued upon the three conventional approaches to
estimate value known as the Income, Sales Comparison and Cost Approaches.  Once
the approaches are completed, the appraiser correlates the individual approaches
into a final value conclusion.
 
The three approaches to estimate value are summarized as follows:
 
Income Approach:  This valuation approach recognizes that the value of the
operating tangible and intangible assets can be represented by the expected
economic viability of the business giving returns on and of the assets.
 
Sales Comparison Approach:  This valuation approach is based upon the principle
of substitution.  When a facility is replaceable in the market, the market
approach assumes that value tends to be set at the price of acquiring an equally
desirable substitute facility.  Since healthcare market conditions change and
frequently are subject to regulatory and financing environments, adjustments
need to be considered.  These adjustments also consider the operating
differences such as services and demographics.
 
Cost Approach:  This valuation approach estimates the value of the tangible
assets only.  Value is represented by the market value of the land plus the
depreciated reproduction cost of all improvements and equipment.
 
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangible and intangible assets,
consider the operating
 

 
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characteristics of the business and have the most significant influence on
attracting potential investors.
 
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.
 
13.1.1.4                      Tenant shall pay, or reimburse Landlord for, all
costs and expenses in connection with the appraisals.
 
13.2           Option to Purchase.  In consideration of rolling the Summerville
Facilities into this Lease, Landlord hereby grants to Tenant an option to
purchase (“Option to Purchase”) all of the Summerville Facilities (but not any
part thereof except as specifically permitted in this §13.2) in accordance with
the terms and conditions of this §13.2.  Tenant may exercise its Option to
Purchase only by giving an irrevocable notice of Tenant’s election to purchase
the Summerville Facilities (“Purchase Notice”) in accordance with the following:
 
(a) During the Initial Term or any Renewal Term, Tenant must give a Purchase
Notice no earlier than the date which is 180 days, and no later than the date
which is 90 days, prior to the expiration date of the then current Term of this
Lease.
 
(b) If any of the Summerville Facilities’ Improvements are substantially
destroyed during the final 18 months of the Initial Term or any Renewal Term,
Tenant (and each Affiliate Tenant if required by Landlord) must give a Purchase
Notice within 15 days after Landlord gives the Termination Notice pursuant to
§9.2.3.
 
(c) If there is a Taking of any of the Summerville Facilities during the final
18 months of the Initial Term or any Renewal Term by exercise of the right of
eminent domain or by conveyance made in response to the threat of the exercise
of such right and this Lease is terminated as to the affected Summerville
Facility as a result thereof, Tenant must give a Purchase Notice within 30 days
after termination pursuant to §10.1.
 
Tenant shall have no right to exercise the Option to Purchase other than in
accordance with the terms of this §13.2.
 
13.2.1                      Option Price.  The option price (“Option Price”)
will be an amount equal to the sum of [a] the Summerville Investment Amount plus
[b] 50% of the amount by which the Summerville Fair Market Value at the time of
the option exercise exceeds the sum of the Summerville Investment Amount and the
Summerville Loan Amount.  In addition to the Option Price, Tenant shall pay all
reasonable closing costs and expenses in connection with the transfer of the
Leased Property to Tenant, including, but not limited to, the
following:  [a] real property conveyance or transfer fees or deed stamps;
[b] reasonable title search fees, title insurance commitment fees, and title
insurance premiums; [c] reasonable survey fees; [d] reasonable environmental
assessment fees; [e] recording fees; [f] reasonable attorneys’ fees of
Landlord’s counsel; and [g] reasonable fees of any escrow agent.  Tenant shall
also pay all reasonable amounts, costs, expenses, charges, Rent and other items
payable by Tenant to Landlord, including, but not limited to, enforcement costs
as set forth in §8.7.
 

 
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13.2.2                      Summerville Fair Market Value.  The fair market
value of the Summerville Facilities (the “Summerville Fair Market Value”) shall
be determined as follows:
 
13.2.2.1                      The parties shall attempt to determine the
Summerville Fair Market Value by mutual agreement within 15 days after the
receipt of the Purchase Notice.  However, if the parties do not agree on the
Summerville Fair Market Value within such 15-day period, the following
provisions shall apply.
 
13.2.2.2                      Landlord and Tenant shall each give the other
party notice of the name of an acceptable appraiser 15 days after the receipt of
the Purchase Notice.  The two appraisers will then select a third appraiser
within an additional five days.  Each appraiser must demonstrate to the
reasonable satisfaction of both Landlord and Tenant that it has significant
experience in appraising properties similar to the Summerville
Facilities.  Within five days after designation, each appraiser shall submit a
resume to Landlord and Tenant setting forth such appraiser’s qualifications,
including education and experience with similar properties.  A notice of
objections to the qualifications of any appraiser shall be given within 10 days
after receipt of such resume.  If a party fails to timely object to the
qualifications of an appraiser, then the appraiser shall be conclusively deemed
satisfactory.  If a party gives a timely notice of objection to the
qualifications of an appraiser, then the disqualified appraiser shall be
replaced by an appraiser selected by the qualified appraisers or, if all
appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.
 
13.2.2.3                      The Summerville Fair Market Value shall be
determined by the appraisers within 60 days thereafter as follows.  Each of the
appraisers shall be instructed to prepare an appraisal of the Summerville
Facilities in accordance with the following instructions:
 
The Summerville Facilities are to be valued upon the three conventional
approaches to estimate value known as the Income, Sales Comparison and Cost
Approaches as defined in §13.1.1.3.  Once the approaches are completed, the
appraiser correlates the individual approaches into a final value conclusion.
 
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the
Summerville Fair Market Value.
 
13.2.2.4                      In the event of any condemnation, similar taking
or threat thereof with respect to any part of the Summerville Facilities or any
insured or partially insured casualty loss to any part of the Summerville
Facilities after Tenant has exercised an Option to Purchase, but before
settlement, the Summerville Fair Market Value shall be redetermined as provided
in this §13.2.2 to give effect to such condemnation, taking or loss and shall
take into account all available condemnation awards and insurance proceeds.
 
13.2.2.5                      Tenant shall pay, or reimburse Landlord for, all
costs and expenses in connection with the appraisals.
 

 
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13.2.3                      Closing.  The purchase of the Summerville Facilities
by Tenant shall close on a date agreed to by Landlord and Tenant which shall be
not less than 60 days after Landlord’s receipt of the Purchase Notice and not
more than 60 days after the Summerville Fair Market Value has been
determined.  At the closing, Tenant shall pay the Option Price and all amounts
payable under §13.2.1 in immediately available funds and Landlord shall convey
title to the Summerville Facilities to Tenant by one or more transferable and
recordable limited warranty deeds and limited warranty bills of sale.
 
13.2.4                      Failure to Close Option.  If Tenant for any reason
fails to purchase the Summerville Facilities after Tenant has given the Purchase
Notice, then Tenant shall pay Landlord all costs and expenses actually incurred
by Landlord as a result of the failure to close, including costs of unwinding
swap transactions or other interest rate protection devices and preparing for
the closing.  Tenant shall continue to be obligated as lessee hereunder for the
remainder of the Term.
 
13.2.5                      Failure to Exercise Option to Purchase.  If Tenant
for any reason does not exercise its Option to Purchase in accordance with the
terms and conditions of this Lease before the expiration of the Term, Tenant
shall be deemed to have forfeited all of Tenant’s rights to exercise the Option
to Purchase.
 
13.2.6                      Early Option to Purchase Dayton
Facility.  Notwithstanding any provision to the contrary contained in this
§13.2, Tenant may exercise the Option to Purchase the Dayton Facility prior to
the end of the Lease Term (“Early Option”) subject to the same terms and
conditions of this §13.2 except that [i] the required Purchase Notice must be
given by June 30, 2009; [ii] at the time that the Purchase Notice is given or in
no event later than June 30, 2009, Tenant shall deliver to Landlord a signed
letter of intent from an unaffiliated third party to purchase the Dayton
Facility from Tenant (“Third-Party Sale”); [iii] the Early Option Price shall be
$4,695,390.84; [iv] at the time the Purchase Notice for the Early Option is
given, no Event of Default has occurred and is continuing; and [v] the purchase
of the Dayton Property shall close on a date agreed to by Landlord and Tenant
which shall be not later than 90 days after Landlord’s receipt of the Purchase
Notice.
 
ARTICLE 14:  NEGATIVE COVENANTS
 
Until the Obligor Group Obligations shall have been performed in full, Tenant
and Subtenant covenant and agree that Tenant and Subtenant (and Guarantor where
applicable) shall not do any of the following without the prior written consent
of Landlord:
 
14.1           No Debt.  Tenant and Subtenant shall not create, incur, assume,
or permit to exist any indebtedness with respect to the Leased Property other
than [i] trade debt incurred in the ordinary course of business;
[ii] indebtedness for Facility working capital purposes; and [iii] indebtedness
that is secured by any Permitted Lien.
 
14.2           No Liens.  Tenant and Subtenant shall not create, incur, or
permit to exist any lien, charge, encumbrance, easement or restriction upon the
Leased Property or any lien upon or pledge of any interest in Subtenant, except
for Permitted Liens.
 

 
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14.3           No Guaranties.  Tenant and Subtenant shall not create, incur,
assume, or permit to exist any guarantee of any loan or other indebtedness with
respect to the operation of the Leased Property except for the endorsement of
negotiable instruments for collection in the ordinary course of business.
 
14.4           No Transfer.  Tenant and Subtenant shall not sell, lease,
sublease, mortgage, convey, assign or otherwise transfer any legal or equitable
interest in the Leased Property or any part thereof, except for transfers made
in connection with any Permitted Lien or leases to the residents of the Leased
Property or commercial leases with respect to a portion of the Leased Property
comprising in the aggregate less than 2,500 square feet provided such commercial
leases shall be for services that are an integral part of the Facility.
 
14.5           No Dissolution.  Tenant or Subtenant shall not dissolve,
liquidate, merge, consolidate or terminate its existence or sell, other than in
a sale/leaseback or sale/manage back transaction, assign, lease, or otherwise
transfer (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired)
unless, in the case of a merger or consolidation by Tenant, the surviving entity
in such merger or consolidation has a net worth immediately after the merger or
consolidation at least equal to that of the Tenant immediately prior thereto;
provided, however, nothing herein shall preclude a merger or consolidation of
Subtenant into Tenant or dissolution of Subtenant in the event of the
termination of the Sublease at such time as Tenant is licensed to operate the
Facilities subleased to Subtenant.
 
14.6           Subordination of Payments to Affiliates.
 
(a) Except as otherwise provided in §14.6(b) below, after the occurrence of an
Event of Default and until such Event of Default is cured or waived in writing,
Tenant and Subtenant shall not make any payments or distributions (including,
without limitation, salary, bonuses, fees, principal, interest, dividends,
liquidating distributions, management fees, cash flow distributions or lease
payments) to any Affiliate or any shareholder, member or partner of Tenant,
Subtenant or any Affiliate.
 
(b) Notwithstanding the provisions of §14.6(a) or any other provision to the
contrary contained in this Lease, [1] whether or not there is outstanding an
Event of Default, the following shall be expressly permitted:  [A] salaries paid
to employees of the Facilities or employees of Tenant and Subtenant in the
ordinary course of business; [B] equity contributions and inter-company loans
from Tenant to its direct and indirect subsidiaries made in the ordinary course
of business; and [C] with respect to Subtenant, (i) distributions, dividends and
repayments of inter-company loans to Tenant made in the ordinary course of
business and (ii) payments to Tenant under the Sublease covering the Summerville
Facilities and provided that any such payments will be held in trust by Tenant
for the sole purpose of paying Rent to Landlord; and [2] so long as there is no
Event of Default under §8.1(a) of this Lease, Tenant may pay cash dividends to
any preferred shareholder of Tenant who is not an Affiliate of Tenant.
 
14.7           Change of Location or Name.  Tenant and Subtenant shall not,
without providing Landlord with 30 days prior notice thereof, change any of the
following:  [i] the location of the principal place of business or chief
executive office of Tenant or Subtenant, or
 

 
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any office where any of Tenant’s or Subtenant’s books and records are
maintained; [ii] the name under which Tenant or Subtenant conducts any of its
business or operations; or [iii] reorganize or otherwise change its respective
Organization State.
 
ARTICLE 15:  AFFIRMATIVE COVENANTS
 
15.1           Perform Obligations.  Tenant and Subtenant shall each perform all
of its obligations under this Lease, the Government Authorizations, the
Permitted Exceptions, and all Legal Requirements.  If applicable, Tenant and
each Subtenant shall take all necessary action to obtain all Government
Authorizations required for the operation of the Facility as soon as possible
after the Amended Effective Date.
 
15.2           Proceedings to Enjoin or Prevent Construction.  If any
proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant’s construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use its best
commercially reasonable efforts to bring about a favorable and speedy
disposition of all such proceedings and any other proceedings.
 
15.3           Documents and Information.
 
15.3.1                      Furnish Documents.  Tenant and each Subtenant shall
periodically during the term of the Lease deliver to Landlord the Annual
Financial Statements, Periodic Financial Statements, Annual Facility Budget,
Annual Company Budget and all other documents, reports, schedules and copies
described on Exhibit E within the specified time periods.  With each delivery of
Annual Financial Statements and Periodic Financial Statements (other than the
monthly Facility Financial Statement) to Landlord, Tenant and each Subtenant
shall also deliver to Landlord a certificate signed by the Chief Financial
Officer, general partner or managing member (as applicable) of Tenant and each
Subtenant, an Annual Facility Financial Report or Quarterly Facility Financial
Report, as applicable, and a Quarterly Facility Accounts Receivable Aging Report
all in the form of Exhibit F.  In addition, Tenant and each Subtenant shall
deliver to Landlord the applicable Annual Facility Financial Report and the
applicable Quarterly Facility Accounts Receivable Aging Report (based upon
internal financial statements) within 60 days after the end of each fiscal
year.  After the occurrence of an Event of Default and receipt of Landlord’s
written request, Tenant shall deliver to Landlord an updated Annual Facility
Budget and Annual Company Budget (based on a 12-month rolling forward period)
within 10 Business Days after receipt of Landlord’s request.
 
15.3.2                      Furnish Information.  Tenant and each Subtenant
shall [i] promptly supply Landlord with such information concerning its
financial condition, affairs and property, as Landlord may reasonably request
from time to time hereafter; [ii] promptly notify Landlord in writing of any
condition or event that constitutes a breach or event of default of any term,
condition, warranty, representation, or provisions of this Lease or any other
agreement, and of any material adverse change in its financial condition;
[iii] maintain a standard and modern system of accounting; [iv] permit Landlord
or any of its agent or representatives to have access
 

 
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to and to examine all of its books and records regarding the financial condition
of the Facility at any time or times hereafter during business hours and after
reasonable oral or written notice; and [v] permit Landlord to copy and make
abstracts from any and all of said books and records subject to any limitations
imposed by State or federal law with respect to the confidentiality of patient
and employee records.
 
15.3.3                      Further Assurances and Information.  Tenant shall,
on request of Landlord from time to time, execute, deliver, and furnish
documents as may be necessary to fully consummate the transactions contemplated
under this Lease.  Within 15 days after a request from Landlord, Tenant and each
Subtenant shall provide to Landlord such additional information regarding
Tenant, Tenant’s financial condition, Subtenant, each Subtenant’s financial
condition or the Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time, including, without limitation, a current Tenant’s Certificate and
Facility Financial Report in the form of Exhibit F.  From and after and during
the continuance of an Event of Default, Landlord shall have the right to require
Tenant to provide to Landlord, at Tenant’s expense, an appraisal prepared by an
MAI appraiser setting forth the current fair market value of the Leased
Property.
 
15.3.4                      Material Communications.  Tenant and each Subtenant
shall transmit to Landlord, within five days after receipt thereof, any material
communication affecting a Facility, this Lease, the Legal Requirements or the
Government Authorizations, and Tenant and each Subtenant will promptly respond
to Landlord’s inquiry with respect to such information.  Tenant and each
Subtenant shall notify Landlord in writing within five days after Tenant or any
Subtenant has knowledge of any potential, threatened or existing litigation or
proceeding against, or investigation of, Tenant, Subtenant, Guarantor or the
Facility that would reasonably be expected to adversely affect the right to
operate the Facility or Landlord’s title to the Facility or Tenant’s interest
therein.
 
15.3.5                      Requirements for Financial Statements.  Tenant shall
meet the following requirements in connection with the preparation of the
financial statements:  [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; [iii] all financial statements shall fairly present the
financial condition and performance for the relevant period in all material
respects; [iv] the audited financial statements shall include all notes to the
financial statements and a complete schedule of contingent liabilities and
transactions with Affiliates; and [v] the audited financial statements shall
contain an unqualified opinion; provided, however, this subsection [v] shall not
be deemed violated if the opinions provided for fiscal year 2000 contain a going
concern qualification.
 
15.4           Compliance With Laws.  Tenant and each Subtenant shall comply
with all Legal Requirements and keep all Government Authorizations in full force
and effect.  Subject to Tenant’s right to contest the same in accordance with
the terms of this Lease, Tenant and each Subtenant shall pay when due all taxes
and governmental charges of every kind and nature that are assessed or imposed
upon Tenant and each Subtenant, respectively, at any time during the term of the
Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to
 

 
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Tenant’s and each Subtenant’s respective business and operations at the Leased
Property.  Tenant and each Subtenant shall be solely responsible for compliance
with all Legal Requirements, including the ADA, and Landlord shall have no
responsibility for such compliance.
 
15.5           Broker’s Commission.  Tenant shall indemnify Landlord from claims
of brokers arising by the execution hereof or the consummation of the
transactions contemplated hereby and from expenses incurred by Landlord in
connection with any such claims (including reasonable attorneys’ fees).
 
15.6           Existence and Change in Ownership.  Except as otherwise
specifically provided herein, Tenant, Subtenant and Guarantor shall maintain its
existence throughout the term of this Lease and any change in the ownership of
Tenant, Subtenant or Guarantor, directly or indirectly, shall require Landlord’s
prior written consent.
 
15.7           Financial Covenants.  The defined terms used in this section are
defined in §15.7.1.  The method of valuing assets shall be consistent with the
Financial Statements.  The following financial covenants shall be met throughout
the term of this Lease:
 
15.7.1                      Definitions.
 
(a) “Portfolio Cash Flow” means the aggregate net income arising from all
Facilities under this Lease as reflected on the Facility Financial Statement of
each Facility plus [i] the amount of the provision for depreciation and
amortization; plus [ii] the amount of the provision for management fees; plus
[iii] the amount of the provision for income taxes; plus [iv] the amount of the
provision for Base Rent payments and interest and equipment lease payments, if
any, relating to the Facilities; minus [v] an imputed management fee equal to 5%
of gross revenues of the Facilities (net of contractual allowances); and minus
[vi] an imputed replacement reserve of $250.00 per unit at the Facilities, per
year.
 
(b) “Portfolio Coverage Ratio” is the ratio of [i] Portfolio Cash Flow for each
applicable period; to [ii] the Base Rent payments under this Lease and all other
debt service and equipment lease payments relating to the Facilities for the
applicable period.
 
15.7.2                      Coverage Ratio.  Tenant shall maintain for each
Fiscal Quarter listed below a Portfolio Coverage Ratio in the amount set forth
below; provided, however, that for purposes of calculating the Portfolio
Coverage Ratio the facility located in Dayton, Ohio shall at all times be
excluded from the calculation:
 
Fiscal Quarter
Required Portfolio Coverage Ratio
4th Quarter 2008
1.00:1.00
1st Quarter 2009
1.00:1.00
2nd Quarter 2009
1.00:1.00
3rd Quarter 2009
1.10:1.00
4th Quarter 2009
1.10:1.00

 
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Fiscal Quarter
Required Portfolio Coverage Ratio
1st Quarter 2010
1.10:1.00
2nd Quarter 2010
1.10:1.00
3rd Quarter 2010 and thereafter
1.20:1.00

15.8           Facility Licensure and Certification.
 
15.8.1                      Notice of Inspection.  Tenant and Subtenant, as
applicable, shall [i] give written notice to Landlord within five days after an
inspection of the Facility with respect to health care licensure or
certification has occurred; and [ii] deliver to Landlord copies of each of the
reports, notices, correspondence and all other items and documents listed under
item no. 18 of Exhibit E within five days after receipt thereof.  Tenant and
Subtenant acknowledge that each has reviewed Exhibit E and agrees to the
foregoing obligation.
 
15.8.2                      Material Deficiencies.  If Tenant or Subtenant
receives a Facility survey or inspection report with material deficiencies that
threatens a loss of licensure or, if applicable, certification of the Facility
or the imposition of a ban on admissions to the Facility (the “Material
Deficiencies”) or notice of failure to comply with a previously submitted plan
of correction or an HIPDB adverse action report related to any Material
Deficiencies, Tenant and Subtenant shall cure all of the Material Deficiencies
and implement all corrective actions with respect thereto by the date required
by the regulatory authority and shall deliver evidence of same to Landlord.
 
15.9           Transfer of License and Facility Operations.  If this Lease is
terminated due to expiration of the Term, pursuant to an Event of Default or for
any reason other than Tenant’s purchase of the Leased Property, or if Tenant or
Subtenant vacates the Leased Property (or any part thereof) without termination
of this Lease (other than during periods of repair or reconstruction after
damage, destruction or a Taking, the following provisions shall be immediately
effective:
 
15.9.1                      Licensure.  Tenant and each Subtenant shall execute,
deliver and file all documents and statements requested by Landlord to effect
the transfer of the Facility license and Government Authorizations to a
replacement operator designated by Landlord (“Replacement Operator”), subject to
any required approval of governmental regulatory authorities, and Tenant and
each Subtenant shall provide to Landlord all information and records required by
Landlord in connection with the transfer of the license and Government
Authorizations.
 
15.9.2                      Facility Operations.  In order to facilitate a
responsible and efficient transfer of the operations of the Facility, Tenant and
Subtenant shall, if and to the extent requested by Landlord, [i] deliver to
Landlord the most recent updated reports, notices, schedules and documents
listed under item nos. 17, 18, 19, 20 and 21 of Exhibit E; [ii] assuming Tenant
or Subtenant has not already vacated the Leased Property, continue and maintain
the operation of the Facility in the ordinary course of business, including
using its commercially reasonable efforts to retain the residents at the
Facility to the fullest extent practicable and consistent with applicable laws
and regulations, until transfer of the Facility operations to the Replacement
 

 
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Operator is completed; [iii] enter into such management agreements, operations
transfer agreements and other types of agreements that may be reasonably
requested by Landlord or the Replacement Operator; provided, however, in no
event shall Tenant or Subtenant be required to permit the Replacement Operator
to operate the Leased Property under their licenses unless they receive
confirmation that doing so will not violate applicable Legal Requirements and
they get appropriate indemnities from the Replacement Operator in form and
substance reasonably acceptable to Tenant and Subtenant; and [iv] provide
reasonable access during normal business hours and on reasonable advance notice
for Landlord and its agents to show the Facility to potential replacement
operators.  Tenant and Subtenant consent to the distribution by Landlord to
potential replacement operators of Facility financial statements, licensure
reports, financial and property due diligence materials and other documents,
materials and information relating to the Facility.  The provisions of this
section do not create or establish any rights in Tenant, Subtenant or any third
party and Landlord reserves all rights and remedies relating to termination of
this Lease.
 
15.10                      Bed Operating Rights.  Tenant and Subtenant
acknowledge and agree that the rights to operate the beds located at the
Facility as set forth on Exhibit C under the law of the Facility State, to
relocate such bed operating rights to another location or locations, and to
transfer such bed operating rights to third parties, are property of the
Landlord and are an integral part of the real and personal property that
constitutes the Leased Property.  Tenant and Subtenant have only the right to
use of such rights during the term of this Lease and subject to its terms and
conditions.  All operating rights shall automatically revert to Landlord or
Landlord’s designee upon the expiration or termination of this Lease for any
reason whatsoever (other than Tenant’s purchase of the Leased Property) without
any requirement of a transfer or the payment of additional consideration.
 
15.11                      Power of Attorney.  Effective upon [i] the occurrence
and during the continuance of an Event of Default, or [ii] termination of this
Lease for any reason other than Tenant’s purchase of the Leased Property, Tenant
and Subtenant hereby irrevocably and unconditionally appoint Landlord, or
Landlord’s authorized officer, agent, employee or designee, as Tenant’s and
Subtenant’s true and lawful attorney-in-fact, to act for Tenant and Subtenant in
Tenant’s and Subtenant’s respective name, place, and stead, to execute, deliver
and file all applications and any and all other necessary documents and
statements to effect the issuance, transfer, reinstatement, renewal and/or
extension of the Facility license and all Governmental Authorizations issued to
Tenant and Subtenant or applied for by Tenant and Subtenant in connection with
Tenant’s and Subtenant’s operation of the Facility, to permit any designee of
Landlord or any other transferee to operate the Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing but only in the event Tenant or Subtenant fail to take such actions or
execute such documents after a request from Landlord.  Tenant and Subtenant
irrevocably and unconditionally grant to Landlord as their respective
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant and Subtenant might or could do if personally present or acting, with
full power of substitution, hereby ratifying and confirming all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and is irrevocable prior to Tenant’s
purchase of the Leased Property.  Landlord shall provide Tenant and Subtenant
with copies of any documents filed and/or with a summary of any actions taken
pursuant to this power of attorney.
 

 
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ARTICLE 16:  ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
 
16.1           Prohibition on Alterations and Improvements.  Except for
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as “Alterations”) to the Leased Property.
 
16.2           Approval of Alterations.  If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the “Plans and Specifications”) showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform.  It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as “design development
drawings” as opposed to working or biddable drawings.  Landlord agrees not to
unreasonably delay its review of the Plans and Specifications.  Within 30 days
after receipt of an invoice, Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise monitoring compliance with the terms of this Article 16.  Tenant shall
comply with the requirements of §16.4 in making any Permitted Alterations.
 
16.3           Permitted Alterations.  Permitted Alterations means any one of
the following:  [i] Alterations approved by Landlord; [ii] Alterations required
under §7.2; [iii] Alterations affecting the structure of the Leased Property and
having a total cost of less than $250,000.00 individually or in the aggregate;
[iv] repairs, rebuilding and restoration required or undertaken pursuant to
§9.4; or [v] non-structural Alterations such as painting, landscaping,
wallpapering, installing new floor coverings, etc. without regard to the cost
thereof.
 
16.4           Requirements for Permitted Alterations.  Tenant shall comply with
all of the following requirements in connection with any Permitted Alterations:
 
(a) The Permitted Alterations shall be made in accordance with the approved
Plans and Specifications.
 
(b) The Permitted Alterations and the installation thereof shall comply with all
applicable legal requirements and insurance requirements.
 
(c) The Permitted Alterations shall be done in a good and workmanlike manner,
shall not impair the value or the structural integrity of the Leased Property,
and shall be free and clear of all mechanic’s liens.
 
(d) For any Permitted Alterations having a total cost of $100,000.00 or more,
Tenant shall deliver to Landlord a payment and performance bond, with a surety
acceptable to Landlord, in an amount equal to the estimated cost of the
Permitted Alterations, guaranteeing the completion of the work free and clear of
liens and in accordance with the approved Plans and Specifications, and naming
Landlord and any mortgagee of Landlord as joint obligees on such bond.
 

 
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(e) Tenant shall, at Tenant’s expense, obtain a builder’s completed value risk
policy of insurance insuring against all risks of physical loss, including
collapse and transit coverage, in a nonreporting form, covering the total value
of the work performed, and equipment, supplies, and materials, and insuring
initial occupancy.  Landlord and any mortgagee of Landlord shall be additional
insureds of such policy.  Landlord shall have the right to approve the form and
substance of such policy.
 
(f) Tenant shall pay the premiums required to increase the amount of the
insurance coverages required by Article 4 to reflect the increased value of the
Improvements resulting from installation of the Permitted Alterations, and shall
deliver to Landlord a certificate evidencing the increase in coverage.
 
(g) Tenant shall, not later than 60 days after completion of the Permitted
Alterations, deliver to Landlord a revised “as-built” survey of the respective
Facility if the Permitted Alterations altered the Land or “footprint” of the
Improvements and an “as-built” set of Plans and Specifications for the Permitted
Alterations in form and substance satisfactory to Landlord.
 
(h) Tenant shall, not later than 30 days after Landlord sends an invoice,
reimburse Landlord for any reasonable costs and expenses, including attorneys’
fees and architects’ and engineers’ fees, incurred in connection with reviewing
and approving the Permitted Alterations and ensuring Tenant’s compliance with
the requirements of this section.  The daily fee for Landlord’s consulting
engineer is $750.00.
 
16.5           Ownership and Removal of Permitted Alterations.  The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant subject to the terms and conditions of this Lease.  Tenant
shall not be required or permitted to remove any Permitted Alterations.
 
16.6           Minimum Qualified Capital Expenditures.  During each calendar
year of the Term, Tenant shall expend at least $300.00 per unit for Qualified
Capital Expenditures to improve the Facilities (provided that as to any Facility
with respect to which a certificate of occupancy was not issued prior to the end
of the first calendar year, the minimum qualified capital expenditures required
by this section shall be waived until the calendar year immediately following
the year in which such certificate of occupancy is issued).  Thereafter
throughout the Term, Tenant shall expend such amount each calendar year,
increased annually in proportion to increases in the CPI.  Landlord and Tenant
acknowledge and agree that as of the Amended Effective Date the amount which
Tenant is required to expend for Qualified Capital Expenditures is $380.00 per
unit.  At least annually, at the request of Landlord, Landlord and Tenant shall
review capital expenditures budgets and agree on modifications, if any, required
by changed circumstances and the changed conditions of the Leased Property.
 
16.7           Signs.  Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations.  Upon the termination or expiration of this
Lease (other than as a result of the exercise by Tenant of its purchase option),
Tenant shall, within 30 days after notice from Landlord, remove the signs and
restore the Leased Property to its original condition.
 

 
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ARTICLE 17:  CONTINGENT PAYMENT
 
17.1           Contingent Payment.  Landlord has no current commitment to make a
Contingent Payment Advance.
 
ARTICLE 18:  ASSIGNMENT AND SALE OF LEASED PROPERTY
 
18.1           Prohibition on Assignment and Subletting.  Tenant acknowledges
that Landlord has entered into this Lease in reliance on the personal services
and business expertise of Tenant.  Tenant may not assign, sublet, mortgage,
hypothecate, pledge, grant a right of first refusal or transfer any interest in
this Lease, or in the Leased Property, in whole or in part, without the prior
written consent of Landlord, which Landlord may withhold in its sole and
absolute discretion.  The following transactions will be deemed an assignment or
sublease requiring Landlord’s prior written consent:  [i] an assignment by
operation of law; [ii] an imposition (whether or not consensual) of a lien,
mortgage, or encumbrance upon Tenant’s interest in the Lease; [iii] except as
otherwise permitted by §§14.4 and 18.3, an arrangement (including, but not
limited to, management agreements, concessions, licenses, and easements) which
allows the use or occupancy of all or part of the Leased Property by anyone
other than Tenant; and [iv] a material change of ownership of Tenant other than
changes resulting from the trading of Tenant’s stock on a national stock
exchange.  Landlord’s consent to any assignment, right of first refusal or
sublease will not release Tenant (or any guarantor) from its payment and
performance obligations under this Lease, but rather Tenant, any guarantor, and
Tenant’s assignee or sublessee will be jointly and severally liable for such
payment and performance.  An assignment, right of first refusal or sublease
without the prior written consent of Landlord will be void at Landlord’s
option.  Landlord’s consent to one assignment, right of first refusal or
sublease will not waive the requirement of its consent to any subsequent
assignment or sublease.  Notwithstanding the foregoing, Tenant may enter into a
Sublease with each Subtenant for each Facility provided that each Sublease
complies with §18.2 and Tenant may enter into any interim sublease and
management agreement required to comply with licensure requirements until such
time as the license to operate the Facility is issued in Tenant’s name.
 
18.2           Requests for Landlord’s Consent to Assignment, Sublease or
Management Agreement.  If Tenant is required to obtain Landlord’s consent to a
specific assignment, sublease, or management agreement, Tenant shall give
Landlord [i] the name and address of the proposed assignee, subtenant or
manager; [ii] a copy of the proposed assignment, sublease or management
agreement; [iii] reasonably satisfactory information about the nature, business
and business history of the proposed assignee, subtenant, or manager and its
proposed use of the Leased Property; and [iv] banking, financial, and other
credit information, and references about the proposed assignee, subtenant or
manager sufficient to enable Landlord to determine the financial responsibility
and character of the proposed assignee, subtenant or manager.  Any assignment,
sublease or management agreement shall contain provisions to the effect that
[a] such assignment, sublease or management agreement is subject and subordinate
to all of the terms and provisions of this Lease and to the rights of Landlord
and that the assignee, subtenant or manager shall comply with all applicable
provisions of this Lease; [b] such assignment, sublease or management agreement
may not be modified without the prior written consent of Landlord not to be
unreasonably withheld or delayed; [c] if this Lease shall terminate before the
expiration of such assignment, sublease or management agreement, the assignee,
subtenant or
 

 
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manager thereunder will, solely at Landlord’s option and only upon the express
written notice of attornment from Landlord, attorn to Landlord and waive any
right the assignee, subtenant or manager may have to terminate the assignment,
sublease or management agreement or surrender possession thereunder as a result
of the termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured.  Any attempt or offer by an
assignee, subtenant or manager to attorn to Landlord shall not be binding or
effective without the express written consent of Landlord.  Tenant hereby
collaterally assigns to Landlord, as security for the performance of its
obligations hereunder, all of Tenant’s right, title, and interest in and to any
assignment, sublease or management agreement now or hereafter existing for all
or part of the Leased Property.  Tenant shall, at the request of Landlord,
execute such other instruments or documents as Landlord may request to evidence
this collateral assignment.  If Landlord, in its sole and absolute discretion,
consents to such assignment, sublease, or management agreement, such consent
shall not be effective until [i] a fully executed copy of the instrument of
assignment, sublease or management agreement has been delivered to Landlord;
[ii] in the case of an assignment, Landlord has received a written instrument in
which the assignee has assumed and agreed to perform all of Tenant’s obligations
under the Lease; and [iii] Tenant has paid to Landlord a fee in the amount equal
to the lesser of Landlord’s actual out-of-pocket costs and expenses and
$2,500.00 (applies only to consent requests after the Closing); and
[iv] Landlord has received reimbursement from Tenant or the assignee for all
attorneys’ fees and expenses and all other reasonable out-of-pocket expenses
incurred in connection with determining whether to give its consent, giving its
consent and all matters relating to the assignment (applies only to consent
requests after the Closing).
 
18.3           Agreements with Residents.  Notwithstanding §18.1, Tenant and
Subtenant may enter into an occupancy agreement with residents of the Leased
Property without the prior written consent of Landlord provided that [i] the
agreement does not provide for lifecare services; [ii] the agreement does not
contain any type of rate lock provision or rate guaranty for more than one
calendar year; [iii] the agreement does not provide for any rent reduction or
waiver other than for an introductory period not to exceed six months;
[iv] Tenant and Subtenant may not collect rent for more than one month in
advance, other than one month of rent collected to be held as security for the
performance of the resident’s obligation to Tenant and Subtenant; and [v] all
residents of the Leased Property are accurately shown in accounting records for
the Facility.  Without the prior written consent of Landlord, Tenant and
Subtenant shall not materially change the form of resident occupancy agreement
that was submitted to Landlord prior to the Amended Effective Date.
 
18.4           Sale of Leased Property.  If Landlord or any subsequent owner of
the Leased Property sells the Leased Property, its liability for the performance
of its agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements.  For purposes of this section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
 

 
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18.5           Assignment by Landlord.  Landlord may transfer, assign, mortgage,
collaterally assign, or otherwise dispose of Landlord’s interest in this Lease
or the Leased Property.
 
ARTICLE 19:  HOLDOVER AND SURRENDER
 
19.1           Holding Over.  If Tenant, with or without the express or implied
consent of Landlord, continues to hold and occupy the Leased Property (or any
part thereof) after the expiration of the Term or earlier termination of this
Lease (other than pursuant to Tenant’s purchase of the Leased Property), such
holding over beyond the Term and the acceptance or collection of Rent in the
amount specified below by Landlord shall operate and be construed as creating a
tenancy from month to month and not for any other term whatsoever.  Said
month-to-month tenancy may be terminated by Landlord by giving Tenant five days
written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.  If, without Landlord’s consent or at
Landlord’s request, Tenant continues after the expiration of the Term or earlier
termination of this Lease to hold and occupy the Leased Property whether as a
month-to-month tenant or a tenant at sufferance or otherwise, Tenant shall pay
Rent for each month in an amount equal to the sum of [i] one and one-half
(1-1/2) times the Base Rent payable during the month in which such expiration or
termination occurs, plus [ii] all General Additional Rent accruing during the
month, plus [iii] any and all other sums payable by Tenant pursuant to this
Lease.  During any continued tenancy after the expiration of the Term or earlier
termination of this Lease, Tenant shall be obligated to perform and observe all
of the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by applicable law, to
continue its occupancy and use of the Leased Property until the tenancy is
terminated.  Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
 
19.2           Surrender.  Except for [i] Permitted Alterations; [ii] normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and [iii] damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up each Facility which is then subject to this Lease at the expiration
or termination of the Term in as good order and condition as of the date that
Facility was added to the Lease.  The provisions of this §19.2 shall not apply
in the event of the termination of the Lease upon the exercise by Tenant of the
rights set forth in Article 13.
 
19.3           Indemnity.  If Tenant fails to surrender the entire Leased
Property or any part thereof upon the expiration or termination of this Lease in
a timely manner and in accordance with the provisions of this Lease, in addition
to any other liabilities to Landlord accruing therefrom, Tenant shall defend,
indemnify and hold Landlord, its principals, officers, directors, agents, and
employees harmless from loss or liability resulting from such failure,
including, without limiting the generality of the foregoing, loss of rental with
respect to any new lease in which the rental payable thereunder exceeds the Rent
collected by Landlord pursuant to this Lease during Tenant’s hold-over and any
claims by any proposed new tenant founded on Tenant’s failure to surrender the
Leased Property.  The provisions of this Article 19 shall survive the expiration
or termination of this Lease.  The provisions of this §19.3 shall not apply
 

 
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in the event of the termination of this Lease upon the exercise by Tenant of the
rights set forth in Article 13.
 
ARTICLE 20:  [RESERVED]
 
ARTICLE 21:  QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES
 
21.1           Quiet Enjoyment.  So long as Tenant performs all of its
obligations under this Lease, Tenant’s possession of the Leased Property will
not be disturbed by Landlord or any party claiming by, through or under
Landlord.
 
21.2           Subordination.  Subject to the terms and conditions of this
section, this Lease and Tenant’s rights under this Lease are subordinate to any
ground lease or underlying lease, first mortgage, first deed of trust, or other
first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior.  The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant’s possession, use and occupancy of the
Leased Property or Tenant’s enjoyment of its rights under this Lease unless and
until an Event of Default occurs hereunder.  Any foreclosure action or
proceeding by any mortgagee with respect to the Leased Property shall not affect
Tenant’s rights under this Lease and shall not terminate this Lease unless and
until an Event of Default occurs hereunder.  The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them.  However, Tenant shall execute, acknowledge and deliver to Landlord, at
any time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this section, to confirm or effect any such
subordination, provided that any such document shall include a nondisturbance
provision as set forth in this section satisfactory to Tenant.  Any mortgagee of
the Leased Property shall be deemed to be bound by the nondisturbance provision
set forth in this section.  If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant’s attorney-in-fact.  Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant’s attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
section.  This power of attorney is coupled with an interest and is irrevocable.
 
21.3           Attornment.  If any holder of any mortgage, indenture, deed of
trust, or other similar instrument described in §21.2 succeeds to Landlord’s
interest in the Leased Property, Tenant will pay to such holder all Rent
subsequently payable under this Lease.  Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease.  The
successor in interest will not be bound by [i] any payment of Rent for more than
one month in advance unless actually received by such successor; [ii] any
amendment or modification of this Lease thereafter made without its consent as
provided in this Lease; [iii] any claim against Landlord arising prior
 

 
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to the date on which the successor succeeded to Landlord’s interest; or [iv] any
claim or offset of Rent against Landlord.  Upon request by Landlord or such
successor in interest and without cost to Landlord or such successor in
interest, Tenant will execute, acknowledge and deliver an instrument or
instruments confirming the attornment.  If Tenant fails or refuses to execute,
acknowledge, and deliver any such instrument within 20 days after written
demand, then Landlord or such successor in interest will be entitled to execute,
acknowledge, and deliver any document on behalf of Tenant as Tenant’s
attorney-in-fact.  Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant’s attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document.  This power of
attorney is coupled with an interest and is irrevocable.
 
21.4           Estoppel Certificates.  At the request of Landlord or any
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying the
following:  [i] that the Lease is unmodified and in full force and effect, or if
there have been modifications that the same is in full force and effect as
modified and stating the modifications; [ii] the date to which Rent and other
charges have been paid; [iii] whether Tenant or Landlord is in default or
whether there is any fact or condition known to Landlord or Tenant which, with
notice or lapse of time, or both, would constitute a default, and specifying any
existing default, if any; [iv] that Tenant has accepted and occupies the Leased
Property; [v] that Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord, if that be the case, or specifying such that
exist; and [vi] such other information as may reasonably be requested by
Landlord or any mortgagee or purchaser.  Any purchaser or mortgagee may rely on
this estoppel certificate.  If Tenant fails to deliver the estoppel certificates
to Landlord within 10 days after the request of Landlord, then Tenant shall be
deemed to have certified that [a] the Lease is in full force and effect and has
not been modified, or that the Lease has been modified as set forth in the
certificate delivered to Tenant; [b] Tenant has not prepaid any Rent or other
charges except for the current month; [c] Tenant has accepted and occupies the
Leased Property; [d] neither Tenant nor Landlord is in default nor is there any
fact or condition which, with notice or lapse of time, or both, would constitute
a default; and [e] Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord.  Tenant hereby irrevocably appoints Landlord as
Tenant’s attorney-in-fact to execute, acknowledge, and deliver on Tenant’s
behalf any estoppel certificate to which Tenant does not object within 10 days
after Landlord sends the certificate to Tenant.  This power of attorney is
coupled with an interest and is irrevocable.
 
ARTICLE 22:  REPRESENTATIONS AND WARRANTIES
 
Tenant and Subtenant hereby make the following representations and warranties,
as of the Amended Effective Date, to Landlord and acknowledge that Landlord is
granting the Lease in reliance upon such representations and
warranties.  Tenant’s and Subtenant’s representations and warranties shall
survive the Closing and, except to the extent made as of a specific date, shall
continue in full force and effect until the Obligor Group Obligations have been
performed in full.
 
22.1           Organization and Good Standing.  Tenant is a corporation, duly
organized, validly existing and in good standing under the laws of its
Organization State. Subtenant is a
 

 
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limited liability company, duly organized, validly existing and in good standing
under the laws of its Organization State.  Tenant is qualified to do business in
and is in good standing under the laws of the Facility States.  Subtenant is
qualified to do business and is in good standing under the laws of its Facility
State.
 
22.2           Power and Authority.  Tenant and Subtenant have the power and
authority to execute, deliver and perform this Lease.  Tenant and Subtenant have
taken all requisite action necessary to authorize the execution, delivery and
performance of their respective obligations under this Lease.
 
22.3           Enforceability.  This Lease constitutes a legal, valid, and
binding obligation of Tenant and Subtenant, as applicable, enforceable in
accordance with its terms except as such enforceability may be limited by
creditors rights laws and general principles of equity.
 
22.4           Government Authorizations.  The Facility is in compliance with
all Legal Requirements.  All Government Authorizations are in full force and
effect.  Except as otherwise noted in Exhibit G, Tenant or the respective
Subtenant holds all Government Authorizations necessary for the operation of the
Facility in accordance with the Facility Uses.  No prior notice to or approval
from any licensure authority is required in connection with the execution of
this Lease by Landlord or Tenant other than those notices which have been given
or approvals which have been obtained prior to the Amended Commencement Date.
 
22.5           Reserved.
 
22.6           Condition of Facility.  To the best of Tenant’s and Subtenant’s
knowledge and except as otherwise disclosed in writing by Tenant to Landlord
prior to the Amended Effective Date, all of the mechanical and electrical
systems, heating and air-conditioning systems, plumbing, water and sewer
systems, and all other items of mechanical equipment or appliances are in good
working order, condition and repair, are of sufficient size and capacity to
service the Facility for the Facility Uses and conform with all applicable
ordinances and regulations, and with all building, zoning, fire, safety, and
other codes, laws and orders.  The Improvements, including the roof and
foundation, are structurally sound and free from leaks and other defects.
 
22.7           Compliance with Laws.  To the best of Tenant’s and Subtenant’s
knowledge, there is no violation of, or noncompliance with, [i] any laws,
orders, rules or regulations, ordinances or codes of any kind or nature
whatsoever relating to the Facility or the ownership or operation thereof
(including, without limitation, building, fire, health, occupational safety and
health, zoning and land use, planning and environmental laws, orders, rules and
regulations); [ii] any covenants, conditions, restrictions or agreements
affecting or relating to the ownership, use or occupancy of the Facility; or
[iii] any order, writ, regulation or decree relating to any matter referred to
in [i] or [ii] above.
 
22.8           No Litigation.  As of the Amended Effective Date and except as
disclosed on Exhibit H, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant or Subtenant with respect to its
 

 
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operation at the Facility or against the Facility; [ii] no HIPDB adverse action
reports have been issued to Tenant or Subtenant with respect to its operations
at the Facility or against the Facility; [iii] neither Tenant nor Subtenant has
received notice of any threatened actions, suits, proceedings or investigations
against Tenant or Subtenant with respect to its operations at the Facility or
against the Facility at law or in equity, or before any governmental board,
agency or authority which, if determined adversely to Tenant or Subtenant, would
materially and adversely affect the Facility or title to the Facility (or any
part thereof), the right to operate the Facility as presently operated, or the
financial condition of Tenant or Subtenant; [iv] there are no unsatisfied or
outstanding judgments against Tenant or Subtenant with respect to its operations
at the Facility or against the Facility; [v] there is no labor dispute
materially and adversely affecting the operation or business conducted by Tenant
or Subtenant at the Facility; and [vi] Tenant does not have knowledge of any
facts or circumstances which might reasonably form the basis for any such
action, suit, or proceeding.
 
22.9           Consents.  The execution, delivery and performance of this Lease
will not require any consent, approval, authorization, order, or declaration of,
or any filing or registration with, any court, any federal, state, or local
governmental or regulatory authority, or any other person or entity, the absence
of which would materially impair the ability of Tenant or Subtenant to operate
the Facility for the Facility Uses except for the post-acquisition filing for
licensure of the Facility.
 
22.10                      No Violation.  The execution, delivery and
performance of this Lease [i] do not and will not conflict with, and do not and
will not result in a breach of Tenant’s or Subtenant’s Organizational Documents;
[ii] do not and will not conflict with, and do not and will not result in a
breach of, and do not and will not constitute a default under (or an event
which, with or without notice or lapse of time, or both, would constitute a
default under), any of the terms, conditions or provisions of any agreement or
other instrument or obligation to which Tenant or Subtenant is a party or by
which its assets are bound; and [iii] do not and will not violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Tenant,
Subtenant or the Facility.
 
22.11                      Reports and Statements.  All reports, statements,
certificates and other data furnished by or on behalf of Tenant or Guarantor to
Landlord in connection with this Lease, and all representations and warranties
made herein or in any certificate or other instrument delivered in connection
herewith and therewith, are true and correct in all material respects and do not
omit to state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data.  The copies of all agreements and instruments submitted to Landlord,
including, without limitation, all agreements relating to management of the
Facility and Tenant’s working capital are true, correct and complete copies in
all material respects and include all material amendments and modifications of
such agreements.
 
22.12                      ERISA.  All plans (as defined in §4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time (“ERISA”)) for which Tenant or Subtenant is an “employer” or a
“substantial employer” (as defined in §§3(5) and 4001(a)(2) of ERISA,
respectively) are in compliance with ERISA and the regulations and published
interpretations thereunder.  To the extent Tenant or Subtenant maintains a
qualified
 

 
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defined benefit pension plan:  [i] there exists no accumulated funding
deficiency; [ii] no reportable event and no prohibited transaction has occurred;
[iii] no lien has been filed or threatened to be filed by the Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA;
and [iv] Tenant and Subtenant have not been deemed to be a substantial employer.
 
22.13                      Chief Executive Office.  Tenant and Subtenant each
maintain its respective chief executive office and its books and records at
Tenant’s address set forth in the introductory paragraph of this Lease.  Tenant
and Subtenant do not conduct any business or operations other than at Tenant’s
chief executive office and at the Facility.
 
22.14                      Other Name or Entities.  Except as disclosed herein,
none of Tenant’s or Subtenant’s business at the Leased Property is conducted
through any subsidiary, unincorporated association or other entity and neither
Tenant nor Subtenant have in connection with its operations at the Leased
Property, within the six years preceding the date of this Lease [i] changed its
name, [ii] used any name other than the name stated at the beginning of this
agreement, or [iii] merged or consolidated with, or acquired any of the assets
of, any corporation or other business.
 
22.15                      Parties in Possession.  Except as disclosed on
Exhibit B and except for each Subtenant, there are no parties in possession of
any Leased Property or any portion thereof as managers, lessees, tenants at
sufferance, or trespassers.
 
22.16                      Access.  Except as otherwise disclosed in writing by
Tenant to Landlord prior to the Amended Effective Date, access to the Land is
directly from a dedicated public right-of-way without any easement.  To the
knowledge of Tenant and Subtenant, there is no fact or condition which would
result in the termination or reduction of the current access to and from the
Land to such right-of-way.
 
22.17                      Utilities.  There are available at the Land gas,
municipal water, and sanitary sewer lines, storm sewers, electrical and
telephone services in operating condition which are adequate for the operation
of the Facility at a reasonable cost.  Except as otherwise disclosed in writing
by Tenant to Landlord prior to the Amended Effective Date, the Land has direct
access to utility lines located in a dedicated public right-of-way without any
easement.  As of the Amended Effective Date, there is no pending or, to the
knowledge of Tenant or Subtenant, threatened governmental or third party
proceeding which would impair or result in the termination of such utility
availability.
 
22.18                      Condemnation and Assessments.  As of the Amended
Effective Date, neither Tenant nor Subtenant has received notice of, and there
are no pending or, to the best of Tenant’s and Subtenant’s knowledge,
threatened, condemnation, assessment (other than as disclosed in writing by
Tenant to Landlord prior to the Amended Effective Date) or similar proceedings
affecting or relating to the Facility, or any portion thereof, or any utilities,
sewers, roadways or other public improvements serving the Facility.
 
22.19                      Zoning.  As of the Amended Effective Date, [i] the
use and operation of the Facility for the Facility Uses is a permitted use under
the applicable zoning code; [ii] except
 

 
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as disclosed on Exhibit G hereto, no special use permits, conditional use
permits, variances, or exceptions have been granted or are needed for such use
of the Facility; [iii] the Land is not located in any special districts such as
historical districts or overlay districts; and [iv] the Facility has been
constructed in accordance with and complies with all zoning laws in effect at
the time of its construction, including, but not limited to, dimensional,
parking, setback, screening, landscaping, sign and curb cut requirements or the
Facility obtained required waivers or variances from such requirements.
 
22.20                      Pro Forma Statement.  Reserved.
 
22.21                      Environmental Matters.  During the period of Tenant’s
or Subtenant’s ownership or possession of the Leased Property and, to the best
of Tenant’s and Subtenant’s knowledge after diligent inquiry, for the period
prior to Tenant’s and Subtenant’s ownership or possession of the Leased
Property, [i] the Leased Property is in compliance with all Environmental Laws;
[ii] there were no releases or threatened releases of Hazardous Materials on,
from, or under the Leased Property, except in compliance with all Environmental
Laws; [iii] no Hazardous Materials have been, are or will be used, generated,
stored, or disposed of at the Leased Property, except in compliance with all
Environmental Laws; [iv] asbestos has not been and will not be used in the
construction of any Improvements; [v] no permit is or has been required from the
Environmental Protection Agency or any similar agency or department of any state
or local government for the use or maintenance of any Improvements;
[vi] underground storage tanks on or under the Land, if any, have been and
currently are being operated in compliance with all applicable Environmental
Laws; [vii] any closure, abandonment in place or removal of an underground
storage tank on or from the Land was performed in compliance with applicable
Environmental Laws and any such tank had no release contaminating the Leased
Property or, if there had been a release, the release was remediated in
compliance with applicable Environmental Laws to the satisfaction of regulatory
authorities; [viii] no summons, citation or inquiry has been made by any such
environmental unit, body or agency or a third party demanding any right of
recovery for payment or reimbursement for costs incurred under CERCLA or any
other Environmental Laws and the Land is not subject to the lien of any such
agency; and [ix] to the best of Tenant’s and Subtenant’s knowledge, the
environmental assessment of the Facility (and all follow-up reports, supplements
and amendments) that was delivered to Landlord by Tenant in connection with the
closing of this Lease is true, complete and accurate.  “Disposal” and “release”
shall have the meanings set forth in CERCLA.
 
22.22                      Leases and Contracts.  As of the Amended Effective
Date and except as disclosed on Exhibit I, there are no leases or contracts
(including, but not limited to, insurance contracts, maintenance contracts,
construction contracts, employee benefit plans, employment contracts, equipment
leases, security agreements, architect agreements, and management contracts) to
which Tenant, Subtenant or Guarantor is a party relating to any part of the
ownership, operation, possession, construction, management or administration of
the Land or the Facility which individually or in the aggregate with respect to
any Facility require payments in excess of $20,000 per year.
 
22.23                      No Default.  As of the Amended Effective Date,
[i] there is no existing Event of Default under this Lease; and [ii] no event
has occurred which, with the giving of notice or the passage of time, or both,
would constitute or result in such an Event of Default.
 

 
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22.24                      Tax Status.  If Tenant or Subtenant is a partnership
or limited liability company, it is taxable as a partnership under the Internal
Revenue Code and all applicable facility state tax laws.
 
ARTICLE 23:  RESERVED
 
ARTICLE 24:  SECURITY INTEREST
 
24.1           Collateral.  Tenant, Subtenant and Guarantor hereby grant to each
Landlord and HCRI (if not a Landlord) (individually and collectively called
“Secured Party”) a security interest in the following described property located
at a Leased Property, whether now owned or hereafter acquired by Tenant,
Subtenant and Guarantor (the “Collateral”), to secure the payment and
performance of the Obligor Group Obligations:
 
(a) All machinery, furniture, equipment, trade fixtures, appliances, inventory
and all other goods (as “equipment”, “inventory” and “goods” are defined for
purposes of Article 9 (“Article 9”) of the Uniform Commercial Code as adopted in
Ohio) and any leasehold interest of Tenant or any Subtenant in any of the
foregoing, including, without limitation, those items which are to become
fixtures or which are building supplies and materials to be incorporated into
any improvement or fixture.
 
(b) All accounts, contract rights, general intangibles, instruments, documents,
and chattel paper [as “accounts”, “contract rights”, “general intangibles”,
“instruments”, “documents”, and “chattel paper”, are defined for purposes of
Article 9] now or hereafter arising.
 
(c) All franchises, permits, licenses, operating rights, certifications,
approvals, consents, authorizations and other general intangibles, including,
without limitation, certificates of need, state health care facility licenses,
and Medicare and Medicaid provider agreements, to the extent permitted by law.
 
(d) Unless expressly prohibited by the terms thereof, all contracts, agreements,
contract rights and materials relating to the design, construction, operation or
management of any improvements, including, but not limited to, plans,
specifications, drawings, blueprints, models, mock-ups, brochures, flyers,
advertising and promotional materials and mailing lists.
 
(e) All subleases, occupancy agreements, license agreements and concession
agreements, written or unwritten, of any nature, now or hereafter entered into,
and all right, title and interest of Tenant thereunder, including, without
limitation, those certain Subleases dated as of the Effective Date, by and
between Tenant, as Sublandlord, and each Subtenant, as Subtenant; and including,
without limitation, Tenant’s right, if any, to cash or securities deposited
thereunder whether or not the same was deposited to secure performance by the
subtenants, occupants, licensees and concessionaires of their obligations
thereunder, including the right to receive and collect the rents, revenues, and
other charges thereunder.
 
(f) All ledger sheets, files, records, computer programs, tapes, other
electronic data processing materials, and other documentation.
 

 
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(g) The products and proceeds of the preceding listed property, including,
without limitation, cash and non-cash proceeds, proceeds of proceeds, and
insurance proceeds.
 
24.2           Additional Documents.  At the request of Landlord, Tenant and
each Subtenant shall execute additional security agreements, financing
statements, and such other documents as may be requested by Landlord to maintain
and perfect such security interest.  Tenant and each Subtenant hereby
irrevocably appoint Landlord, its successors and assigns, as Tenant’s or
Subtenant’s attorney-in-fact to execute, acknowledge, deliver and file such
documents on behalf of Tenant or such Subtenant.  This power of attorney is
coupled with an interest and is irrevocable.
 
24.3           Notice of Sale.  With respect to any sale or other disposition of
any of the Collateral after the occurrence of an Event of Default, Landlord,
Tenant and each Subtenant agree that the giving of five days’ notice by
Landlord, sent by overnight delivery, postage prepaid, to Tenant’s or
Subtenant’s notice address designating the time and place of any public sale or
the time after which any private sale or other intended disposition of such
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Tenant and each Subtenant waive any other notice with respect thereto.
 
24.4           Recharacterization.  Landlord and Tenant intend this Lease to be
a true lease.  However, if despite the parties’ intent, it is determined or
adjudged by a court for any reason that this Lease is not a true lease or if
this Lease is recharacterized as a financing arrangement, then this Lease shall
be considered a secured financing agreement and Landlord’s title to the Leased
Property shall constitute a perfected first priority lien in Landlord’s favor on
the Leased Property to secure the payment and performance of all the Obligor
Group Obligations.
 
ARTICLE 25:  MISCELLANEOUS
 
25.1           Notices.  Landlord, Tenant and Subtenant hereby agree that all
notices, demands, requests, and consents (hereinafter “notices”) required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] certified mail, return
receipt requested, postage prepaid; or [iii] nationally recognized overnight
courier.  Notices to any Subtenant should be sent c/o Tenant at Tenant’s address
set forth in the introductory paragraph.  All notices shall be deemed to be
given upon the earlier of actual receipt or three Business Days after mailing,
or one Business Day after deposit with the overnight courier.  Any notices
meeting the requirements of this section shall be effective, regardless of
whether or not actually received.  Landlord or Tenant may change its notice
address at any time by giving the other party notice of such change.
 
25.2           Advertisement of Leased Property.  In the event the Tenant fails
to exercise its option to renew within the time period set forth in §12.1, then
Landlord or its agent shall have the right to enter the Leased Property at all
reasonable times for the purpose of exhibiting the Leased Property to others and
to place upon the Leased Property for and during the period commencing 120 days
prior to the expiration of this Lease, “for sale” or “for rent” notices or
signs.
 

 
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25.3           Entire Agreement.  This Lease contains the entire agreement
between Landlord and Tenant with respect to the subject matter hereof.  No
representations, warranties, and agreements have been made by Landlord except as
set forth in this Lease.  No oral agreements or understandings between Landlord
and Tenant shall survive execution of this Lease.
 
25.4           Severability.  If any term or provision of this Lease is held or
deemed by Landlord to be invalid or unenforceable, such holding shall not affect
the remainder of this Lease and the same shall remain in full force and effect,
unless such holding substantially deprives Tenant of the use of the Leased
Property or Landlord of the rents herein reserved, in which event this Lease
shall forthwith terminate as if by expiration of the Term.
 
25.5           Captions and Headings.  The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Lease or the intent of any provision hereof.
 
25.6           Governing Law.  This Lease shall be governed by and construed in
accordance with the laws of the State of Ohio, except as to matters under which
the laws of a State in which a respective Facility is located, or under
applicable procedural conflicts of laws rules, require the application of laws
of such other State, in which case the laws or conflicts of laws rules, as the
case may be, of such State shall govern to the extent required.
 
25.7           Memorandum of Lease.  Tenant shall not record this Lease.  Tenant
shall, however, record a memorandum of lease approved by Landlord upon
Landlord’s request.
 
25.8           Waiver.  No waiver by Landlord of any condition or covenant
herein contained, or of any breach of any such condition or covenant, shall be
held or taken to be a waiver of any subsequent breach of such covenant or
condition, or to permit or excuse its continuance or any future breach thereof
or of any condition or covenant, nor shall the acceptance of Rent by Landlord at
any time when Tenant or Subtenant is in default in the performance or observance
of any condition or covenant herein be construed as a waiver of such default, or
of Landlord’s right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.
 
25.9           Binding Effect.  This Lease will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord, Tenant and Subtenant.
 
25.10                      No Offer.  Landlord’s submission of this Lease to
Tenant is not an offer to lease the Leased Property, or an agreement by Landlord
to reserve the Leased Property for Tenant.  Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.
 
25.11                      Modification.  This Lease may only be modified by a
writing signed by both Landlord and Tenant.  All references to this Lease,
whether in this Lease or in any other document or instrument, shall be deemed to
incorporate all amendments, modifications and renewals of this Lease, made after
the date hereof.  If Tenant requests Landlord’s consent to any
 

 
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change in ownership, merger or consolidation of Tenant or Guarantor, any
assumption of the Lease, or any modification of the Lease, Tenant shall provide
Landlord all relevant information and documents sufficient to enable Landlord to
evaluate the request.  In connection with any such request, Tenant shall pay to
Landlord a fee in an amount equal to the lesser of $2,500.00 and Landlord’s
actual reasonable attorney’s fees and expenses and other reasonable
out-of-pocket expenses incurred in connection with Landlord’s evaluation of
Tenant’s request, the preparation of any documents and amendments, the
subsequent amendment of any documents between Landlord and its collateral pool
lenders (if applicable), and all related matters.
 
25.12                      Landlord’s Modification.  Tenant acknowledges that
Landlord may mortgage the Leased Property or use the Leased Property as
collateral for a collateralized mortgage obligations or Real Estate Mortgage
Investment Companies (REMICS).  If any mortgage lender of Landlord desires any
modification of this Lease, Tenant agrees to consider such modification in good
faith and to execute an amendment of this Lease if Tenant finds such
modification acceptable.  Landlord shall not do anything in connection with its
financing of the Leased Property which would limit the rights granted to Tenant
or Subtenant hereunder.
 
25.13                      No Merger.  The surrender of this Lease by Tenant or
the cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant’s default will not work a merger,
and will, at Landlord’s option, terminate any subleases or operate as an
assignment to Landlord of any subleases.  Landlord’s option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
 
25.14                      Laches.  No delay or omission by either party hereto
to exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
 
25.15                      Limitation on Tenant’s Recourse.  Tenant’s sole
recourse against Landlord, and any successor to the interest of Landlord in the
Leased Property, is to the interest of Landlord, and any such successor, in the
Leased Property.  Tenant will not have any right to satisfy any judgment which
it may have against Landlord, or any such successor, from any other assets of
Landlord, or any such successor.  In this section, the terms “Landlord” and
“successor” include the shareholders, venturers, and partners of “Landlord” and
“successor” and the officers, directors, and employees of the same.  The
provisions of this section are not intended to limit Tenant’s right to seek
injunctive relief or specific performance.
 
25.16                      Construction of Lease.  This Lease has been prepared
by Landlord and its professional advisors and reviewed by Tenant and its
professional advisors.  Landlord, Tenant, and their advisors believe that this
Lease is the product of all their efforts, that it expresses their agreement,
and agree that it shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing it.
 
25.17                      Counterparts.  This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
 

 
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25.18                      Custody of Escrow Funds.  Any funds paid to Landlord
in escrow hereunder may be held by Landlord or, at Landlord’s election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency.  The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.
 
25.19                      Landlord’s Status as a REIT.  Tenant acknowledges
that Landlord (or a Landlord Affiliate) has elected and may hereafter elect to
be taxed as a real estate investment trust (“REIT”) under the Internal Revenue
Code.
 
25.20                      Exhibits.  All of the exhibits referenced in this
Lease are attached hereto and incorporated herein.
 
25.21                      WAIVER OF JURY TRIAL.  LANDLORD, TENANT AND SUBTENANT
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF
THEM AGAINST THE OTHER ON ALL MATTERS ARISING OUT OF THIS LEASE OR THE USE AND
OCCUPANCY OF THE LEASED PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY
DAMAGE).  IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT,
TENANT AND SUBTENANT WILL NOT INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY
COUNTERCLAIM IN ANY SUCH PROCEEDING.
 
25.22                      CONSENT TO JURISDICTION.  TENANT AND SUBTENANT HEREBY
IRREVOCABLY SUBMIT AND CONSENT TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY
STATE OR FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO OR ANY COUNTY
IN WHICH A FACILITY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR
[III] ANY DOCUMENT EXECUTED BY TENANT OR SUBTENANT IN CONNECTION WITH THIS
LEASE.  TENANT AND SUBTENANT HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
TENANT AND SUBTENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING.  TENANT AND SUBTENANT AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW.
 
TENANT AND SUBTENANT AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF
LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT,
THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO UNLESS SUCH COURT LACKS IN
PERSONAM OR SUBJECT MATTER JURISDICTION IN WHICH CASE
 

 
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TENANT AND SUBTENANT SHALL HAVE THE RIGHT TO INSTITUTE SUCH ACTION OR PROCEEDING
BEFORE ANY COURT HAVING SUCH JURISDICTION.
 
TENANT AND SUBTENANT HEREBY CONSENT TO SERVICE OF PROCESS BY LANDLORD IN ANY
MANNER AND IN ANY JURISDICTION PERMITTED BY LAW.  NOTHING HEREIN SHALL AFFECT OR
IMPAIR LANDLORD’S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW,
OR LANDLORD’S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT, SUBTENANT
OR THE PROPERTY OF TENANT OR SUBTENANT IN THE COURTS OF ANY OTHER JURISDICTION.
 
25.23                      Attorney’s Fees and Expenses.  Tenant shall pay to
Landlord all reasonable costs and expenses incurred by Landlord in administering
this Lease and the security for this Lease, enforcing or preserving Landlord’s
rights under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, but not limited to, [a] reasonable
attorney’s and paralegal’s fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and
[e] consulting and witness fees and expenses incurred by Landlord in connection
with any litigation or other proceeding; provided, however, Landlord’s internal
bookkeeping and routine lease servicing costs are not payable by Tenant.
 
25.24                      Survival.  The following provisions shall survive
termination of the Lease:  Article 8 (Defaults and Remedies); Article 9 (Damage
and Destruction); Article 10 (Condemnation); §15.3.6 (Confidentiality); §15.9
(Transfer of License and Facility Operations); §15.10 (Bed Operating Rights);
§18.2 (Assignment or Sublease); Article 19 (Holdover and Surrender); Article 24
(Security Interest) and §25.24 (Survival).
 
25.25                      Time.  Time is of the essence in the performance of
this Lease.
 
25.26                      Subtenant.  Each Subtenant has joined in the
execution of this Lease to acknowledge that it is subject to and bound by the
terms of the Lease applicable to such Subtenant, including, without limitation,
the grant of a security interest under Article 24.
 
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IN WITNESS WHEREOF, the parties hereto have executed this Lease or caused the
same to be executed by their respective duly authorized officers as of the date
first set forth above.
 
Signed and acknowledged in the presence of:
 
Signature /s/Rita J. Rogge
Print Name Rita
Rogge                                                                
 
Signature /s/ Donna J.
Lunsford                                                                
Print Name Donna
Lunsford                                                                
HEALTH CARE REIT, INC.
 
By: /s/ Erin C
Ibele                                                                    
 
Title: Senior Vice President Administration
               and Corporate
Secretary                                                                    
   
 
 
 
 
Signature /s/Rita J.
Rogge                                                                
Print Name Rita
Rogge                                                                
 
Signature /s/ Donna J.
Lunsford                                                                
Print Name Donna
Lunsford                                                                
HCRI COLD SPRING PROPERTIES, LLC
 
By:Health Care REIT, Inc., its Sole Member
 
By: /s/ Erin C
Ibele                                                             
 
Title: Senior Vice President Administration
               and Corporate
Secretary                                                                    
   
 
 
 
 
 
Signature s/Rita J.
Rogge                                                                
Print Name Rita
Rogge                                                                
 
Signature/s/ Donna J.
Lunsford                                                                
Print Name Donna
Lunsford                                                                
HCRI LOUISIANA PROPERTIES, L.P.
 
By:HCRI Southern Investments I, Inc., General Partner
 
By: /s/ Erin C Ibele
 
Title: Senior Vice President Administration
               and Corporate Secretary _
   
 
 
Signature /s/ Marrji
Padden                                                                
Print Name Marrji
Padden                                                                
 
Signature /s/ Melanie
Pennington                                                                
Print Name Melanie
Pennington                                                                
EMERITUS CORPORATION
 
By: /s/ Eric
Mendelsohn                                                                    
 
Title: SVP Corporate Development
 
Tax I.D.
No.:                                                                    
   

 
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Signature /s/ Marrji
Padden                                                                
Print Name Marrji
Padden                                                                
 
Signature /s/ Melanie
Pennington                                                                
Print Name Melanie
Pennington                                                                
SUMMERVILLE AT KENNER, L.L.C.
 
By: /s/ Eric
Mendelsohn                                                                    
 
Title: SVP Corporate Development
 
Tax I.D.
No.:                                                                    
   
 
 
Signature /s/ Marrji
Padden                                                                
Print Name Marrji
Padden                                                                
 
Signature /s/ Melanie
Pennington                                                                
Print Name Melanie Pennington
                                                                
SUMMERVILLE AT DAYTON LLC
 
By: /s/ Eric
Mendelsohn                                                                    
 
Title: SVP Corporate Development
 
Tax I.D.
No.:                                                                    
   
 
 
 
Signature/s/ Marrji
Padden                                                                
Print Name Marrji
Padden                                                                
 
Signature /s/ Melanie
Pennington                                                                
Print Name Melanie
Pennington                                                                
SUMMERVILLE AT OUTLOOK MANOR LLC
 
By: /s/ Eric
Mendelsohn                                                                    
 
Title: SVP Corporate Development
 
Tax I.D.
No.:                                                                    
   
 
 
 
 
 
Signature /s/ Marrji
Padden                                                                
Print Name Marrji
Padden                                                                
 
Signature /s/ Melanie
Pennington                                                                
Print Name Melanie
Pennington                                                                
SENIOR LIVING PROPERTIES, LLC (solely for purposes of confirming the termination
of the Summerville Lease in accordance with §1.7.)
 
By: /s/ Eric
Mendelsohn                                                                    
 
Title: SVP Corporate Development
 
Tax I.D.
No.:                                                                    

 
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STATE OF OHIO                                           )
) SS:
COUNTY OF LUCAS                                                      )
 
The foregoing instrument was acknowledged before me this 13th day of January,
2009 by Erin C. Ibele, the Senior Vice President Administration and Corporate
Secretary of Health Care REIT, Inc., a Delaware corporation, on behalf of the
corporation.
 
/s/ Rita J. Rogge
Notary Public
 
My Commission Expires:08-26-2010 [SEAL]
 
STATE OF OHIO                                           )
) SS:
COUNTY OF LUCAS                                                      )
 
The foregoing instrument was acknowledged before me this 13th day of January,
2009 by Erin C. Ibele, Senior Vice President Administration and Corporate
Secretary of Health Care REIT, Inc., a Delaware corporation and the sole member
of HCRI Cold Spring Properties, LLC, a limited liability company organized under
the laws of the State of Delaware, on behalf of the limited liability company.
 
/s/ Rita J.
Rogge                                                                
Notary Public
 
My Commission Expires:
08-26-2010                                                                                                                                           [SEAL]
 
STATE OF OHIO                                                      )
) SS:
COUNTY OF LUCAS                                                      )
 
The foregoing instrument was acknowledged before me this 13th day of January,
2009 by Erin C. Ibele, the Senior Vice President Administration and Corporate
Secretary of HCRI Southern Investments I, Inc., a Delaware corporation and the
General Partner of HCRI Louisiana Properties, L.P., a Delaware limited
partnership, on behalf of the limited partnership.
 
/s/ Rita J.
Rogge                                                                
Notary Public
 
My Commission Expires:
08-26-2010                                                                                                                                           [SEAL]
 

 
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STATE OF
WASHINGTON                                                                )
) SS:
COUNTY OF KING                                                )
 
The foregoing instrument was acknowledged before me this 14th day of January,
2009 by Eric Mendelsohn, the SVP Corporate Development of Emeritus Corporation,
a Washington corporation, on behalf of the corporation.
 
/s/ Melanie
Pennington                                                                
Notary Public
 
My Commission
Expires:07-09-2011                                                                                                                                           [SEAL]
 
STATE OF
WASHINGTON                                                                )
) SS:
COUNTY OF KING                                                )
 
The foregoing instrument was acknowledged before me this 14th day of January,
200__ by Eric Mendelsohn, the SVP Corporate Development of Summerville at
Kenner, L.L.C., a Delaware limited liability company, on behalf of the company.
/s/ Melanie Pennington
Notary Public
 
My Commission Expires: 07-09-2011 [SEAL]
 
STATE OF
WASHINGTON                                                                )
) SS:
COUNTY OF KING                                                )
 
The foregoing instrument was acknowledged before me this 14th day of January,
2009 by Eric Mendelsohn, the SVP Corporate Development of Summerville at Dayton
LLC, a Delaware limited liability company, on behalf of the company.
 
/s/ Melanie Pennington
Notary Public
 
My Commission Expires: 07-09-2011 [SEAL]
 

 
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STATE OF
WASHINGTON                                                                )
) SS:
COUNTY OF KING                                                )
 
The foregoing instrument was acknowledged before me this 14th day of January,
2009 by Eric Mendelsohn, the SVP Corporate Development of Summerville at Outlook
Manor LLC, a Delaware  limited liability company, on behalf of the company.
 
/s/ Melanie Pennington
Notary Public
 
My Commission Expires: 07-09-2011 [SEAL]
 
STATE OF
WASHINGTON                                                                )
) SS:
COUNTY OF KING)
The foregoing instrument was acknowledged before me this 14th day of January,
2009 by Eric Mendelsohn, the SVP Corporate Development of Senior Living
Properties, LLC, a Delaware  limited liability company, on behalf of the
company.
/s/ Melanie Pennington
Notary Public
My Commission Expires: 07-09-2011 [SEAL]

THIS INSTRUMENT PREPARED BY:

Cheryl K. Slotterbeck, Esq.
Shumaker, Loop & Kendrick, LLP
1000 Jackson Street
Toledo, Ohio  43604-5573

 
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