EXHIBIT
10.12




__________________________________________






SECOND
AMENDED AND RESTATED


MASTER
LEASE AGREEMENT




__________________________________________









Among




OMEGA
HEALTHCARE INVESTORS, INC.







THE
LESSOR ENTITIES IDENTIFIED ON THE SIGNATURE PAGE HEREOF






THE
LESSEE ENTITIES IDENTIFIED ON THE SIGNATURE PAGE HEREOF






AND






THE
GUARANTOR ENTITIES IDENTIFIED ON THE SIGNATURE PAGE HEREOF






Dated As
Of









February
1, 2008











TABLE
OF CONTENTS


ARTICLE
      I
            21.1
            LEASE
            21.2
            SINGLE,
      INDIVISIBLE LEASE
            31.3
            JOINT
      AND SEVERAL OBLIGATION
            41.4
            TERM
            41.5
            OPTIONS
      TO RENEW
            4ARTICLE
      II
            62.1
            DEFINITIONS
            6ARTICLE
      III
            163.1
            RENT
            163.2
            ADDITIONAL
      CHARGES
            163.3
            LATE
      CHARGE
            163.4
            METHOD
      OF PAYMENT OF RENT
            173.5
            NET
      LEASE
            173.6
            LIMITATION
      ON COUNTERCLAIM
            173.7
            FUTURE
      TRANSITION OF CERTAIN ADDITIONAL FACILITIES.
            17ARTICLE
      IV
            194.1
            PAYMENT
      OF IMPOSITIONS
            194.2
            NOTICE
      OF IMPOSITIONS
            204.3
            ADJUSTMENT
      OF IMPOSITIONS
            214.4
            UTILITY
      CHARGES
            214.5
            INSURANCE
      PREMIUMS
            21ARTICLE
      V
            215.1
            NO
      TERMINATION, ABATEMENT, ETC.
            21ARTICLE
      VI
            216.1
            OWNERSHIP
      OF THE LEASED PROPERTIES
            216.2
            LESSOR’S
      PERSONAL PROPERTY
            226.3
            LESSEE’S
      PERSONAL PROPERTY
            226.4
            GRANT
      OF SECURITY INTEREST IN LESSEE’S PERSONAL PROPERTY
            23ARTICLE
      VII
            237.1
            CONDITION
      OF THE LEASED PROPERTIES
            237.2
            USE
      OF LEASED PROPERTIES
            237.3
            CERTAIN
      ENVIRONMENTAL MATTERS
            24ARTICLE
      VIII
            30


i





8.1
            REPRESENTATIONS
      AND WARRANTIES OF LESSEE AND SUN
            308.2
            REPRESENTATIONS
      AND WARRANTIES OF LESSOR
            318.3
            LIMITATION
      ON REMEDIES
            338.4
            COMPLIANCE
      WITH LEGAL AND INSURANCE REQUIREMENTS
            338.5
            LEGAL
      REQUIREMENT COVENANTS
            338.6
            CERTAIN
      COVENANTS REGARDING MANAGEMENT
            33ARTICLE
      IX
            349.1
            MAINTENANCE
      AND REPAIR
            349.2
            ENCROACHMENTS,
      RESTRICTIONS, ETC.
            369.3
            FACILITY
      IMPROVEMENTS
            37ARTICLE
      X
            3710.1
            CONSTRUCTION
      OF ALTERATIONS AND ADDITIONS TO THE LEASED PROPERTIES
            37ARTICLE
      XI
            3811.1
            LIENS
            38ARTICLE
      XII
            3812.1
            PERMITTED
      CONTESTS
            3812.2
            LESSOR’S
      REQUIREMENT FOR DEPOSITS
            39ARTICLE
      XIII
            4013.1
            GENERAL
      INSURANCE REQUIREMENTS
            4013.2
            REPLACEMENT
      COST
            4113.3
            ADDITIONAL
      INSURANCE
            4213.4
            WAIVER
      OF SUBROGATION
            4213.5
            FORM
      SATISFACTORY, ETC.
            4213.6
            INCREASE
      IN LIMITS
            4313.7
            BLANKET
      POLICY
            4313.8
            NO
      SEPARATE INSURANCE
            43ARTICLE
      XIV
            4414.1
            INSURANCE
      PROCEEDS
            4414.2
            RESTORATION
      IN THE EVENT OF DAMAGE OR DESTRUCTION   COVERED BY
      INSURANCE
            4414.3
            RESTORATION
      IN THE EVENT OF DAMAGE OR DESTRUCTION   NOT COVERED BY
      INSURANCE
            4514.4
            LESSEE’S
      PROPERTY
            4514.5
            RESTORATION
      OF LESSEE’S PROPERTY
            4514.6
            DAMAGE
      NEAR END OF TERM
            4514.7
            WAIVER
            4614.8
            PROCEDURE
      FOR DISBURSEMENT OF INSURANCE PROCEEDS EQUAL   TO OR GREATER
      THAN THE SELF-ADMINISTERED AMOUNT
            4614.9
            INSURANCE
      PROCEEDS PAID TO FACILITY MORTGAGEE
            4714.10
            TERMINATION
      OF MASTER LEASE; ABATEMENT OF RENT
            47ARTICLE
      XV
            48


ii





15.1
            CONDEMNATION
      ARTICLE DEFINITIONS
            4815.2
            PARTIES’
      RIGHTS AND OBLIGATIONS
            4815.3
            TOTAL
      TAKING
            4815.4
            ALLOCATION
      OF PORTION OF AWARD
            4815.5
            PARTIAL
      TAKING
            4915.6
            TEMPORARY
      TAKING
            5015.7
            CONDEMNATION
      AWARDS PAID TO FACILITY MORTGAGEE
            50ARTICLE
      XVI
            5116.1
            EVENTS
      OF DEFAULT
            5116.2
            CERTAIN
      REMEDIES
            5416.3
            DAMAGES
            5416.4
            WAIVER
            5516.5
            APPLICATION
      OF FUNDS
            5516.6
            AVAILABILITY
      OF REMEDIES
            55ARTICLE
      XVII
            5517.1
            RIGHTS
      TO CURE DEFAULT
            55ARTICLE
      XVIII
            5618.1
            HOLDING
      OVER
            5618.2
            CONTINUING
      CLEAN-UP
            5718.3
            POST
      TERMINATION TRANSITION
            5718.4
            INDEMNITY
            57ARTICLE
      XIX
            5719.1
            SUBORDINATION
            5719.2
            ATTORNMENT
            5819.3
            ESTOPPEL
      CERTIFICATE
            58ARTICLE
      XX
            5920.1
            RISK
      OF LOSS
            59ARTICLE
      XXI
            5921.1
            LESSEE
      INDEMNIFICATION
            5921.2
            LESSOR
      INDEMNIFICATION
            5921.3
            SURVIVAL
            60ARTICLE
      XXII
            6022.1
            GENERAL
      PROHIBITION AGAINST ASSIGNMENT
            6022.2
            CORPORATE
      OR PARTNERSHIP TRANSACTIONS
            6022.3
            SUBORDINATION
      AND ATTORNMENT
            6122.4
            SUBLEASE
      LIMITATION
            61ARTICLE
      XXIII
            6123.1
            OFFICER’S
      CERTIFICATES AND FINANCIAL STATEMENTS
            6123.2
            PUBLIC
      OFFERING INFORMATION
            6323.3
            LESSOR’S
      OBLIGATIONS
            63




iii





ARTICLE
      XXIV
            6424.1
            LESSOR’S
      RIGHT TO INSPECT
            64ARTICLE
      XXV
            6425.1
            NO
      WAIVER
            64ARTICLE
      XXVI
            6426.1
            REMEDIES
      CUMULATIVE
            64ARTICLE
      XXVII
            6427.1
            ACCEPTANCE
      OF SURRENDER
            64ARTICLE
      XXVIII
            6428.1
            NO
      MERGER OF TITLE
            6428.2
            NO
      PARTNERSHIP
            64ARTICLE
      XXIX
            6529.1
            CONVEYANCE
      BY LESSOR
            65ARTICLE
      XXX
            6530.1
            QUIET
      ENJOYMENT
            65ARTICLE
      XXXI
            6531.1
            NOTICES
            65ARTICLE
      XXXII
            6632.1
            RIGHT
      OF FIRST OPPORTUNITY
            6632.2
            APPRAISERS
            67ARTICLE
      XXXIII
            6833.1
            BREACH
      BY LESSOR
            6833.2
            COMPLIANCE
      WITH FACILITY MORTGAGES
            68ARTICLE
      XXXIV
            6834.1
            FACILITY
      TRADE NAMES
            6834.2
            TRANSFER
      OF OPERATIONAL CONTROL OF THE FACILITIES
            6934.3
            INTANGIBLES
      AND PERSONAL PROPERTY
            70ARTICLE
      XXXV
            7035.1
            ARBITRATION
            70ARTICLE
      XXXVI
            7136.1
            INDEMNIFICATION
      OF LESSOR
            7136.2
            INDEMNIFICATION
      OF SUN
            7136.3
            CONDUCT
      OF CLAIMS
            72ARTICLE
      XXXVII
            72


iv





37.1
            SURVIVAL,
      CHOICE OF LAW
            7237.2
            LIMITATION
      ON RECOVERY
            7337.3
            CONSENTS
            7337.4
            COUNTERPARTS
            7337.5
            OPTIONS
      PERSONAL
            7337.6
            RIGHTS
      CUMULATIVE
            7337.7
            ENTIRE
      AGREEMENT
            7337.8
            AMENDMENT
      IN WRITING
            7437.9
            SEVERABILITY
            7437.10
            SUCCESSORS
            7437.11
            TIME
      OF THE ESSENCE
            74ARTICLE
      XXXVIII
            7438.1
            COMMISSIONS
            74ARTICLE
      XXXIX
            7539.1
            MEMORANDUM
      OF LEASE
            75ARTICLE
      XL
            7540.1
            SECURITY
      DEPOSIT
            7540.2
            APPLICATION
      OF SECURITY DEPOSIT
            7540.3
            TRANSFER
      OF SECURITY DEPOSIT
            76





v


THIS
SECOND AMENDED AND RESTATED MASTER LEASE AGREEMENT (this “Master Lease”), is
made and entered into on this 1st day of
February, 2008 (the “Effective Date”) by
and among the lessor entities identified on the signature page hereof
(collectively, the “Lessor,” and where
the context requires, each, a “Lessor”), the lessee
entities listed on the signature page hereof (collectively, jointly and
severally, the “Lessee,” and where
the context requires, each, a “Lessee”), OMEGA
HEALTHCARE INVESTORS, INC., a Maryland corporation (“Omega”), and the
guarantor entities identified on the signature page hereof (each a “Guarantor” and
collectively, the “Guarantors”).




RECITALS




The
circumstances underlying the execution of this Master Lease are as
follows:




A.           Capitalized
terms used in this Master Lease and not otherwise defined herein are defined in
Article II hereof.




B.           Pursuant
to an Amended and Restated Master Lease Agreement dated as of March 1, 2004, but
effective as of December 1, 2003, as amended by a First Amendment to Amended and
Restated Master Lease Agreement, Amended and Restated Security Agreement and
Amended and Restated Guaranty dated as of December 1, 2004 (the “Original Sun Master
Lease”), a Second Amendment to Amended and Restated Master Lease
Agreement, Amended and Restated Security Agreement and Amended and Restated
Guaranty dated as of March 16, 2005, a Third Amendment to Amended and Restated
Master Lease Agreement, Amended and Restated Security Agreement and Amended and
Restated Guaranty dated as of December 9, 2005, and a Fourth Amendment to
Amended and Restated Master Lease Agreement, Amended and Restated Security
Agreement and Amended and Restated Guaranty dated as of March 1, 2006
(collectively, the “ExistingSunMaster Lease”), among
certain of the entities comprising Lessor, certain of the entities comprising
Lessee, Omega and Sun, Lessee leases from Lessor, as of the Effective Date,
thirty-two (32) long term nursing, rehabilitation hospitals or other health care
facilities.




C.           Pursuant
to an Amended and Restated Guaranty, dated as of as of the 1st day of March,
2004 (to be effective as of December 1, 2003 (as amended, supplemented or
otherwise modified from time to time, the “Guaranty”), Sun
agreed to guaranty the obligations of each of the entities comprising Lessee
under the Existing Sun Master Lease.




D.           Pursuant
to a Master Lease dated as of March 1, 2002, as amended by that certain First
Amendment to Master Lease dated as of February 28, 2007 (as amended, the
“Harborside Master
Lease”) by and between OHIMA, Inc., a Massachusetts corporation, as
lessor, and Massachusetts Holdings I, LLC, a Delaware limited liability company
(“Harborside
Lessee”), as lessee, the Harborside Lessee leased the Harborside
Facilities (as defined below).  The Harborside Lessee subleased such
facilities to certain of the entities comprising Lessee (the “Harborside
Sublessees”).  Harborside Healthcare Corporation, a Delaware
corporation (“Harborside
Guarantor”), has guaranteed the obligations of the Harborside Lessee
under the Harborside Master Lease.  Prior to the Effective Date,
Sun  acquired the Harborside Guarantor




1


and, as a
result, the Harborside Guarantor, the Harborside Lessee and the Harborside
Sublessees are, as of the Effective Date, direct or indirect subsidiaries of
Sun.




E.           Pursuant
to a Master Lease Agreement dated as of October 31, 2002, as modified by that
certain letter dated December 24, 2003, a First Amendment to Master Lease
Agreement dated as of September 19, 2007, a Second Amendment to Master Lease
Agreement dated as of November 30, 2007, a Third Amendment to Master Lease
Agreement dated as of December 31, 2007, and a Fourth Amendment to Master Lease
Agreement dated as of January 31, 2008 (as amended, the “Litchfield Peak
Lease”) by and between OHI Asset (CO), LLC, a Delaware limited liability
company, as landlord, and Peak Medical Colorado No. 2, Inc., a Delaware
corporation (the “Litchfield Peak
Lessee”), as tenant, the Litchfield Peak Lessee leased the Litchfield
Facilities (as defined below).   Peak Medical Corporation, a
Delaware corporation (the “Litchfield Peak
Guarantor”), has guaranteed the obligations of the Litchfield Peak Lessee
under the Litchfield Peak Lease.  Prior to the Effective Date, Sun
acquired the Litchfield Peak Guarantor and, as a result, the Litchfield Peak
Guarantor and the Litchfield Peak Lessee are, as of the Effective Date, direct
or indirect subsidiaries of Sun.




F.           Sun,
Lessee, Omega and Lessor have agreed as of the Effective Date to (i) amend and
restate in its entirety the Existing Sun Master Lease, (ii) incorporate the
Litchfield Facilities into this Master Lease and (iii) terminate the Harborside
Master Lease and incorporate the Harborside Facilities into this Master
Lease.




G.           A
list of the forty two (42) facilities covered by this Master Lease as of the
Commencement Date is attached hereto as Exhibit A (the “Facilities”)




F.           Concurrently
with the execution and delivery of this Master Lease, the Guaranty, the Existing
Security Agreement and the Existing Letter of Credit Agreement shall be amended
and restated as set forth herein and Sun, the Harborside Guarantor and
Litchfield Peak Guarantor shall jointly and severally guaranty the obligations
of Lessee under this Master Lease.




NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:




ARTICLE
I




1.1           Lease.  Upon
and subject to the terms and conditions set forth in this Master Lease, from and
after the Effective Date, Lessor shall continue to lease to Lessee, and Lessee
shall continue to lease from Lessor, the Leased Properties upon which the
forty-two (42) Facilities listed on attached Exhibit A (which
includes the Future Transition Facilities) are located, on the terms and
conditions set forth herein, it being the express intention of the parties that
the leasehold estates governed by this Master Lease shall be one and the same as
the leasehold estates created under the Existing Sun Master Lease, the
Harborside Master Lease, and  the Litchfield Peak Lease.




The term
“Leased
Properties” as of the Commencement Date means all of Lessor’s right,
title and interest in and to the real properties described on Exhibit B to this
Master Lease (the “Land”) and all of the
following:




2


(i)           all
buildings, structures, Fixtures (as hereinafter defined) and other improvements
of every kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures presently
situated upon the Land (collectively, the “Leased
Improvements”);




(ii)
            all
      easements, rights and appurtenances relating to the Land and the Leased
      Improvements (collectively, the “Related
      Rights”);




(iii)
            all
      permanently affixed equipment, machinery, fixtures, and other items of
      real and/or 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 Leased Improvements, including,
      without limitation, all furnaces, boilers, heaters, electrical equipment,
      heating, plumbing, lighting, ventilating, refrigerating, incineration, air
      and water pollution control, waste disposal, air-cooling and
      air-conditioning systems and apparatus (other than individual units),
      sprinkler systems and fire and theft protection equipment, and built-in
      oxygen and vacuum systems, 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 but specifically excluding all items included within the
      categories of Lessor’s Personal Property (defined below) (collectively the
      “Fixtures”);
      and




(iv)
            all
      of the Personal Property (including intangibles), now or hereafter located
      on the Land or in the Leased Improvements, together with any and all
      replacements thereof, which is the property of Lessor, and all Personal
      Property that pursuant to the terms of this Master Lease becomes the
      property of Lessor during the Term (“Lessor’s Personal
      Property”); provided, however that  the term “Lessor’s
      Personal Property” shall expressly exclude Cash, Accounts, Lessee’s
      Personal Property and all proceeds
thereof.




In the
event that, at anytime during the Term, this Master Lease, by its terms,
terminates as to any portion of the Leased Properties, then effective from and
after such termination and without the need by any of the parties to execute any
amendments to this Master Lease, the “Leased Properties” shall refer to that
portion of the Leased Properties which continues to be subject to the terms of
this Master Lease. The Leased Properties are leased subject to all covenants,
conditions, restrictions, easements and other matters affecting the Leased
Properties as of the Commencement Date and such subsequent covenants,
conditions, restrictions, easement and other matters as may be agreed to by
Lessor or Lessee in accordance with the terms of this Lease, whether or not of
record, including the Permitted Encumbrances and other matters which would be
disclosed by an inspection or accurate survey of the Leased Properties. Lessor
represents and warrants to Lessee that as of the Commencement Date it has no
actual knowledge of any covenants, conditions, restrictions, easement or other
matters affecting the Leased Properties which is not of record.




3


1.2           Single, Indivisible
Lease.  This Master Lease constitutes one indivisible lease of
the Leased Properties and not separate leases governed by similar terms. The
Leased Properties constitute one economic unit, and the Base Rent and all other
provisions have been negotiated and agreed to based on a demise of all of the
Leased Properties to Lessee as a single, composite, inseparable transaction and
would have been substantially different had separate leases or a divisible lease
been intended. Except as expressly provided in this Master Lease for specific,
isolated purposes (and then only to the extent expressly otherwise stated) and
except for the  Future Transition Facilities, which may be
transitioned in accordance with the terms of this Master Lease, all provisions
of this Master Lease apply equally and uniformly to all of the Leased Properties
as one unit. An Event of Default with respect to any Leased Property is an Event
of Default as to all of the Leased Properties. The parties intend that the
provisions of this Master Lease shall at all times be construed, interpreted and
applied so as to carry out their mutual objective to create an indivisible lease
of all of the Leased Properties and, in particular but without limitation, that,
for purposes of any assumption, rejection or assignment of this Master Lease
under 11 U.S.C. Section 365, this is one indivisible and non-severable lease and
executory contract dealing with one legal and economic unit and that this Master
Lease must be assumed, rejected or assigned as a whole with respect to all (and
only as to all) of the Leased Properties.




1.3           Joint and Several
Obligation.  Lessee acknowledges that collectively they are
jointly and severally liable for the payment of all sums payable and for the
performance of all obligations performable, by one or more of the Lessees.
Notwithstanding the foregoing, however, no Lessee shall, by virtue of this
Master Lease, have any rights to, or title or interest in, the Leased Property
or Properties leased by another Lessee or any obligation to operate the same to
the extent it is not licensed to do so under applicable law.




1.4           Term.




1.4.1                      The
initial continued term of this Master Lease (“Initial Continued
Term”) shall commence:




(i)           on
December 1, 2003 and end on December 31, 2013 for the Continued Facilities;
and




(ii)           on
the Effective Date and end on December 31, 2013 for the Harborside
Facilities;




in each
case, subject to renewal as set forth in Section 1.5.1 below.





1.4.2                      The
initial term of the Master Lease for the Litchfield Facilities (the “Initial Litchfield
Term”) shall commence on the Effective Date and end on September 30,
2017, subject to renewal as set forth in Section 1.5.2 below.




1.5           Options to
Renew.




1.5.1                      Lessee
is hereby granted two (2) successive options to renew this Master Lease as to
the Non-Litchfield Facilities for a period of ten (10) Lease Years each (each a
“Non-Litchfield Option
to Renew”), with the first such Non-Litchfield Option to
Renew




4


being for
the period from January 1, 2014 through December 31, 2023 and the second such
option being for the period from January 1, 2024 through December 31,
2033.  The Non-Litchfield Options to Renew are subject to the
following terms and conditions (which conditions may be waived by Lessor in its
sole discretion):




(a)           A
Non-Litchfield Option to Renew is exercisable only by Notice to Lessor at least
three hundred and sixty-five (365) days, and not more than five hundred
forty-five (545), prior to the expiration of the Initial Continued Term (or
prior to the expiration of the period covered by the preceding Non-Litchfield
Option to Renew, as the case may be);




(b)           No
Event of Default shall have occurred and be continuing either at the time a
Non-Litchfield Option to Renew is exercised or at the commencement of the period
covered by each Non-Litchfield Option to Renew;




(c)           During
the period covered by each Non-Litchfield Option to Renew, except as otherwise
specifically provided for herein, all of the terms and conditions of this Master
Lease shall remain in full force and effect; and,




(d)           Lessee
may exercise its Non-Litchfield Facilities Option to Renew with respect to all
(and no fewer than all) of the Non-Litchfield Facilities which are subject to
this Master Lease at the time of exercise of each Non-Litchfield Option to
Renew.




1.5.2                      Lessee
is hereby granted two (2) successive options to renew this Master Lease as to
the Litchfield Facilities (each a “Litchfield Option to
Renew”), with the first such Litchfield Option to Renew being for
the period from October 1, 2017 through December 31, 2023 and the second such
option being for the period from January 1, 2024 through December 31,
2033.  The Litchfield Options to Renew are subject to the following
terms and conditions (which conditions may be waived by Lessor in its sole
discretion):




(a)           A
Litchfield Option to Renew is exercisable only by Notice to Lessor at least
three hundred and sixty-five (365) days, and not more than five hundred
forty-five (545), prior to the expiration of the Initial Litchfield Term (or
prior to the expiration of the period covered by the preceding Litchfield Option
to Renew, as the case may be);




(b)           No
Event of Default shall have occurred and be continuing either at the time a
Litchfield Option to Renew is exercised or at the commencement of each period
covered by a Litchfield Option to Renew;




(c)           Lessee
shall have exercised all Non-Litchfield Options to Renew which can be exercised
as of the date of the applicable Litchfield Option to Renew;




5


(d)           During
the period covered by a Litchfield Option to Renew, except as otherwise
specifically provided for herein, all of the terms and conditions of this Master
Lease shall remain in full force and effect; and,




(e)           Lessee
may exercise its Litchfield Option to Renew with respect to all (and no fewer
than all) of the Litchfield Facilities which are subject to this Master Lease at
the time of exercise of each Litchfield Option to Renew.




ARTICLE
II




2.1           Definitions.  For
all purposes of this Master Lease, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article II
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
GAAP as at the time applicable, (iii) all references in this Master Lease to
designated “Articles,” “Sections” and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Master Lease, and
(iv) the words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Master Lease as a whole and not to any particular
Article, Section or other subdivision.




Accounts: All
accounts, all rights to payment or reimbursement for goods sold or leased or
services rendered (including, without limitation, Medicare, Medicaid and other
third party reimbursed receivables) and all accounts receivable, in each case
whether or not evidenced by a contract, document, instrument or chattel paper
and whether or not earned by performance, including without limitation, the
right to payment of management fees and all proceeds of the
foregoing.




Action:  Any
claim, demand, action or proceeding.




Additional
Charges:  As defined in Article III.





Affiliate:  When
used with respect to any corporation, limited liability company, or partnership,
the term “Affiliate” shall mean any person which, directly or indirectly,
controls or is controlled by or is under common control with such corporation,
limited liability company or partnership.  For the purposes of this
definition, “control” (including the correlative meanings of the terms
“controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.





Allocated Current
Rent:  As defined in Section 3.9.




Amended Security
Agreement:  The Second Amended and Restated Security Agreement
dated of even date herewith between Lessor and Lessee, as may be amended or
supplemented from time to time, which agreement amends and restates the Existing
Security Agreement.




Applicable
Rate:  A rate of interest per annum equal to the higher of: (a) six
percent (6%) and (b) 375 basis points above LIBOR.




6


Article XXXVI Default
Notice: As defined in Section 36.8.




Assessment:  Any
assessment on the Leased Properties or any part of any of them for public
improvements or benefits whether or not commenced or completed prior to the date
hereof and whether or not to be completed within the Term.




Assumed
Indebtedness:  Any indebtedness or other obligations expressly
assumed by or taken subject to by Lessor, existing on the Commencement Date and,
secured by a mortgage, deed of trust or other security agreement in or on the
related Leased Property.




Award:  As
defined in Article XV.




Base Rent: means the
sum of (i) the Non-Litchfield Base Rent and (ii) the Litchfield Base
Rent.




Board:  The
Board of Directors of Sun.




Business
Day:  Any day on which the Common Stock may be traded on any
applicable national securities exchange or via the NASDAQ automated quotation
system, or if not admitted for trading on any national securities exchange, any
day other than a Saturday, Sunday or holiday on which banks in New York City,
New York are required or permitted to be closed.




Capital
Stock:  (i) With respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital or capital stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership, limited
partnership, limited liability company or other equity interests of such
Person.




Cash: Cash and cash
equivalents and all instruments evidencing the same or any right thereto and all
proceeds thereof.




Code:  The
Internal Revenue Code of 1986, as amended.




Collateral:  As
defined in the Amended Security Agreement.




Commencement
Date:  means the Effective Date for the Harborside Facilities
and the Litchfield Facilities, and December 1, 2003 for all Continued
Facilities.




Common
Stock:  Sun’s common stock, par value $.01 per share, and any
Capital Stock for or into which such Common Stock hereafter is exchanged,
converted, reclassified or recapitalized by Sun.




Condemnation,
Condemnor:  As defined in Article XV.




Continued Facilities:
All Facilities other than the Harborside Facilities and the Litchfield
Facilities.




7


Conversion
Shares:  The 760,000 shares of Common Stock which were issued
to Lessor by Sun on April 15, 2004 upon the conversion of the Deferred Base Rent
(as previously defined in the Existing Sun Master Lease).




CPI:  The
United States Department of Labor, Bureau of Labor Statistics Revised Consumer
Price Index for All Urban Consumers (1982-84=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.




Credit Suisse: As
defined in the Security Agreement.




Date of
Taking:  As defined in Article XV.




Encumbrance:  Any
mortgage, deed of trust, lien, encumbrance or other matter affecting title to
any of the Leased Properties, or any portion thereof or interest
therein.




Event of
Default:  As defined in Article XVI.




Exchange
Act:  The Securities Exchange Act of 1934, as
amended.




Excluded Lessee’sPersonalProperty: All
vehicles, business office equipment, including computer hardware, software and
peripherals, telephone systems and Specialized Medical Equipment owned or leased
by Lessee and used in connection with the operation of the Leased
Properties.




Executive
Officer:  Any of the Chairman of the Board of Directors, the
President, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, any Vice President and the Secretary of any corporation, a
general partner of any partnership and a managing member of any limited
liability company upon which service of a Notice is to be made.




Existing Letter of Credit
Agreement:  The Amended and Restated Letter of Credit Agreement
dated as of December 9, 2005, as amended, among Lessor, Lessee, Omega and
Sun.




Existing Security
Agreement:   The Amended and Restated Security Agreement
dated as of March 1, 2004, and effective as of December 1, 2003 among Lessor and
Lessee, as amended.




ExistingSun Master
Lease:   As defined in Recital B.




Expiration
Date:  As to the Non-Litchfield Facilities, December 31, 2013
if no Renewal Option has been exercised, December 31, 2023 if the first Renewal
Option has been exercised, or December 31, 2033 if the first and second Renewal
Options have been exercised, and, as to the Litchfield Facilities, September 30,
2017 if no Renewal Option has been exercised, December 31, 2023 if the first
Renewal Option has been exercised, or December 31, 2033 if the first and second
Renewal Options have been exercised.




8


Facilit(y)(ies):  The
licensed nursing homes, rehabilitation hospitals or other health care facilities
being operated on the Leased Propert(y)(ies).




Facility
Mortgage:  As defined in Section 13.1.




Facility
Mortgagee:  As defined in Section 13.1.




Facility Trade
Name:  As defined in Section 33.2.




Financial Statements:
For a fiscal year period, statements of Sun’s earnings and retained earnings and
of changes in financial position and profit and loss for such period and for the
period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year and prepared in accordance with GAAP and reported on by a “big four”
or other nationally recognized accounting firm approved by Lessor, which
approval will not be unreasonably withheld or delayed from the beginning of the
fiscal year to the end of such period.




Financials: Unaudited
statements of a the financial performance or condition of any of (i) each
Guarantor or the Guarantors, taken as a whole or (ii) each Facility
individually, and the Facilities, taken as a whole, whether or not fulfilling
the requirements for Financial Statements.




Fiscal
Year:  The annual period commencing January 1 and terminating
December 31 of each year.




Fixtures:  As
defined in Section 1.1.




Future Operator
Lease: As defined in Section 3.9.




Future Operators: As
defined in Section 3.9.




Future Transition
Facilities:  The Facilities listed on attached Schedule
III.




Future Transition Facilities
Notice: As defined in Section 3.9.




Future Transition Facilities
Rent: As defined in Section 3.9.




Future Transition Facilities
Rent Shortfall: An amount equal to 75% of the difference between the
Allocated Current Rent and the Future Transition Facilities Rent.




Future Transition Facilities
Rent Shortfall Statement: As defined in Section 3.9.




GAAP:  Generally
accepted accounting principles consistent with those applied in the preparation
of financial statements.




Guarantor or Guarantors:  One,
some or all of Sun Healthcare Group, Inc., a Delaware corporation, Peak Medical
Corporation, a Delaware corporation, Harborside




9


Healthcare
Corporation, a Delaware corporation or any successor entity that guaranties the
payment or collection of all or any portion of the amounts payable by Lessee, or
the performance by Lessee of all or any of its obligations, under this Master
Lease.




Guarantor Lender: As
defined in the Security Agreement.




Guaranty:  Any
guaranty executed by a Guarantor in favor of Lessor, as the same may be amended
or supplemented from time to time.




Harborside
Facilities: means the Facilities commonly known as:




Name
            AddressFalmouth
      Nursing & Rehab Center
            359
      Jones Road, Falmouth, MAMashpee
      Nursing & Rehab Center
            161
      Falmouth Road, Rte 128, Mashpee, MAWakefield
      Nursing & Rehab Center
            1
      Bathol Street, Wakefield, MAWestfield
      Nursing & Rehab Center
            60
      East Silver Street, Westfield, MA







Hazardous
Substances:  As defined in Section 7.3.




Impositions:  Collectively,
all taxes (including, without limitation, all capital stock and franchise taxes
of Lessor, all ad valorem, sales and use, single business, gross receipts,
transaction privilege, rent or similar taxes), assessments (including
Assessments as herein defined), ground rents, water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and 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 Properties
or the business conducted thereon by Lessee and/or the Rent (including all
interest and penalties thereon due to any failure of payment by Lessee)
applicable to periods of time commencing on the Possession Date (unless any
Tenant’s obligations for any portion of such period has been discharged as a
matter of law) and ending on the expiration of the Term hereof which at any time
during or in respect of such period hereof may be assessed or imposed on or in
respect of or be a lien upon (i) Lessor or Lessor’s interest in the Leased
Properties, (ii) the Leased Properties or any part thereof or any rent therefrom
or any estate, right, title or interest therein, or (iii) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Properties or the leasing or use of the Leased
Properties or any part thereof or (iv) the Rent.  The term
“Imposition” shall not include:  (a) any tax based on gross or net
income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor generally and not specifically arising in connection with the
Leased Properties, but Lessee shall pay any tax hereafter specifically imposed
on Rent received by Lessor from Lessee, or (b) any net revenue tax of
Lessor or any other person, or (c) any tax imposed with respect to the sale,
exchange or other disposition by Lessor of the Leased Properties or the proceeds
thereof or (d) any principal or interest on any Assumed Indebtedness on the
Leased Properties or any other indebtedness of Lessor, except to the extent that
any tax, assessment, tax levy or charge, which Lessee is obligated to pay
pursuant to the first sentence of this definition and which is in effect at any
time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (a) or (b) is levied,
assessed or imposed in lieu thereof.




10


Initial Continued
Term:  As defined in Section 1.4.1.




Initial Litchfield
Term:  As defined in Section 1.4.2.




Insurance
Requirements:  All terms of any insurance policy required by
this Master Lease and all requirements of the issuer of any such
policy.




Judgment
Date:  The date on which a judgment is entered against a Lessee
that establishes, without the possibility of appeal, the amount of liquidated
damages to which Lessor is entitled under this Master Lease.




Land:  As
defined in Section 1.1.




Lease Year: January 1
through the following December 31 during the Term.  If this Master
Lease is terminated before the end of any Lease Year, the final Lease Year for
purposes of such terminated lease will be January 1 through the date of
termination thereof.




Leased
Properties:  As defined in Section 1.1.




Legal
Requirements:  As to the Leased Properties, all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting either the
Leased Properties or the construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any which may (i) require repairs,
modifications or alterations in or to any of the Leased Properties or (ii) in
any way adversely affect the use and enjoyment thereof, and all permits,
licenses and authorizations and regulations relating thereto including, but not
limited to, those relating to existing healthcare licenses, those authorizing
the current number of licensed beds and the level of services delivered from the
Leased Properties, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Lessee at any time in
force affecting any Leased Property (other than covenants, agreements,
restrictions and encumbrances created by Lessor with the consent of Lessee,
which consent shall not be unreasonably withheld or delayed, providing that such
covenants, agreements, restrictions and encumbrances will not materially and
adversely affect Lessee’s leasehold rights hereunder).




Lessee Encumbrances:
All real estate taxes, assessments, water charges, requirements of municipal or
other governmental authorities, or other covenants, agreements, matters or
things which are the obligation of Lessee or its Affiliates to pay, comply with,
conform to or discharge under the provisions of this Master Lease, the
Litchfield Peak Lease, or the Harborside Master Lease; and all liens,
encumbrances, violations, charges or conditions that are due to any act or
omission of Lessee.




Lessee’s Leasehold Award: As
defined in Section 15.4.




Lessee’s Personal
Property:  Personal Property owned or leased by Lessee that is
not included within the definition of the term “Lessor’s Personal Property” but
is used by Lessee in the operation of the Facilities, including, but not limited
to, the Excluded Lessee’s Personal Property and any Personal Property
hereinafter provided by Lessee in compliance with Section 6.3 hereof, but
specifically excluding Cash and Accounts.




11


Lessee’s Personal Property
Award: As defined in Section 15.4.




Lessor Indemnified
Party:  Lessor and each of Lessor’s officers, directors,
employees, agents and affiliates and each person that controls (within the
meaning of Section 20 of the Exchange Act) any of the foregoing persons.




Lessor’s Personal
Property:  As defined in Section 1.1.




Letter of Credit
Agreement:  An agreement Lessor, Lessee and Guarantor, as the
same may be amended, modified, replaced or restated from time to time, providing
for a letter of credit to be delivered to Lessor as the Security
Deposit.




Litchfield Base
Rent:




(A)            During
the Initial Litchfield Term, the Litchfield Base Rent shall be:




(i)           For
the period from the Effective Date through September 30, 2008, the annual sum of
Five Million Seven Hundred Thousand and 00/100 Dollars
($5,700,000);




(ii)           For
each period from October 1 through September 30 thereafter, the Litchfield Base
Rent for the previous twelve month period, increased by an amount equal to the
Litchfield Base Rent for the previous twelve month period multiplied by the
lesser of (x) 235 basis
points over the ten year treasury securities constant maturity rate in effect
for the month of December immediately prior to each such increase and (y) two
and one-half percent (2.5%).




(B)
            During
      a Renewal Term, the Litchfield Base Rent shall
  be:




(i)
            For
      each Lease Year during a Renewal Term, the Litchfield Base Rent for the
      previous Lease Year increased by an amount equal to the Litchfield Base
      Rent for the previous Lease Year multiplied by the lesser of (x) 235 basis
      points over the ten year treasury securities constant maturity rate in
      effect for the month of December immediately prior to each such increase
      and (y) two and one-half percent
(2.5%).




Litchfield
Facilities: means the Facilities commonly known as:




Name
            AddressCapitol
      Care Center
            8211
      Ustick Road, Boise, IDCheyenne
      Mountain Care Center
            835
      Tenderfoot Hill Road, Colorado Springs, COCheyenne
      Place Retirement Center
            945
      Tenderfoot Hill Road, Colorado Springs, COMesa
      Manor Care Center
            2901
      North 12th Street, Grand Junction, COPikes
      Peak Care Center
            2719
      North Union Boulevard, Colorado Springs, COPueblo
      Extended Care Center
            2611
      Jones Avenue, Pueblo, CO







12


Material Capital
Improvement: Any repair, replacement, modification or addition to any of
the Remaining Transition Facilities, including any of the Personal Property
located therein, which has or is reasonably estimated to have a useful life in
excess of twenty four (24) months.




MinimumPurchase Price: The
Purchase Price for each Leased Property as set forth in Exhibit C
hereto.




NASD:  The
National Association of Securities Dealers.




Net Proceeds: As
defined in Section 14.1.




Non-Litchfield Base
Rent:




(A)            During
the Initial Continued Term, the Non-Litchfield Base Rent shall be:




(i)           For
the period prior to the Effective Date, the amounts set forth in the Existing
Sun Master Lease;




(ii)           For
the period from February 1, 2008 through December 31, 2008, the monthly sum of
Two Million Eighty Five Thousand One Hundred Seventy Five and 44/100 Dollars
($2,085,175.44), which on an annualized basis is Twenty Five Million Twenty Two
Thousand One Hundred Five and 19/100 Dollars ($25,022,105.19) (the “2008Annualized Non-Litchfield
Base Rent”);




(iii)           For
Lease Year commencing January 1, 2009, the 2008 Annualized Non-Litchfield Base
Rent, increased by an amount equal to the 2008 Annualized Non-Litchfield Base
Rent multiplied by the lesser of (x) 235 basis
points over the ten year treasury securities constant maturity rate in effect
for the month of December immediately prior to each such increase and (y) two
and one-half percent (2.5%);




(iv)           For
each Lease Year following 2009, the Non-Litchfield Base Rent for the previous
Lease Year, increased by an amount equal to the Non-Litchfield Base Rent for the
previous Lease Year multiplied by the lesser of (x) 235 basis
points over the ten year treasury securities constant maturity rate in effect
for the month of December immediately prior to each such increase and (y) two
and one-half percent (2.5%).




(B)
            During
      a Renewal Term, the Non-Litchfield Base Rent shall
  be:




(i)
            For
      each Lease Year during a Renewal Term, the Non-Litchfield Base Rent for
      the previous Lease Year increased by an amount equal to the Non-Litchfield
      Base Rent for the previous Lease Year multiplied by the lesser of (x) 235 basis
      points over the ten year treasury securities constant maturity rate in
      effect for the month of December immediately prior to each such increase
      and (y) two and one-half percent
(2.5%).




13


Non-Litchfield
      Facilities: means all Facilities other than the Litchfield
      Facilities.




Notice:  A
notice given in accordance with Article XXXI.




Officer’s
Certificate:  A certificate of Lessee signed by one or more
Executive Officers of Lessee.




Omega:  Omega
Healthcare Investors, Inc., a Maryland corporation.




Omega Lenders: As
defined in Section 8.2(f).




Original Master
Leases:  The Master Lease Agreements identified on Schedule
I attached hereto.




Original Security
Agreements:  Those certain security agreements between Lessor
and any applicable Lessee executed pursuant to any facility lease, the Existing
Sun Master Lease or Original Master Leases, as amended, supplemented or
otherwise modified from time to time prior to the Effective Date.




OTA: As defined in
Section 3.7.




Overdue
Rate:  On any date, a rate equal to five (5) percentage points
above the Prime Rate, but in no event greater than the maximum rate then
permitted under applicable law.




Payment
Date:  The due date for the payment of the installments of Base
Rent, Additional Charges, or any other sums payable under this Master
Lease.




PeakIdahoFacilities: means
the Facilities commonly known as:




Name
            AddressIdaho
      Falls Care Center
            3111
      Channing Way, Idaho Falls, IdahoTwin
      Falls Care Center
            674
      Eastland Drive, Twin Falls, Idaho





Permitted
Encumbrances:  The Permitted Encumbrances described in Exhibit D hereto.




Permitted Personal
PropertyLeases
orLiens: Liens or other
exceptions to title granted to, or leases entered into with, a third party in
connection with the acquisition of new Personal Property.




Person:  An
individual or a corporation, partnership, trust, incorporated or unincorporated
association, limited liability company, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.




Personal
Property:  All machinery, equipment, furniture, furnishings,
movable walls or partitions, computers (and all associated software and
peripheral equipment), trade fixtures and other tangible personal property (but
excluding consumable inventory and supplies owned by Lessee, Cash and Accounts),
together with all replacements, modifications, alterations




14


and
additions thereto, except items, if any, included within the definition of
Fixtures or Leased Improvements. The term “Personal Property” shall exclude
personal property leased from third parties.




Possession Date: As
to each Facility, the date that a Lessee first took possession of such Facility,
which, in the case of the Harborside Facilities, means March 1, 2002, in the
case of the Litchfield Facilities, means November 1, 2002, in the case of the
Peak Idaho Facilities, means March 26, 1999, in the case of the Continuing
Facilities which are the subject of the Delta I Master Lease or the Delta II
Master Lease (as those terms are defined in Schedule I), means October 7, 1997,
in the case of the Continuing Facilities which are the subject of the Regency
North Carolina Master Lease (as that term is defined in Schedule I) means
February 1, 1996 and in the case of the Continuing Facilities which are the
subject of the Qualicorp Master Lease (as that term is defined in Schedule I)
means June 1, 1997.




Primary Intended
Use:  As defined in Section 7.2.2.




Prime
Rate:  On any date, a rate equal to the annual rate on such
date publicly announced by Citibank, N.A. to be its prime rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing, but
in no event greater than the maximum rate then permitted under applicable
law.




Reconstruction
Period:  Two hundred forty days (240) following damage,
destruction or Condemnation, as applicable, subject to extension to the extent
required by Unavoidable Delay.




Relinquished
Lessee’s Personal Property:
All of the Lessee’s Personal Property other than the Excluded Lessee’s Personal
Property.




Renewal Term: A
period for which the Term is renewed in accordance with Section
1.5.




Rent:  Collectively,
the Base Rent and Additional Charges.




Replacement Property:
As defined in Section 9.1.6.




SEC:  The
United States Securities and Exchange Commission.




SEC
Filing:  As defined in Section 8.1(i).




Securities
Act:  The Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.




Security Deposit: As
defined in Section 40.1.




Self-Administered
Amount:  One Hundred and Fifty Thousand ($150,000.00)
Dollars.




15


Specialized Medical
Equipment: Any non-affixed equipment (i) which is owned or leased by
Lessee, and (ii) which is used by Lessee for lifting or transferring, or
providing therapeutic interventions or other specialized medical services to,
residents/patients.




State:  With
respect to each Facility, the state in which such Facility is
located




Sun:  Sun
Healthcare Group, Inc., a Delaware corporation.




Taking:  As
defined in Section 15.1.1.




Term:  Collectively,
the Initial Continued Term and the Initial Litchfield Term plus the Renewal Term
or Renewal Terms, if any.




Transfer:  As
defined in Section 22.1.




Unavoidable
Delays:  Delays due to strikes, lock-outs, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of a
party.




Unsuitable for Its Primary
Intended Use:  A state or condition of any Facility such that
by reason of damage or destruction, or a partial taking by Condemnation, such
Facility cannot be operated on a commercially practicable basis for its Primary
Intended Use, taking into account, among other relevant factors, the number of
useable beds, the amount of square footage and the estimated revenue affected by
such damage or destruction.




ARTICLE
III




3.1           Rent.  During
the Term, Lessee will pay to Lessor the Base Rent and Additional Charges in
lawful money of the United States of America and legal tender for the payment of
public and private debts, in the manner provided in Section 3.5. The Base Rent
during any Lease Year is payable in advance in consecutive monthly installments
on the third day of each calendar month during that Lease
Year.  Unless otherwise agreed by the parties, Base Rent and
Additional Charges shall be prorated as to any partial months at the beginning
and end of the Term.




3.2           Additional
Charges.  In addition to the Base Rent, Lessee will also pay
and discharge as and when due and payable all Impositions as provided in Section
4.1, any Future Transition Facilities Rent Shortfall, and all other amounts,
liabilities, obligations and Impositions which Lessee assumes or agrees to pay
under this Master Lease.  In the event of any failure on the part of
Lessee to pay any of those items referred to in the previous sentence, Lessee
will also promptly pay and discharge every fine, penalty, interest and cost
which may be added for non-payment or late payment of such items referred to in
this sentence and the previous sentence.  Collectively, the items
referred to in the first two sentences of this Section 3.3 are referred to as
the “Additional
Charges” and shall also constitute Rent.




16


3.3           Late
Charge.  If any installment of Base Rent, or Additional Charges
owing by Lessee to Lessor shall not be paid by its due date, Lessee shall pay
Lessor on demand, as an Additional Charge, a late charge equal to the greater of
(i) five percent (5%) on the amount of such installment or (ii) all charges,
expenses, fees or penalties imposed on Lessor by the Facility Mortgagee for late
payment.




3.4           Method of Payment of
Rent.  Rent to be paid to Lessor shall be paid by electronic
funds transfer debit transactions through wire transfer of immediately available
funds and shall be initiated by Lessee for settlement on or before the due date
each calendar month; provided, however, if the due date is not a Business Day,
then settlement shall be made on the next succeeding day which is a Business
Day.  Lessor shall provide Lessee with appropriate wire transfer
information in a Notice from Lessor to Lessee.  Lessee shall inform
Lessor of payment by sending a facsimile transmission of Lessee’s wire transfer
confirmation not later than noon, Eastern Standard or Daylight Savings time on
each payment date. If Lessor directs Lessee to pay any Base Rent to any party
other than Lessor, Lessee shall send to Lessor, simultaneously with such
payment, a copy of the transmittal letter or invoice and a check whereby such
payment is made or such other evidence of payment as Lessor may reasonably
require.




3.5           Net
Lease.




3.5.1                      The
Rent shall be paid absolutely net to Lessor, so that this Master Lease shall
yield to Lessor the full amount of the installments of Base Rent and Additional
Charges payable thereunder throughout the Term, subject only to any other
provisions of this Master Lease which expressly provide for adjustment or
abatement of Rent or other charges.  This Master Lease is and shall be
a “pure-net” or “triple-net” lease, as such terms are commonly used in the real
estate industry, it being intended that Lessee shall pay all costs, expenses,
and charges arising out of the use, occupancy and operation of the Leased
Properties.




3.5.2                      Lessor
shall not be required to furnish any services whatsoever to the Leased
Properties, or make any payment of any kind whatsoever.   Lessee
hereby assumes the full and sole responsibility for the condition, operation,
repair, alteration, improvement, replacement, maintenance and management of the
Leased Properties.  Lessor shall not be responsible for any loss or
damage to any property of Lessee or any sub-tenant, concessionaire, or other
user or occupant of any part of the Leased Properties, absent the gross
negligence or willful misconduct of Lessor, its employees or
agents.




3.6           Limitation on
Counterclaim.  If Lessor commences any proceedings for
non-payment of Rent, Lessee will not interpose any counterclaim or cross
complaint or similar pleading of any nature or description in such proceedings
unless Lessee would lose or waive such claim by the failure to assert
it.  This shall not, however, be construed as a waiver of Lessee’s
rights to assert such claims in a separate action brought by
Lessee.  The covenants to pay rent and other amounts hereunder are
independent covenants, and Lessee shall have no right to hold back, offset or
fail to pay any such amounts for default by Lessor or for any other reason
whatsoever.




3.7           Future Transition of Certain
Additional Facilities.




17


3.7.1                      If
as a consequence of actions taken by the State of California or any
instrumentality thereof or of any political subdivision thereof, including
without limitation the California Department of Health Services or Department of
Justice, any County Department of Mental Health or the California Bureau of
Medi-Cal Fraud and Elder Abuse, whether under the Superseding Permanent
Injunction and Final Judgment filed on September 14, 2005 in the Superior Court
of the State of California for the County of San Diego, Central Division in
People
v. Sun Healthcare Group, Inc., et al(San Diego Superior Court Case No.
GIC853861) (the “PIFJ”) or otherwise
(i) the cash flow of the Future Transition Facilities taken as a whole
(inclusive of all overhead, administrative and other costs allocable to those
facilities) is negative and in the reasonable opinion of Sun is likely to remain
negative under the then current circumstances for more than two (2) years, or
(ii) Sun and Omega otherwise jointly agree (in the exercise of their
respective good faith reasonable business judgment) that it is no longer
economically feasible for the applicable Lessee to continue to operate the
Future Transition Facilities, Lessee is permitted as to all, but not fewer than
all, of the Future Transition Facilities on written notice to Lessor (the “Future Transition Facilities
Notice”) to (A) transition, in one or more transactions the Future
Transition Facilities to one or more new operators acceptable to Omega in its
reasonable business discretion (the “Future Operators”)
and/or (B) with respect to any of the Future Transition Facilities which have
not been transitioned to Future Operators within a period of one (1) year after
the delivery to Lessor of the Future Facilities Transition Notice, to close any
of the Future Transition Facilities in accordance with the laws of the State, it
being understood and agreed that in the event Lessee delivers the Future
Facilities Transition Notice to Lessor, then Lessee shall be required to use its
commercially reasonable efforts for a period of one (1) year thereafter to
transition to Future Operators all, but not less than all, of the Future
Transition Facilities.




3.7.2                      The
affected Lessee shall negotiate an Operations Transfer Agreement (“OTA”) in good faith,
provided that such OTA shall be substantially in the form of Exhibit E. Omega
shall negotiate in good faith the terms of a new Lease with the Future Operators
(the “Future Operator
Lease”) provided that the Future Operator Lease shall be in substantially
the same form as Omega’s standard form lease for similar size
transactions.




3.7.3                      Prior
to the Effective Date, Lessor has entered into a Term Sheet proposing the sale
(the “Proposed
Sale”) of the Future Transition Facilities to Vibra Healthcare, LLC, a Delaware
limited liability company, or an entity owned or controlled by or under common
control therewith.  Lessee has agreed to cooperate in such sale
and shall negotiate in good faith the terms of an OTA with the proposed
purchaser thereof.  Lessee hereby agrees to pay all of Lessor’s
reasonable attorneys fees and reasonable expenses of Lessor’s attorneys incurred
in connection with the Proposed Sale, up to a maximum of Fifty Thousand and
no/100 Dollars ($50,000).




3.7.4                      Upon
completion of the transition of any or all of the Future Transition Facilities
pursuant to Section 3.7.1, (i) upon the effective
date of the applicable Future Operator Lease, this Master Lease shall terminate
as to the applicable Future Transition Facility(ies), (ii) upon the
effective date of the applicable Future Operator Lease, the


18




Base Rent
under this Master Lease shall be reduced by the Allocated Current Rent with
respect to the applicable Future Transition Facility(ies) and (iii) from and
after the effective date of the applicable Future Operator Lease and throughout
the remainder of the Initial Continued Term or the then applicable Renewal Term
(if the transition or closure occurs during a Renewal Term), Lessor shall
deliver to Lessee on a quarterly basis a statement (the “Future Transition Facilities
Rent Shortfall Statement”) setting forth in reasonable detail (A) the
amount of the Base Rent actually received by Lessor, on an aggregate basis,
during the preceding quarter from the Future Operators of the Future Transition
Facilities (the “Future Transition Facilities
Rent”) and (B) the amount due from Lessee, if any, with respect to the
Future Transition Facilities Rent Shortfall, it being understood and agreed that
during any quarter when the Future Transition Facilities Rent is equal to or
greater than the Allocated Current Rent, Lessee shall have no Future Transition
Facilities Rent Shortfall obligation to Lessor. The Future Transition Facilities
Rent Shortfall shall be due and payable within ten (10) Business Days after
Lessee’s receipt from Lessor of the Future Transition Facilities Rent Shortfall
Statement.  Lessee shall have the right on reasonable notice to Lessor
and during normal business hours to review the books and records of Lessor in
order to verify the accuracy of the information and calculations contained in
the Future Transition Facilities Rent Shortfall Statement and the cost thereof
shall be borne by Lessee unless the same discloses that Lessor overbilled Lessee
for the Future Transition Facilities Rent Shortfall by five percent (5%) or
more, in which case the cost of such review shall be borne by
Lessor.




3.7.5                      Upon
completion of the transition of any or all of the Future Transition Facilities
pursuant to the Proposed Sale (but not otherwise) (i) upon the effective date of
the sale of the Future Transition Facilities this Master Lease shall terminate
as to the applicable Future Transition Facility(ies), and (ii) upon the closing
of the sale of the Future Transition Facilities pursuant to Proposed Sale, the
Non-Litchfield Base Rent shall be reduced at the time of the closing of the
Proposed Sale by an amount equal to 5.862% of the gross purchase price for the
Future Transition Facilities, it being understood and agreed that the Proposed
Sale currently contemplates a purchase price of $29,000,000 and that in such
event the Base Rent shall be reduced by One Million Seven Hundred Thousand and
no/100 Dollars ($1,700,000) concurrently with the closing of the sale of such
Future Transitioned Facilities.




3.7.6                      For
purposes of applying the provisions of this Section 3.7, as of January 1, 2007,
the Allocated Current Rent for the Future Transition Facilities shall, in the
aggregate, be One Hundred Thirty Four Thousand Eight Hundred Forty Two and
27/100 Dollars ($134,842.27) per month and shall be allocated among the Future
Transition Facilities in the manner set forth in Schedule II.  The
Allocated Current Rent shall increase by 2.5% on January 1, 2008 and on each
January 1 thereafter.




ARTICLE
IV




4.1           Payment of
Impositions.  Subject to Section 12.1 relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and will promptly, upon
request, furnish to Lessor copies of official receipts or other




19


satisfactory
proof evidencing such payments.  If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and in such event, shall pay such
installments during the Term hereof (subject to Lessee’s right of contest
pursuant to the provisions of Section 12.1) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto.  If any provision of any Facility Mortgage requires deposits
for payment of real estate taxes or other Impositions to be made with such
Facility Mortgagee, Lessee shall either pay to Lessor monthly the amounts
required and Lessor shall transfer the amounts to such Facility Mortgagee, or,
pursuant to written direction by Lessor, Lessee shall make such deposits
directly with such Facility Mortgagee.  Lessor, at its expense, shall,
to the extent required or permitted by applicable law, prepare and file all tax
returns and reports as may be required by governmental authorities in respect of
Lessor’s net income, gross receipts, sales and use, single business, transaction
privilege, rent, ad valorem, franchise taxes and taxes on its capital stock, and
Lessee, at its expense, shall, to the extent required or permitted by applicable
laws and regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by governmental
authorities.  If any refund is due from any taxing authority in
respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default has occurred hereunder and is
continuing.  Any such funds retained by Lessor due to an Event of
Default shall be applied as provided in Article XVI.  Lessor and
Lessee 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 Properties as
may be necessary to prepare any required returns and reports.  In the
event governmental authorities classify any property covered by this Master
Lease as personal property, Lessee shall file all required personal property tax
returns.  Lessor, to the extent it possesses the same, and Lessee, 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
classified as personal property.  Lessee may, upon Notice to and with
the consent of Lessor (which consent shall not be unreasonably withheld), at
Lessee’s sole cost and expense, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee’s expense as aforesaid,
shall cooperate with Lessee in such protest, appeal, or other action. Lessee
shall reimburse Lessor for Lessor’s direct costs of cooperating with Lessee for
such protest, appeal or other action.  Billings for reimbursement by
Lessee to Lessor of personal property taxes shall be accompanied by copies of a
bill therefor and payments thereof which identify the personal property with
respect to which such payments are made.  Unless otherwise agreed by
Lessor and Lessee, notwithstanding the foregoing, upon the expiration or earlier
termination of the Term, all Impositions applicable to the final Lease Year of
the Term (if a partial calendar year) shall be prorated between Lessee and
Lessor as set forth in Section 4.3 hereof.




4.2           Notice of
Impositions.  Lessor shall give prompt Notice to Lessee of all
Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, but Lessor’s failure to give any such Notice shall in no way diminish
Lessee’s obligation hereunder to pay such Impositions, but such failure shall
obviate any default hereunder for a reasonable time after Lessee receives Notice
of any Imposition which it is obligated to pay.


20




Adjustment of
Impositions


Lessor
and Lessee, whether or not such Imposition is imposed before or after
termination or expiration, and Lessee’s obligation to pay its prorated share
thereof if the same becomes due after such termination or expiration shall
survive such termination or expiration.




4.4           Utility
Charges.  Lessee will pay or cause to be paid when due all
charges for electricity, power, gas, oil, water and other utilities used in the
Leased Properties during the Term.




4.5           Insurance
Premiums.  Lessee will pay or cause to be paid when due all
premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.




ARTICLE
V




5.1           No Termination, Abatement,
etc.  Except as otherwise specifically provided in this Master
Lease, Lessee shall remain bound by this Master Lease in accordance with its
terms and shall not take any action without the consent of Lessor to modify,
surrender or terminate the same, and shall not seek or be entitled to any
abatement, deduction, deferment or reduction of Rent, or setoff against the
Rent.  Except as expressly set forth herein, the respective
obligations of Lessor and Lessee shall not be affected by reason of (i) any
damage to, or destruction of, any of the Leased Properties or any portion of any
Leased Property from whatever cause or any Taking of any Leased Property or any
portion thereof, (ii) the lawful or unlawful prohibition of, or restriction
upon, Lessee’s use of any Leased Property, or any portion thereof, or the
interference with such use by any person, corporation, partnership or other
entity, or the eviction of Lessee by paramount title; (iii) any claim which
Lessee has or might have against Lessor or by reason of any default or breach of
any warranty by Lessor under this Master Lease or any other agreement between
Lessor and Lessee, or to which Lessor and Lessee are parties, (iv) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee or
transferee of Lessor, or (v) for any other cause whether similar or dissimilar
to any of the foregoing other than a discharge of Lessee from any such
obligations as a matter of law.  Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (a) modify, surrender or terminate this Master Lease
or quit or surrender the Leased Properties or any portion thereof, or
(b) entitle Lessee to any abatement, reduction, suspension or deferment of
the Rent or other sums payable by Lessee hereunder except as otherwise
specifically provided herein.  The obligations of Lessor and Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be payable
in all events unless the obligations to pay the same are terminated pursuant to
the express provisions of this Master Lease.




ARTICLE
VI




6.1           Ownership of the Leased
Properties.  Lessor warrants and represents that it has the
right to lease the Leased Properties to Lessee, and, if Lessor acquired the
Leased Properties from anyone other than Lessee or an Affiliate of Lessee,
Lessor warrants and represents it has good and marketable fee simple title to
the Leased Properties, subject only to the Permitted


21


Encumbrances
and any Lessee Encumbrances.  Lessee acknowledges that the Leased
Properties are the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Properties upon the terms and conditions
of this Master Lease.  Lessee will not, at any time during the
Term:  (i) file any income tax return or other associated documents;
(ii) file any other document with or submit any document to any governmental
body or authority; (iii) enter into any written contractual arrangement with any
Person; or (iv) release any financial statements of Lessee, in each case that
takes a position other than that Lessor is the owner of the Leased Properties
for federal, state and local income tax purposes and that this Master Lease is a
“true lease.”  If Lessee should reasonably conclude that GAAP or the
SEC require treatment different from that set forth in the subsections (i),
(ii), (iii) and (iv) of the previous sentence, then Lessee (y) shall give
prior Notice to Lessor, and (z) notwithstanding the prior sentence, Lessee may
comply with such requirements.




6.2           Lessor’s Personal
Property.  Lessee hereby acknowledges and agrees that, as of
the Commencement Date, all Personal Property located on the Land or in the
Leased Improvements on the Effective Date is the Personal Property of Lessor,
except for the Excluded Lessee’s Personal Property.  Lessee shall,
during the entire Term, maintain all of Lessor’s Personal Property in good
order, condition and repair as shall be necessary in order to operate the
Facilities for the Primary Intended Use in compliance with all applicable
licensure and certification requirements, all applicable Legal Requirements and
Insurance Requirements, and customary industry practice for the Primary Intended
Use, reasonable wear and tear and obsolescence excepted.  If any of
Lessor’s Personal Property requires replacement in order to comply with the
foregoing, Lessee shall replace it with similar property of the same or better
quality at Lessee’s sole cost and expense, and when such replacement property is
placed in service with respect to any Leased Property it shall become Lessor’s
Personal Property.  At the expiration or earlier termination of this
Master Lease, all of Lessor’s Personal Property shall be surrendered to Lessor
with the Leased Properties at or before the time of the surrender of the Leased
Properties in good operating condition.




6.3           Lessee’s Personal
Property.  Lessee shall provide and maintain during the Term
such Personal Property, in addition to Lessor’s Personal Property, as shall be
reasonably necessary and appropriate in order to operate the Facilities for the
Primary Intended Use in compliance with all licensure and certification
requirements and in compliance with all applicable Legal Requirements and
Insurance Requirements. Upon the expiration or earlier termination of this
Master Lease as to any or all of the Leased Properties other than as a result of
Lessee’s purchase of the Leased Properties or any portion thereof in accordance
with the terms of this Master Lease (i) Lessee shall have the right, at its sole
cost and expense, to remove from the Leased Properties or the Leased
Property(ies) as to which this Master Lease has terminated, as applicable, the
Excluded Lessee’s Personal Property unless there is then outstanding an Event of
Default hereunder and Lessor elects to exercise its rights with respect to the
Excluded Lessee’s Personal Property in accordance with the terms of the Amended
Security Agreement and (ii) the Relinquished Lessee’s Property shall be and
remain the property of Lessor and Lessee shall, upon request, execute such
documents as may be reasonably necessary to convey to Lessor all of Lessee’s
right, title and interest therein free and clear of all liens, claims, charges
and encumbrances. Any of the Excluded Lessee’s Personal Property which Lessee
fails to remove from the affected Leased Property(ies) within twenty (20) days
following the expiration or earlier termination of this Master Lease shall be
considered abandoned by Lessee and may be


22


appropriated,
sold, destroyed or otherwise disposed of by Lessor without giving notice thereof
to Lessee and without any payment to Lessee or any obligation to account
therefore.  Lessee shall reimburse Lessor for any and all
expenses reasonably incurred by Lessor in disposing of any of the Excluded
Lessee’s Personal Property in accordance with the immediately preceding sentence
and shall either at its own expense restore the Leased Properties to the
condition required by Section 9.1.7, including repair of all damages to the
Leased Properties caused by the removal of any of the Excluded Lessee’s Personal
Property, or reimburse Lessor for any and all expense reasonably incurred by
Lessor for such restoration and repair.




6.4           Grant of Security Interest
in Lessee’s Personal Property.  Lessee has concurrently granted
to Lessor a security interest in the “Collateral” (as defined in the Amended
Security Agreement), as more particularly described in the Amended Security
Agreement.




ARTICLE
VII




7.1           Condition of the Leased
Properties.  Lessee has been and currently is in possession of
the Leased Properties and otherwise has knowledge of the condition of the Leased
Properties and has found the same to be in good order and repair and
satisfactory for its purposes hereunder.  Lessee continues to lease
the Leased Properties “as is” in their condition at the time this Master Lease
is entered into.  Lessee waives any claim or action against Lessor in
respect of the condition of any Leased Property.  LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, TO LESSEE OR TO ANY PARTY WITH
WHICH LESSEE ENTERS INTO A MANAGEMENT CONTRACT, IN RESPECT OF ANY LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE.  LESSEE ACKNOWLEDGES THAT EACH
LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO
LESSEE.  Lessee further acknowledges that Lessee is solely responsible
for the condition of the Leased Properties from and after the Commencement
Date.  Unless any Leased Property was acquired from Lessee, and to the
extent permitted by law, Lessor hereby assigns to Lessee, all of Lessor’s
rights, if any, to proceed against any predecessor in title for breaches of
warranties or representations, or for latent defects in such Leased Property and
Lessee agrees to fully prosecute any and all such claims.  Lessor
shall cooperate with Lessee in the prosecution of any such claims, in Lessor’s
or Lessee’s name, all at Lessee’s sole cost and expense.




7.2           Use of Leased
Properties.




7.2.1                      Lessee
covenants that it will obtain and maintain all approvals, licenses and permits
needed to use and operate the Leased Properties and the Facilities under
applicable local, state and federal law, including, but not limited to,
licensure as a licensed nursing home or other applicable designation, such as
rehabilitation hospital, and Medicare or Medicaid certification, to the extent
applicableto
the operation of each Facility from time to time.


23


7.2.2                      After
the Commencement Date and during the entire Term, Lessee shall use or cause each
Leased Property to be used as the applicable Facility thereon is currently
licensed, and for such other uses as may be necessary or incidental to such use (the
particular such use is herein referred to as the “Primary Intended
Use”).  Lessee shall not use any Leased Property or any portion
thereof for any other use without the prior written consent of
Lessor.  No use shall be made or permitted to be made by Lessee, its
agents and employees of any Leased Properties, and no acts shall be done by
Lessee, its agents and employees, which will cause the cancellation of any
insurance policy covering any Leased Property or any part thereof, nor shall
Lessee sell or otherwise provide to residents or patients therein, or permit to
be kept, used or sold in or about any Leased Property any article which may be
prohibited by law or by the standard form of fire insurance policies, or any
other insurance policies required to be carried hereunder, or fire underwriter’s
regulations.




7.2.3                      Lessee
covenants and agrees that during the Term it will continuously operate the
Facilities on the Leased Properties as providers of health care services in
accordance with the Primary Intended Use and that it will maintain its
certification for reimbursement and licensure and its accreditation, if
applicable.




7.2.4                      Lessee
shall not commit or suffer to be committed any waste on any Leased Property nor
shall Lessee cause or permit any nuisance thereon.




7.2.5                      Lessee
shall neither suffer nor permit any Leased Property or any portion thereof, or
Lessee’s Personal Property, to be used in such a manner as (i) might reasonably
tend to impair Lessor’s (or Lessee’s, as the case may be) title thereto or to
any portion thereof, or (ii) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of such Leased Property or any portion thereof.




7.3           Certain Environmental
Matters.




7.3.1                      Definitions.  The
terms defined in this Section have the meanings assigned to them in this Section
and include the plural as well as the singular:




(a)           Clean-Up:  The
investigation, removal, restoration, remediation and/or elimination of, or other
response to, Contamination (as hereinafter defined) to the satisfaction of all
governmental agencies having jurisdiction, in compliance with or as may be
required by Environmental Laws (as hereinafter defined).




(b)           Contamination.  The
presence, Release or threatened Release of any Hazardous Substance at any Leased
Property in violation of any Environmental Law, or in a quantity that would give
rise to any affirmative Clean-Up obligation under an Environmental Law,
including, but not limited to, the existence of any injury or potential injury
to public health, safety, natural resources or the environment associated
therewith, or any other environmental condition at, in, about, under or
migrating from or to such Leased Property.




24




(c)           Environmental
Documents:  Each and every (i) document received by Lessee or
any Affiliate from, or submitted by Lessee or any Affiliate to, the United
States Environmental Protection Agency and/or any other federal, state, county
or municipal agency responsible for enforcing or implementing Environmental
Laws with respect to the condition of a Leased Property, or Lessee’s operations
at a Leased Property; and (ii) review, audit, report, or other analysis data
pertaining to environmental conditions, including, but not limited to, the
presence or absence of Contamination, at, in, or under or with respect to a
Leased Property that have been prepared by, for or on behalf of
Lessee.




(d)           Environmental Laws:
All federal, state and local laws (including, without limitation, common law),
statutes, codes, ordinances, regulations, rules, orders, permits or decrees
relating to the introduction, emission, discharge or release
of  Hazardous Substances into the indoor or outdoor environment
(including, without limitation, air, surface water, groundwater, land or soil)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, transportation or disposal of Hazardous Substances; or the
Cleanup of Contamination, all as are now or may hereinafter be in
effect.




(e)           Environmental
Report:  The environmental review, audit and/or report relating
to any Leased Property provided to Lessor in connection with Lessor’s
acquisition of such Leased Property.




(f)           Hazardous
Substances:  Any and all dangerous, toxic or hazardous
material, substance, pollutant, contaminant, chemical, waste (including medical
waste), or substance including petroleum products, asbestos and PCB’s defined,
listed or described as such under any Environmental Law.




(g)           Regulatory
Actions:  With respect to any Leased Property, any claim,
demand, notice, action or proceeding brought, threatened or initiated by any
governmental authority in connection with any Environmental Law, including,
without limitation, civil, criminal and/or administrative proceedings, and
whether or not seeking costs, damages, equitable remedies, penalties or
expenses.




(h)           Release:  The
intentional or unintentional spilling, leaking, dumping, pouring, emptying,
seeping, disposing, discharging, emitting, depositing, injecting, leaching,
escaping, abandoning, or any other release or threatened release, however
defined, of any Hazardous Substance.




(i)           Third Party
Claims:  Any claims, actions, demands or proceedings (other
than Regulatory Actions) howsoever based (including without limitation those
based on negligence, trespass, strict liability, nuisance, toxic tort or
detriment to health welfare or property) due to Contamination, and whether or
not seeking costs, damages, penalties or expenses, brought by any person or
entity other than a governmental agency.




25




7.3.2                      Prohibition Against Use of
Hazardous Substances.  Lessee shall not permit, conduct or
allow on any Leased Property, the generation, introduction, presence,
maintenance, use, receipt, acceptance, treatment, manufacture, production,
installation, management, storage, disposal or release of any Hazardous
Substance except for those types and
quantities of Hazardous Substances necessary for and ordinarily associated with
the conduct of Lessee’s business and in full compliance with all Environmental
Laws.




7.3.3                      Notice of Environmental
Claims, Actions or Contaminations.  Lessee will notify Lessor,
in writing, promptly upon learning of any existing, pending or threatened: (i)
investigation, inquiry, claim or action by any governmental authority with
respect to any Leased Property in connection with any Environmental Law, (ii)
Third Party Claims, (iii) Regulatory Actions, and/or (d) Contamination of any
Leased Property.




7.3.4                      Costs of Remedial Actions
with Respect to Environmental Matters.  If any investigation
and/or Clean-Up of any Hazardous Substance or other environmental condition on,
under, about or with respect to any Leased Property is required by any
Environmental Law, then Lessee shall complete, at its own expense, such
investigation and/or Clean-Up or cause each such other person as may be
responsible for any of the foregoing to conduct such investigation and/or
Clean-Up.




7.3.5                      Delivery of Environmental
Documents.  Lessee shall deliver to Lessor complete copies of
any and all Environmental Documents that may now be in or at any time hereafter
come into the possession of Lessee.




7.3.6                      Environmental
Audit.  At Lessee’s expense, Lessee shall from time to time,
after Lessor’s request therefor, provide to Lessor a written certificate, in
form and substance satisfactory to Lessor, from an environmental firm acceptable
to Lessor, which states that there is no Contamination on the Leased Property
identified by Landlord in such request and that such Leased Property is
otherwise in strict compliance with Environmental Laws (the “Environmental
Audit”).  All tests and samplings shall be conducted using
generally accepted and scientifically valid technology and
methodologies.  Lessee shall give the engineer or environmental
consultant reasonable access to such Leased Property and to all records in the
possession of Lessee that may indicate the presence (whether current or past) or
a Release or threatened Release of any Hazardous Substances on, in, under or
about such Leased Property.  Lessee shall also provide the engineer or
environmental consultant an opportunity to interview such persons employed in
connection with such Leased Property as the engineer or consultant deems
appropriate.  However, Lessor shall not be entitled to request such
certificate or certificates from Lessee unless (i) there have been any changes,
modifications or additions to any Environmental Laws as applied to or affecting
such Leased Property; (ii) a significant change in the condition of any Leased
Property has occurred; or (iii) Lessor has another good reason for requesting
such certificate or certificates.  If the Environmental Audit
discloses the presence of Contamination or any noncompliance with Environmental
Laws, Lessee shall immediately perform all of Lessee’s obligations hereunder
with respect to such Hazardous Substances or noncompliance.


26




7.3.7                      Entry onto Leased Property
for Environmental Matters.  If Lessee fails to provide the
Environmental Audit contemplated by Section 7.3.6 hereof, Lessee shall permit
Lessor from time to time, by its employees, agents, contractors or
representatives, to enter upon such Leased Property for the purposes of
conducting such soil and chemical tests or
any other environmental investigations, examinations, or analyses (hereafter
collectively referred to as “Investigation”) as Lessor may
desire.  Lessor, and its employees, agents, contractors, consultants
and/or representatives, shall conduct any such investigation in a manner which
does not unreasonably interfere with Lessee’s use of and operations on any
Leased Property (however, reasonable temporary interference with such use and
operations is permissible if the investigation cannot otherwise be reasonably
and inexpensively conducted).  Other than in an emergency, Lessor
shall provide Lessee with prior notice before entering any of the Leased
Properties to conduct such Investigation, and shall provide copies of any
reports or results to Lessee, and Lessee shall cooperate fully in such
Investigation.




7.3.8                      Environmental Matters Upon
Termination or Expiration of Term of This Master Lease.  Upon
the termination of the Term or the expiration of the Term of this Master Lease,
Lessee shall cause the Leased Properties to be delivered free of any and all
Contamination, Regulatory Actions and Third Party Claims and otherwise in strict
compliance with all Environmental Laws with respect thereto.




7.3.9                      Compliance with
Environmental Laws.  Lessee shall comply with, and cause its
agents, servants and employees, to comply with, and shall use reasonable efforts
to cause each tenant and other occupant and user of each Leased Property, and
the agents, servants and employees of such tenants, occupants and users, to
comply with each and every Environmental Law applicable to Lessee and each such
tenant, occupant or user with respect to each Leased
Property.  Specifically, but without limitation:




(a)           Maintenance of Licenses and
Permits.  Lessee shall obtain and maintain (and Lessee shall
use reasonable efforts to cause each tenant, occupant and user to obtain and
maintain) all permits, certificates, licenses and other consents and approvals
required by any applicable Environmental Law from time to time with respect to
Lessee, each and every part of the Leased Properties and/or the conduct of any
business at the Facilities or related thereto;




(b)           Contamination.  Lessee
shall not cause, suffer or permit any Contamination;




(c)           Clean-Up.  If
a Contamination occurs, Lessee promptly shall cause the Clean-Up and the removal
of any Hazardous Substance and in any such case such Clean-Up and removal of the
Hazardous Substance shall be effected in strict compliance with and in
accordance with the provisions of the applicable Environmental
Laws;




(d)           Discharge of
Lien.  Within twenty (20) days of the date any lien is imposed
against any Leased Property or any part thereof under any Environmental


27







(e)           Notification of
Lessor.  Promptly upon receipt by Lessee of notice or discovery
by Lessee of any fact or circumstance which might result in a breach or
violation of any covenant or agreement, Lessee shall notify Lessor in writing of
such fact or circumstance; and




(f)           Requests, Orders and
Notices.  Promptly upon receipt of any request, order or other
notice relating to any Leased Property under any Environmental Law, Lessee shall
forward a copy thereof to Lessor.




7.3.10                      Environmental Related
Remedies.  In the event of a breach by Lessee beyond any
applicable notice and/or grace period of its covenants with respect to
environmental matters, Lessor may, in its sole discretion, do any one or more of
the following (the exercise of one right or remedy hereunder not precluding the
simultaneous or subsequent taking of any other right hereunder):




(a)           Cause a
Clean-Up.  Cause the Clean-Up of any Hazardous Substance or
other environmental condition on or under any Leased Property, or both, at
Lessee’s cost and expense; or




(b)           Payment of Regulatory
Damages.  Pay on behalf of Lessee any damages, costs, fines or
penalties imposed on Lessee as a result of any Regulatory Actions;
or




(c)           Payments to Discharge
Liens.  Make any payment on behalf of Lessee or perform any
other act or cause any act to be performed which will prevent a lien in favor of
any federal, state or local governmental authority from attaching to any Leased
Property or which will cause the discharge of any lien then attached to such
Leased Property; or




(d)           Payment of Third Party
Damages.  Pay, on behalf of Lessee, any damages, cost, fines or
penalties imposed on Lessee as a result of any Third Party Claims;
or




(e)           Demand of
Payment.  Demand that Lessee make immediate payment of all of
the costs of such Clean-Up and/or exercise of the remedies set forth in this
Section 7.3 incurred by Lessor and not theretofore paid by Lessee as of the date
of such demand, whether or not such costs exceed the amount of Rent and
Additional Charges that are otherwise to be paid pursuant to this Master Lease,
and whether or not any court has ordered the Clean-Up, and payment of said costs
shall become immediately due, without notice.




7.3.11                      Environmental
Indemnification.  Lessee shall and does hereby agree to defend
Lessor, its principals, officers, directors, agents and employees (hereinafter,
all


28


“Indemnitees”) from
and against each and every incurred and potential claim, cause of action, demand
or proceeding, and does hereby agree to indemnify, defend and hold harmless
Indemnitees from and against each and every obligation, fine, laboratory fee,
liability, loss, penalty, imposition, settlement, levy, lien removal,
litigation, judgment, disbursement, expense and/or cost (including without
limitation the cost of each and every Clean-Up), however defined and of whatever
kind or nature, known or unknown, foreseeable or unforeseeable, contingent,
incidental, consequential or otherwise (including, but not limited to,
attorneys’ fees, consultants’ fees, experts’ fees and related expenses, capital,
operating and maintenance costs, incurred in connection with (i) any
investigation or monitoring of site conditions at any Leased Property, and (ii)
any Clean Up required or performed by any federal, state or local governmental
entity or performed by any other entity or person because of the presence of any
Hazardous Substance, Release, threatened Release or any Contamination on, in,
under or about any of the Leased Properties) which may be asserted against,
imposed on, suffered or incurred by, each and every Indemnitee arising out of or
in any way related to, or allegedly arising out of or due to any environmental
matter including, but not limited to, any one or more of the
following:




(a)           Release Damage or
Liability.  The presence of Contamination in, on, at, under, or
near any Leased Property or migrating to any Leased Property from another
location;




(b)           Injuries.  All
injuries to health or safety (including wrongful death), or to the environment,
by reason of environmental matters relating to the condition of or activities
past or present on, at, in or under any Leased Property;




(c)           Violations of
Law.  All violations, and alleged violations, of any
Environmental Law relating to any Leased Property or any activity on, in, at,
under or near any Leased Property;




(d)           Misrepresentation.  All
material misrepresentations relating to environmental matters in any documents
or materials furnished by Lessee to Lessor and/or its representatives in
connection with this Master Lease;




(e)           Event of
Default.  Each and every Event of Default hereunder relating to
environmental matters;




(f)           Lawsuits.  Any
and all lawsuits brought or threatened against any one or more of the
Indemnitees, settlements reached and governmental orders relating to any
Hazardous Substances at, on, in, under or near any Leased Property, and all
demands of governmental authorities, and all policies and requirements of
Lessor’s, based upon or in any way related to any Hazardous Substances at, on,
in or under any Leased Property; and




(g)           Presence of
Liens.  All liens imposed upon any Leased Property and charges
imposed on any Indemnitee in favor of any governmental entity or


29






7.3.12      Rights Cumulative and
Survival.  The rights granted Lessor under this Section are in
addition to and not in limitation of any other rights or remedies available to
Lessor hereunder or allowed at law or in equity.  The obligations of
Lessee to defend, indemnify and hold Lessor harmless, as set forth in this
Section 7.3, arising as a result of an act,
omission, condition or other matter occurring or existing during the Term,
whether or not the act, omission, condition or matter as to which such
obligations relate is discovered during the Term, shall survive the expiration
or earlier termination of the Term of this Master Lease.




ARTICLE
VIII




8.1           Representations and
Warranties of Lessee and Sun.  Each of Lessee and Sun hereby
represents and warrants to Lessor as of the Effective Date (except as otherwise
set forth below) as follows:




(a)           Good Standing; Due
Authorization.  Sun is duly incorporated and is validly
existing in good standing under the laws of the State of
Delaware.  Each of the Lessees has been duly formed or organized and
is validly existing in good standing under the laws of the state or jurisdiction
of its organization or formation.  The execution, delivery and
performance of this Master Lease (including the authorization, sale, issuance
and delivery of the Common Stock) by Sun and each Lessee have been duly
authorized by all requisite corporate action and no further consent or
authorization of any Lessee, Sun, the Board or Sun’s shareholders is
required.




(b)           Enforceability.  This
Master Lease has been duly executed and delivered by each of Sun and each Lessee
and, when this Master Lease is duly authorized, executed and delivered by
Lessor, will be a valid and binding agreement enforceable against Sun and Lessee
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of equity.  The
issuance of the Common Stock was not be subject to any preemptive or similar
rights.




(c)           Authority.  Each
of Lessee and Sun has full corporate power and authority necessary to (i) own
and operate its properties and assets, execute and deliver this Master Lease,
(ii) perform its obligations hereunder (including, but not limited to, the
issuance of the Common Stock) and (iii) carry on its business as presently
conducted and as presently proposed to be conducted.  Each Lessee is
duly qualified and authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so would not
have a material adverse effect on the business affairs, assets or results of
operations of Sun and its subsidiaries, taken as a whole.


30




(d)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
other body is required for execution and delivery by Sun or any Lessee of this
Master Lease or the performance by Sun or any Lessee of any of its obligations
hereunder to be performed on or before the Effective Date other than such as may
already have been received.
  (e)           No
Conflicts.  Neither the execution and delivery by Sun or any
Lessee of this Master Lease nor the performance by Sun or any Lessee of any of
its obligations hereunder:




(i)           violates,
conflicts with, results in a breach of, or constitutes a default (or an event
which with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) or creates any rights in respect of any person
under (A) the certificates of incorporation, by-laws or other organizational
documents of Sun or any of its subsidiaries, including Lessee, (B) any decree,
judgment, order, or determination of any court, governmental agency or body, or
arbitrator having jurisdiction over Sun or any Lessee or any of their
subsidiaries or any of their respective properties or assets or any material
law, treaty, rule or regulation, (C) the terms of any bond, debenture, note,
indenture, credit agreement or any other evidence of indebtedness, or any
material agreement, stock option or other similar plan, lease, mortgage, deed of
trust or other instrument to which Sun, any Lessee or any of their subsidiaries
is a party, by which Sun, any Lessee or any of its subsidiaries is bound, or to
which any of the properties or assets of Sun, any Lessee or any of its
subsidiaries is subject; or




(ii)           results
in the creation or imposition of any material lien, charge or encumbrance upon
any of the properties or assets of Sun, any Lessee or any of its
subsidiaries.




(f)           Proceedings. There is
no pending or, to the best knowledge of Sun or any Lessee, threatened action,
suit, proceeding or investigation before any court, governmental agency or body
or arbitrator having jurisdiction over Sun, any Lessee or any of their
Affiliates that would materially affect the execution by Sun or any Lessee of
this Master Lease.




8.2           Representations and
Warranties of Lessor.  Lessor hereby represents and warrants to
Sun as of the Effective Date (except as otherwise set forth below) as
follows:




(a)           Good Standing; Due
Authorization.  Omega is duly incorporated and validly existing
in good standing under the laws of the State of Maryland.  Each of the
entities comprising Lessor has been duly formed or organized and is validly
existing in good standing under the laws of the state or jurisdiction of its
organization or formation.  The principal place of business of Omega
and each Lessor is in the State of Maryland. The execution, delivery and
performance of this Master Lease and the acquisition of the Conversion Shares in
accordance with the terms of the Existing Sun Master Lease by each Lessor have
been duly authorized by all requisite corporate action and no further


31




(b)           Enforceability.  This
Master Lease has been duly executed and delivered by each of Omega and each
Lessor and, when this Master Lease is duly authorized, executed and delivered by
Lessee, will be a valid and binding agreement enforceable against Omega and each
Lessor in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights generally and to general principles of
equity.




(c)           Authority.  Each
of each Lessor and Omega has full corporate power and authority necessary to (i)
own and operate its properties and assets, execute and deliver this Master
Lease, (ii) perform its obligations hereunder and (iii) carry on its business as
presently conducted and as presently proposed to be conducted.




(d)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
other body is required for execution and delivery by Omega or any Lessor of this
Master Lease or the performance by Omega or any Lessor of any of its obligations
hereunder other than such as may already have been received. In furtherance and
not in limitation of the foregoing, Omega and Lessor (i) represent and warrant
that (A) all of the amendments, modifications and waivers to the Existing Sun
Master Lease provided for herein, have been consented to under the terms of that
certain Credit Agreement dated as of March 31, 2006 among Bank of America, NA
(“BofA”) and
the other financial institutions who are or thereafter become parties thereto
(the “Omega
Lenders”), as Lender and Lessor and certain affiliates of Lessor, as
Borrowers (the “BofA
Credit Agreement”) and (B) in particular that the requirements of Section
7.08 of the BofA Credit Agreement will be satisfied after the execution by
Omega, Lessor and Lessee of this Master Lease.




(e)           No
Conflicts.  Neither the execution and delivery by Omega or any
Lessor of this Master Lease nor the performance by Omega or any Lessor of any of
its obligations hereunder violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) or creates
any rights in respect of any person under (A) the certificates of incorporation,
by-laws or other organization documents of Omega or any of its subsidiaries,
including Lessor, (B) any decree, judgment, order, or determination of any
court, governmental agency or body, or arbitrator having jurisdiction over Omega
or any Lessor or any of their subsidiaries or any of their respective properties
or assets or any material law, treaty, rule or regulation, (C) the terms of any
bond, debenture, note, indenture, credit agreement or any other evidence of
indebtedness, or any material agreement, stock option or other similar plan,
lease, mortgage, deed of trust or other instrument to which Omega, any Lessor or
any of their subsidiaries is a party, by which Omega, any Lessor or any of its
subsidiaries is bound, or to which any of the properties or assets of Omega, any
Lessor or any of its subsidiaries is subject, or (D) any material rule or
regulation of the quotation services or any markets where Omega’s securities are
publicly traded or quoted, applicable either to Omega or the transactions
contemplated hereby.


32




8.3           Limitation on
Remedies.  Notwithstanding any provision of this Master Lease
to the contrary, with respect to any breach as of the Effective Date of the
representations and warranties set forth in Sections 8.1 and 8.2, each of the
parties shall have any and all rights or remedies available at law or in equity,
other than the right (i) to recover incidental and consequential damages or (ii)
to seek any remedy designed to result in a termination of Lessee’s leasehold
rights hereunder or (iii) to enforce the remedies specified in Article XVI
hereof.
  8.4           Compliance with Legal and
Insurance Requirements.  Subject to Section 12.1 relating to
permitted contests, Lessee, at its expense, will promptly (i) comply with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Properties and
Lessee’s Personal Property, whether or not compliance therewith requires
structural changes in any of the Leased Improvements (any such structural
changes, nevertheless, being subject to Lessor’s prior written approval, which
approval shall not be unreasonably withheld or unreasonably delayed) or
interferes with the use and enjoyment of the Leased Properties including such
expenditures as are required to conform the Leased Properties to such standards
as may from time to time be required by Federal Medicare  (Title 18)
or Medicaid (Title 19) Skilled Care Nursing Programs, if applicable, or any
other applicable programs or legislation, or capital improvements required by
any other governmental agency having jurisdiction over any Leased Property as a
condition to the continued operation of such Leased Property, approved for
Medicare, Medicaid or similar programs, pursuant to present or future laws or
governmental regulation and (ii) procure, maintain and comply with all licenses,
certificates of need, provider agreements and other authorizations required for
any use of any Leased Property and Lessee’s Personal Property then being made,
and for the proper erection, installation, operation and maintenance of any
Leased Property or any part thereof.




8.5           Legal Requirement
Covenants.  Lessee covenants and agrees that the Leased
Properties and Lessee’s Personal Property shall not be used for any unlawful
purpose.  Lessee further covenants and agrees that Lessee’s use of the
Leased Properties and maintenance, alteration, and operation of the same, and
all parts thereof, shall at all times conform to all applicable local, state,
and federal laws, ordinances, rules, and regulations (including but not limited
to the Americans with Disabilities Act) unless the same are held by a court of
competent jurisdiction to be unlawful.  Lessee may, however, upon
prior written Notice to Lessor, contest the legality or applicability of any
such law, ordinance, rule or regulation, or any licensure or certification
decision as provided in Section 12.1.  The judgment of any court of
competent jurisdiction or the admission of Lessee in any action or proceeding
against Lessee, whether Lessor is a party thereto or not, that Lessee has
violated any such Legal Requirements or Insurance Requirements shall be
conclusive of that fact as between Lessor and Lessee.




8.6           Certain
CovenantsRegarding Management.




8.6.1                      Limitation of Management
Fees.  A condition to the effectiveness of the Term with
respect to this Master Lease shall be the disclosure to Lessor of the terms of
any management agreement between Lessee and any other entity affecting the
operational control of any Facility, and Lessor’s approval, which shall not be
unreasonably withheld, of such terms and of such other entity. Each manager
shall subordinate its right to receive any management fee from any Facility to
Lessee’s obligation to pay Lessor the Base Rent and Additional Charges for such
Facility.


33




8.6.2                      Management
Agreements.  Lessee covenants that during the Term of this
Lease it shall neither (i) enter into any management agreement with respect to a
Facility without Lessor’s approval, which Lessor shall not unreasonably
withhold  (provided the proposed manager does not fail to meet the
criteria set forth in paragraphs 2 and 3 set forth on Exhibit G which would
be applicable to it if it were a proposed “Transferee” and it is not proposed
that the use of the affected Leased Property change from the Primary Intended
Use or violate any other agreement affecting the affected Leased Property), or
(ii) amend, modify, renew, replace or otherwise change the terms of any existing
management agreement for a Facility without the prior written consent of Lessor,
which Lessor may not unreasonably withhold, and, in either case, without a
satisfac­tory subordination by such manager of its right to receive its
management fee to the obligation of Lessee to pay the Base Rent and Additional
Charges to Lessor.




ARTICLE
IX




9.1           Maintenance and
Repair.




9.1.1                      Lessee,
at its expense, will keep the Leased Properties and all fixtures thereon and all
landscaping, private roadways, sidewalks and curbs appurtenant thereto and which
are under Lessee’s control and Lessee’s Personal Property in good order and
repair (whether or not the need for such repairs occurs as a result of Lessee’s
use, the elements or the age of the Leased Properties or any portion thereof, or
any cause whatever except the failure of Lessor to make any payment or to
perform any act expressly required under this Master Lease or any willful
misconduct of Lessor), and, except as otherwise provided in Article XIV, with
reasonable promptness, make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition whether or not existing prior to the commencement of the
Term (concealed or otherwise).  Lessee shall not make any changes or
alterations to any Leased Property, except as permitted pursuant to Article
X.




9.1.2                      Lessee
shall do or cause others to do all shoring of any Leased Property or adjoining
property (whether or not owned by Lessor) or of the foundations and walls of the
Leased Improvements, and every other act necessary or appropriate for the
preservation and safety thereof, by reason of or in connection with any
subsidence, settling or excavation or other building operation upon any of the
Leased Properties or adjoining property, whether or not Lessor shall, by any
Legal Requirements, be required to take such action or be liable for the failure
to do so.  All repairs shall, to the extent reasonably achievable, be
at least equivalent in quality to the original work, and, subject to the
provisions of paragraph 9.1.6, where, by reason of age or condition, such
repairs cannot be made to the quality of the original work, the property to be
repaired shall be replaced.




9.1.3                      It
is the intention of these provisions that the level of maintenance of the Leased
Properties shall be not less than the standard applied by Lessee in its
operation of other similar licensed health care facilities it owns and/or
operates. At all times Lessee shall maintain, operate and otherwise manage the
Leased Properties on a quality basis


34




9.1.4                      Lessor
shall not under any circumstances be required to build or rebuild any
improvements on any Leased Property, or to make any repairs, replacements,
alterations, restorations or renewals of any nature or description to any Leased
Property, whether
ordinary or extraordinary, structural or non-structural, foreseen or unforeseen,
or upon any adjoining property, whether to provide lateral or other support for
any Leased Property or abate a nuisance affecting any Leased Property, or
otherwise, or to make any expenditure whatsoever with respect thereto, in
connection with this Master Lease, or to maintain any Leased Property in any
way.  Lessee hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Lessor pursuant to any law in effect at the
time of the execution of this Master Lease or hereafter
enacted.




9.1.5                      Nothing
contained in this Master Lease, and no action or inaction by Lessor, shall be
construed for the benefit of any contractor, subcontractor, laborer, materialman
or vendor as (i) constituting the consent or request of Lessor, expressed or
implied, to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to any Leased Property or any part thereof, or (ii)
subject to the provisions of Section 12.1 , giving Lessee any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in any
Leased Property, or any portion thereof.  Lessor shall have the right
to give, record and post, as appropriate, notices of non-responsibility under
any mechanics’ lien laws now or hereafter existing.




9.1.6                      Lessee
shall, from time to time, replace with other operational equipment or parts or
property (the “Replacement
Property”) any of the Fixtures or Lessor’s Personal Property (the “Replaced Property”)
which shall have (i) become worn out, obsolete or unusable for the purpose for
which it is intended, (ii) been taken by Condemnation, in which event Lessee
shall be entitled to that portion of any Award made therefor, or (iii) been
lost, stolen, damaged or destroyed; provided, however, that the Replacement
Property shall (1) be in good operating condition, (2) have a then value (as
adjusted for inflation) and useful life at least equal to the value and
estimated useful life of the Replaced Property as of the date hereof for
Replaced Property specified in Subparagraph 9.1.6(i), or have a value and useful
life at least equal to the value and estimated useful life of the Replaced
Property immediately prior to the time that the Replaced Property specified in
Subparagraphs 9.1.6 (ii) and 9.1.6 (iii) had become so taken or so lost, stolen,
damaged or destroyed, and (3) be suitable for a use which is the same or similar
to that of the Replaced Property.  Lessee shall repair at its sole
cost and expense all damage to the Leased Properties caused by the removal of
Replaced Property or other personal property of Lessee or the installation of
Replacement Property.  All Replacement Property shall become the
property of Lessor and shall become a part of the Fixtures or Lessor’s Personal
Property, as the case may be, to the same extent as the


35




Lessee
shall pay all taxes, fees, costs and other expenses that may become payable as a
result thereof.  At the expiration of the Term or the sooner
termination of this Master Lease, the Leased Properties covered by this Master
Lease, including all Leased Improvements, Fixtures and Personal Property shall
be in good operating condition, ordinary wear and tear
excepted.  Notwithstanding the foregoing, Lessee shall be deemed to be
in compliance with the requirements of this Section 9.1.6 if the total amount of
the Permitted Personal Property Leases or Liens (as calculated by summing the
annual amount of rental, principal and interest payments for all such leases and
financings) affecting the Replaced Property or Lessee’s Personal Property (other
than the Excluded Lessee’s Personal Property) for any Facility at any time does
not exceed, (i) in the case of a Facility, the Primary Intended Use of which is
as a nursing home, $420 per bed and (i) in the case of a Facility, the Primary
Intended Use of which is as a rehabilitation hospital, $1,260 per bed, which per
bed limit shall be increased in the case of each of clauses (i) and (ii) on each
anniversary of the Commencement Date by the percentage change in the
CPI.  For the avoidance of doubt, nothing herein shall be construed as
limiting the liens or other exceptions to title which may affect the Excluded
Lessee’s Personal Property.




9.1.7                      Upon
the expiration or earlier termination of the Term, Lessee shall vacate and
surrender the Leased Properties to Lessor as a fully equipped, licensed nursing
home or rehabilitation hospital or other healthcare facility, as applicable,
with all equipment required by the laws of the State to maintain its then
current license.  The Leased Properties shall be returned in the
condition in which it was originally received from Lessor, ordinary wear and
tear excepted, and except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Master Lease.




9.2           Encroachments, Restrictions,
etc.  Except in the case of Permitted Encumbrances, if any of
the Leased Improvements, at any time, encroaches upon any property, street or
right-of-way adjacent to the Leased Properties, or violates the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting any Leased Property, or any part thereof, or impairs the rights of
others under any easement or right-of-way to which the Leased Properties is
subject, then promptly upon the request of Lessor or at the behest of any person
affected by any such encroachment, violation or impairment, Lessee shall, at its
expense, subject to its right to contest the existence of any encroachment,
violation or impairment as provided in Section 12.1 and in such case, in the
event of an adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Lessor or Lessee or (ii) make such changes to the Leased Improvements, and take
such other actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, and to end such violation
or impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Properties for the
Primary Intended Use


36







9.3           Facility
Improvements.  As of the Effective Date, Lessee hereby
represents and warrants to Lessor that the “Work” has been completed and Lessor
and Lessee acknowledge and agree that the “Escrow” has been fully disbursed (as
such terms are defined in the Second Amendment to the Existing Sun Master
Lease).




ARTICLE
X




10.1           Construction of Alterations
and Additions to the Leased Properties.  Lessee shall not make
or permit to be made any alterations, improvements or additions of or to any
Leased Property or any part thereof, unless and until Lessee has obtained
Lessor’s written approval thereof if and as required pursuant to the terms of
this Article X, which approval shall not be unreasonably withheld, and, if and
as required by the terms of a Facility Mortgage, the approval of the Facility
Mortgagee. Routine landscaping, painting, floor and wallcovering replacements
shall not be deemed to be alterations within the meaning of this Article
X.




10.1.1                      Without
the prior written consent of Lessor, Lessee shall not make any structural
alterations to any Leased Property (other than replacement with the same
materials in the same configuration) the cost of which in any period of twelve
(12) consecutive months exceeds Fifty Thousand Dollars ($50,000), including,
without limitation, any alterations to the roof, exterior and other load-bearing
walls, windows and foundation of such Leased Property.




10.1.2                      Without
the prior written consent of Lessor, Lessee shall not make any non-structural
alterations to any Leased Property (other than replacement with the same
materials in the same configuration) the cost of which in any period of twelve
(12) consecutive months exceeds the Self Administered Amount.




10.1.3                      As
to any proposed alterations that do not require the approval of Lessor, before
commencing the proposed alterations Lessee shall give Lessor at least fifteen
(15) Business Days’ Notice, and, in the case of structural alterations not
requiring the approval of Lessor, Lessee shall deliver a copy of the plans and
specifications therefor to Lessor within thirty (30) days after the commencement
of such alterations.




10.1.4                      If
the approval of Lessor of a proposed structural alteration is required, at least
thirty (30) days prior to the date upon which Lessee wishes to commence
construction of such alteration, Lessee shall cause a copy of the plans and
specifications therefor, prepared at Lessee’s expense by a licensed architect,
to be submitted to Lessor and, if and as required by a Facility Mortgage, to the
Facility Mortgagee. Lessor’s approval shall not be unreasonably withheld or
delayed.




10.1.5                      If
a required approval is granted, Lessee shall cause the work described in the
approved plans and specifications to be performed at its expense, promptly and
in a first class workmanlike manner, by a licensed general contractor and in
compliance with


37


all
applicable Insurance Requirements and Legal Requirements and the standards
herein.  Each alteration, alone or in conjunction with each affected
portion of any Leased Property, shall constitute a complete architectural unit
in keeping with the character of such Leased Property and the area in which such
Leased Property is located, and shall not diminish the value of such Leased
Property or change the Primary Intended Use of such Leased
Property.  Each and every such alteration shall immediately become a
part of any Leased Property and shall belong to Lessor subject to the terms and
conditions of this Master Lease. Lessee shall have no claim against Lessor at
any time in respect of the cost or value of any such alteration.  All
materials which are scrapped or removed in connection with the making of such
alteration shall be the property of Lessee. There shall be no adjustment in the
Base Rent by reason of any such alteration.




10.1.6                      In
connection with any alteration which involves the removal, demolition or
disturbance of  any asbestos-containing material, Lessee shall cause
to be prepared at its expense a full asbestos assessment applicable to such
alteration, and shall carry out such asbestos monitoring and
maintenance  program as shall reasonably be required thereafter in
light of the results of such assessment.




ARTICLE
XI




11.1           Liens.  Subject
to the provisions of Section 12.1 relating to permitted contests, Lessee will
not directly or indirectly create or allow to remain and will promptly discharge
at its expense any lien, encumbrance, attachment, title retention agreement or
claim upon any Leased Property or any attachment, levy, claim or encumbrance in
respect of the Rent, not including, however, (i) this Master Lease, (ii) the
Permitted Encumbrances, (iii) restrictions, liens and other encumbrances which
are consented to in writing by Lessor (Lessor’s consent to such liens not to be
unreasonably withheld or delayed) and any Facility Mortgagee or any easements
granted by or consented to in writing by Lessor, (iv) liens for those taxes of
Lessor which Lessee is not required to pay hereunder, (v) subleases
permitted by Article XXIII, (vi) liens for Impositions or for sums resulting
from noncompliance with Legal Requirements so long as (a) the same are not yet
payable, or (b) such liens are in the process of being contested as permitted by
Section 12.1, (vii) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed or not yet due, provided that (a) the payment
of such sums shall not be postponed for more than sixty (60) days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or GAAP shall have been made
therefor and (b) any such liens are in the process of being contested as
permitted by Section 12.1, (viii) any liens which are the responsibility of
Lessor hereunder, and (ix) any other liens expressly permitted by the terms
hereof.




ARTICLE
XII




12.1           Permitted
Contests.  Lessee, on its own or on Lessor’s behalf (or in
Lessor’s) name, but at Lessee’s sole cost and expense, may contest the amount or
validity of any Imposition or any Legal Requirement or Insurance Requirement or
any lien, attachment, levy, encumbrance, charge or claim, or any encroachment or
restriction burdening any Leased Property as provided in Section 9.2 (“Claims”), not
otherwise permitted by Article XI, by appropriate legal proceedings in good
faith and with due diligence (but this shall not be deemed


38


or
construed in any way as relieving, modifying or extending Lessee’s covenants to
pay or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale of any Leased Property, or any part thereof,
to satisfy the same or cause Lessor or Lessee to be in default under any
Encumbrance or in violation of any Legal Requirements or Insurance Requirements
upon any Leased Property or any interest therein.  Upon request of
Lessor, Lessee shall either (i) provide a bond, letter of credit or other
assurance reasonably satisfactory to Lessor and any court having jurisdiction
thereof that all Claims which may be assessed against any Leased Property
together with interest and penalties, if any, thereon will be paid, or (ii)
deposit within the time otherwise required for payment with a bank or trust
company selected by Lessor as trustee, as security for the payment of such
Claims, money in an amount sufficient to pay the same, together with interest
and penalties in connection therewith and all Claims which may be assessed
against or become a Claim on any Leased Property, or any part thereof, in said
legal proceedings, or (iii) deposit in the court having jurisdiction thereof an
amount required by the laws of the State in which a Facility is located, to
release any lien from any Leased Property.  Lessee shall furnish
Lessor and any lender of Lessor and any other party entitled to assert or
enforce any Legal Requirements or Insurance Requirements with evidence of such
deposit within five (5) days of the same.  Lessor agrees to join in
any such proceedings if required to legally prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of any costs or expenses in
connection with any such proceedings; and Lessee covenants to indemnify and save
harmless Lessor from any such costs or expenses, including but not limited to
reasonable attorneys’ fees incurred in any arbitration proceeding, trial, appeal
and post-judgment enforcement proceedings.  Lessee shall be entitled
to any refund of any Claims and such charges and penalties or interest thereon
which have been paid by Lessee or paid by Lessor and for which Lessor has been
fully reimbursed.  If Lessee fails to pay or satisfy the requirements
or conditions of any Claims when due or to provide the security therefor as
provided in this paragraph and to diligently prosecute any contest of the same,
Lessor may, upon thirty (30) days’ advance written Notice to Lessee, pay such
charges or satisfy such claims together with any interest and penalties and the
same (or the cost thereof) shall be repayable by Lessee to Lessor  as
Additional Charges upon presentation of a written statement setting forth the
amounts so claimed.  If Lessor reasonably determines that the giving
of such Notice would risk loss to any Leased Property or cause damage to Lessor,
then Lessor shall give such written Notice as is practical under the
circumstances.




12.2           Lessor’s Requirement for
Deposits. Upon and at any time after Lessee has failed on three (3)
consecutive occasions to fulfill its obligations hereunder with respect to the
payment of Rent or Impositions or the compliance with any Insurance Requirements
or Legal Requirements, whether or not Lessor has declared an Event of Default
hereunder, Lessor, in its sole discretion, shall thereafter be entitled to
require Lessee to pay monthly a pro rata portion of the amounts required to
comply with the relevant Insurance Requirements, any Imposition and any Legal
Requirements, and when such obligations become due, Lessor shall pay them (to
the extent of the deposit) upon Notice from Lessee requesting such
payment.  In the event that sufficient funds have not been deposited
to cover the amount of the obligations due at least thirty (30) days in advance
of the due date, Lessee shall forthwith deposit the same with Lessor upon
written request from Lessor.  Lessor shall not be obligated to pay
Lessee any interest on any deposit so held by Lessor.  Upon an Event
of Default, any of the funds remaining on deposit may


39








ARTICLE
XIII




13.1           General Insurance
Requirements.  During the Term, Lessee shall at all times keep
the Leased Properties, and all property located in or on Leased Property,
including Lessor’s Personal Property and Lessee’s Personal Property, insured
with the kinds and amounts of insurance described below. Except as otherwise
provided in this Article XIII, (a) this insurance shall be written by companies
authorized to do insurance business in the State and, (b) all such policies
provided and maintained during the Term shall be written by companies having a
rating classification of not less than “A-” and a financial size category of
“Class X,” according to the then most recent issue of Best’s Key Rating
Guide.  The policies (other than Workers’ Compensation policies) must
name Lessor as an additional insured.  Losses shall be payable to
Lessor or Lessee as provided in Article XIV.  In addition, the
policies shall name as an additional insured, the holder of any mortgage deed of
trust or other security agreement on the Leased Properties (“Facility Mortgagee”)
securing any Assumed Indebtedness and any other Encumbrance placed on the Leased
Properties in accordance with the provisions of Article XXXIV (“Facility Mortgage”),
as its interest may appear, by way of a standard form of mortgagee’s loss
payable endorsement in use in the State and in accordance with any such other
requirements as may be established by the Facility Mortgagee.  Any
loss adjustment in the excess of the Self-Administered Amount shall require the
written consent of Lessor, Lessee, and the Facility Mortgagee, which consent
shall not be unreasonably withheld by either Lessor or
Lessee.  Evidence of insurance shall be deposited with Lessor and, if
requested, with the Facility Mortgagee(s).  If any provision of a
Facility Mortgage requires deposits of premiums for insurance to be made with
the Facility Mortgagee, Lessee shall either pay to Lessor monthly the amounts so
required and Lessor shall transfer such amounts to the Facility Mortgagee, or,
pursuant to written direction by Lessor, Lessee shall make such deposits
directly with such Facility Mortgagee.  Upon Lessee’s request, Lessor
shall provide Lessee with evidence of its transfer of such
amounts.  The policies on the Leased Properties, including the Leased
Improvements, Fixtures and Lessor’s Personal Property, and on Lessee’s Personal
Property, shall insure against the following risks:




13.1.1                      Loss
or damage by fire, vandalism and malicious mischief, earthquake (if available at
commercially reasonable rates) and extended coverage perils commonly known as
“Special Risk,” and all physical loss perils normally included in such Special
Risk insurance, including but not limited to sprinkler leakage, in an amount not
less than one hundred percent (100%) of the then full replacement cost thereof
(as defined below in Section 13.2);




13.1.2                      Loss
or damage by explosion of steam boilers, pressure vessels or similar apparatus,
now or hereafter installed in any Facility, in such amounts with respect to any
one accident as may be required by Lessor from time to time;




13.1.3                      Loss
of rental included in a business income or rental value insurance policy
covering risk of loss during reconstruction necessitated by the occurrence of
any of the hazards described in Sections 13.1.1 or 13.1.2 (but in no event for a
period of less


40








13.1.4                      Claims
for personal injury or property damage under a policy of commercial general
public liability insurance with a combined single limit per occurrence in
respect of bodily injury and death and property damage of One Million Dollars
($1,000,000), and an aggregate limitation of Three  Million Dollars
($3,000,000), which insurance shall include contractual liability
insurance;




13.1.5                      Claims
arising out of professional malpractice in an amount not less than One Million
Dollars ($1,000,000) for each person and for each occurrence and an aggregate
limit of Three Million Dollars ($3,000,000);




13.1.6                      Flood
(when any Leased Property is located in whole or in part within a designated
flood plain area) and such other hazards and in such amounts as may be customary
for comparable properties in the area;




13.1.7                      During
such time as Lessee is constructing any improvements, Lessee, at its sole cost
and expense, shall carry, or cause to be carried (i) workers’ compensation
insurance and employers’ liability insurance covering all persons employed in
connection with the improvements in statutory limits, (ii) a completed
operations endorsement to the commercial general liability insurance policy
referred to above, (iii) builder’s risk insurance, completed value form,
covering all physical loss, in an amount and subject to policy conditions
satisfactory to Lessor, and (iv) such other insurance, in such amounts, as
Lessor deems necessary to protect Lessor’s interest in the Leased Properties
from any act or omission of Lessee’s contractors or subcontractors;




13.1.8                      Lessee
shall procure, and at all times during the Term of this Master Lease shall
maintain, a policy of primary automobile liability insurance with limits of One
Million Dollars ($1,000,000) per occurrence for owned and non-owned and hired
vehicles; and




13.1.9                      If
Lessee chooses to carry umbrella liability coverage to obtain the limits of
liability required hereunder, all such policies must cover in the same manner as
the primary commercial general liability policy and must contain no additional
exclusions or limitations materially different from those of the primary
policy.




13.2           Replacement
Cost.  The term “full replacement
cost” as used herein, shall mean as to each Leased Property, the actual
replacement cost of the Leased Improvements, Fixtures and Personal Property,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy, of such Leased
Property.  In all events, full replacement cost shall be an amount
sufficient that neither Lessor nor Lessee is deemed to be a co-insurer of a
Leased Property.  If Lessor believes that full replacement cost (the
then replacement cost less such exclusions) of a Leased Property has increased
at any time during the Term, it shall have the right to have such full
replacement cost reasonably redetermined by an appraiser reasonably acceptable
to the fire insurance company which is then carrying the largest amount of fire
insurance carried on the Leased Properties, hereinafter referred to as
“impartial


41


appraiser”.  The
determination of the impartial appraiser shall be final and binding on Lessor
and Lessee, and Lessee shall forthwith increase, but not decrease, the amount of
the insurance carried pursuant to this Section, as the case may be, to the
amount so determined by the impartial appraiser, subject to the approval of
the Facility Mortgagee, as applicable.  Lessor and Lessee shall each
pay one-half (1⁄2) of the fee, if any, of the impartial appraiser.




13.3           Additional
Insurance.  In addition to the insurance described above,
Lessee shall within ninety (90) days after the receipt of Notice of any such
requirement maintain such additional insurance as may be required from time to
time by the Facility Mortgagee and shall further at all times maintain worker’s
compensation insurance coverage for all persons employed by Lessee on the Leased
Properties to the extent required under applicable State laws.  Such
worker’s compensation insurance shall be in accordance with the requirements of
applicable local, state and federal law.




13.4           Waiver of
Subrogation.  All insurance policies carried by either party
covering the Leased Properties, the Fixtures, the Facilities, Lessor’s Personal
Property or Lessee’s Personal Property, including without limitation, contents,
fire and casualty insurance, shall expressly waive any right of subrogation on
the part of the insurer against the other party.  Lessee shall pay any
additional costs or charges for obtaining such waiver.




13.5           Form Satisfactory,
etc.




13.5.1                      All
of the policies of insurance referred to in this Article XIII shall be written
in a form reasonably satisfactory to Lessor and any Facility
Mortgagee.  The property loss insurance policy shall contain a
Replacement Cost Endorsement.  If Lessee obtains and maintains the
professional malpractice insurance described in Section 13.1.5 above on a
“claims-made” basis, Lessee shall provide continuous liability coverage for
claims arising during the Term either by obtaining an endorsement providing for
an extended reporting period reasonably acceptable to Lessor in the event such
policy is canceled or not renewed for any reason whatsoever, or by obtaining
either (a) “tail” insurance coverage converting the policies to “occurrence”
basis policies providing coverage for a period of at least three (3) years
beyond the expiration of the Term, or (b) retroactive coverage back to the
commencement date (which date shall be at least three (3) years prior to the
expiration of the Term) for the policy in effect prior to the expiration of the
Term and maintaining such coverage for a period of at least three (3) years
beyond the expiration of the Term.  Lessee shall (i) pay when due all
of the premiums therefor, and deliver such policies or certificates thereof to
Lessor prior to their effective date, (ii) with respect to any renewal policy,
prior to the expiration of the existing policy, Lessee shall furnish a new
policy or binder to Lessor) and (iii) promptly thereafter, deliver the
certificate or the new policy and in the event of the failure of Lessee either
to effect such insurance as herein called for or to pay the premiums therefor,
or to deliver such policies or certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor when due, which premiums shall be
repayable to Lessor upon written demand therefor as Rent, and failure to repay
the same shall constitute an Event of Default within the meaning of Section
16.1.


42


13.5.2                      Each
insurer mentioned in this Article XIII shall agree, by endorsement on the policy
or policies issued by it, or by independent instrument furnished to Lessor, that
it will give to Lessor (and to any Facility Mortgagee, if required by the same)
at least




13.5.3                      
Notwithstanding any provision of this Article XIII to the contrary, each Lessor
acknowledges and agrees that the coverage required to be maintained by Lessee,
including but not limited to the coverages required under Sections 13.1.4,
13.1.5, 13.1.8 and any workers’ compensation insurance, may be provided under
one or more policies of self-insurance maintained by Sun and/or one or more of
the Lessees or their respective Affiliates.




13.6           Increase in
Limits.  If, from time to time after the Commencement Date,
Lessor determines in the exercise of its reasonable business judgment that the
limits of the personal injury or property damage-public liability insurance then
carried are insufficient, Lessor may give Lessee Notice of acceptable limits for
the insurance to be carried; and within ninety (90) days after the receipt of
such Notice, the insurance shall thereafter be carried with limits as prescribed
by Lessor until further increase pursuant to the provisions of this
Section.




13.7           Blanket
Policy.  Notwithstanding anything to the contrary contained in
this Article XIII, Lessee’s obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee; provided, however, that
the coverage afforded Lessor will not be reduced or diminished or otherwise be
materially different from that which would exist under a separate policy meeting
all other requirements hereof by reason of the use of the blanket policy, and
provided further that the requirements of this Article XIII (including
satisfaction of the Facility Mortgagee’s requirements and the approval of the
Facility Mortgagee) are otherwise satisfied, and provided further that Lessee
maintains specific allocations acceptable to Lessor.




13.8           No Separate
Insurance.




13.8.1                      Lessee
shall not on Lessee’s own initiative or pursuant to the request or requirement
of any third party, take out separate insurance concurrent in form or
contributing in the event of loss with that required in this Article, to be
furnished by, or which may reasonably be required to be furnished by, Lessee, or
increase the amount of any then existing insurance by securing an additional
policy or policies, unless all parties having an insurable interest in the
subject matter of the insurance, including in all cases Lessor and all Facility
Mortgagees are included therein as additional insureds, and the loss is payable
under said insurance in the same manner as losses are payable
hereunder.




13.8.2                      Nothing
herein shall prohibit Lessee from insuring against risks not required to be
insured hereby, and as to such insurance, Lessor and any Facility Mortgagee need
not be included therein as additional insureds, nor must the loss thereunder be
payable in the same manner as losses are payable hereunder except to the extent
required to avoid a default under the Facility Mortgage or any other Permitted
Encumbrance.




43




ARTICLE
XIV




14.1           Insurance
Proceeds.  All proceeds, net of any costs incurred by Lessor in
obtaining such proceeds, payable by reason of any loss or damage to any Leased
Property, or any portion thereof, insured under (i) any policy of insurance
required by Article XIII or (ii) under any other policies of insurance owned or
maintained by Lessee with respect to any Leased Property shall be paid to Lessor
and held by Lessor as provided herein.  If such proceeds, net of
collection costs, but inclusive of the proceeds with respect to the Personal
Property which Lessee elects to restore or replace pursuant to Section 14.2
(the “Net
Proceeds”) are less than the Self-Administered Amount, and, if no Event
of Default has occurred and is continuing, Lessor shall pay the Net Proceeds to
Lessee promptly upon the completion of any restoration or repair, as the case
may be, of any damage to or destruction of any Leased Property, or any portion
thereof.  If the Net Proceeds equal or exceed the Self-Administered
Amount, and if no Event of Default has occurred and is continuing, the Net
Proceeds shall be made available for restoration or repair, as the case may be,
of any damage to or destruction of any Leased Property, or any portion thereof,
as provided in Section 14.9; provided, however, that within fifteen (15) days of
the receipt of the Net Proceeds, Lessor and Lessee shall agree as to the
portion, if any, thereof attributable to Lessee’s Personal Property (and failing
such shall submit the matter to arbitration pursuant to the provisions hereof)
and those Net Proceeds which the parties agree are payable by reason of any loss
or damage to any of Lessee’s Personal Property shall be disbursed in the manner
specified in Section 14.4.




14.2           Restoration in the Event of
Damage or Destruction Covered by Insurance.




14.2.1                      If
during the Term any Leased Property is totally or partially damaged or destroyed
from a risk covered by the insurance described in Article XIII and such Leased
Property thereby is rendered Unsuitable for its Primary Intended Use, Lessee
shall give Lessor Notice of such damage or destruction within five (5) Business
Days of the occurrence thereof.  Lessee shall, within sixty (60) days
of the occurrence, either (i) commence the restoration of the affected
Leased Property to substantially the same (or better) condition as the condition
of such Leased Property immediately prior to such damage or destruction, and
complete such restoration within the Reconstruction Period of the occurrence, or
(ii) purchase the affected Leased Property from Lessor for a purchase price
equal to the Minimum Purchase Price at the time of the damage or
destruction.




14.2.2                      If
during the Term, any Leased Property is totally or partially destroyed from a
risk covered by the insurance described in Article XIII, but such Leased
Property is not thereby rendered Unsuitable for its Primary Intended Use, Lessee
shall give Lessor Notice of such damage or destruction within five (5) Business
Days of the occurrence thereof.  Within sixty (60) days of the
occurrence, Lessee shall commence to restore such Leased Property to
substantially the same (or better) condition as existed immediately before the
damage or destruction and complete the restoration within the Reconstruction
Period. Lessor shall make the Net Proceeds available to Lessee for such purpose
as provided in this Article XIV.  Such damage or destruction shall not
terminate this Master Lease with respect to such Leased Property; provided,
however, if Lessee cannot within a reasonable time obtain all necessary
government approvals, including building permits, licenses, conditional use
permits and any certificates of need, after diligent efforts to do




44


so, in
order to be able to perform all required repair and restoration work and
to operate such Leased Property for its Primary Intended Use in
substantially the same manner as that existing immediately prior to such damage
or destruction, Lessee shall purchase such Leased Property for a purchase price
equal to the Minimum Purchase Price at the time of the damage or
destruction.




14.3           Restoration in the Event of
Damage or Destruction Not Covered by Insurance.  Except as
provided in Section 14.7 below, if during the Term, a Leased Property is totally
or partially destroyed from a risk not covered by the insurance described in
Article XIII, Lessee shall give Lessor Notice of such damage or destruction
within five (5) Business Days of the occurrence thereof.  Whether or
not such damage or destruction renders such Leased Property Unsuitable for Its
Primary Intended Use, Lessee at its option shall either restore such Leased
Property to substantially the same condition it was in immediately before such
damage or destruction, and such damage or destruction shall not terminate this
Master Lease as to such affected Leased Property, or purchase such Leased
Property for the Minimum Purchase Price.  If Lessee fails to make the
election within sixty (60) days of the occurrence or if Lessee elects not to
restore, or if Lessee fails to commence or complete the restoration within the
Reconstruction Period, then Lessee shall be deemed to have elected to purchase
such affected Leased Propertyand upon
the closing of such purchase, this Master Lease shall terminate as to the
affected Leased Property.  Lessee shall complete the purchase within
the Reconstruction Period.




14.4           Lessee’s
Property.  All insurance proceeds payable by reason of any loss
of or damage to any of Lessee’s Personal Property shall be paid to Lessee, and
Lessee shall hold such insurance proceeds in trust to pay the cost of repairing
or replacing damaged Lessee’s Personal Property.




14.5           Restoration of Lessee’s
Property.  If Lessee is required or elects to restore a Leased
Property as provided in Section 14.2 or 14.3, Lessee shall also restore all
alterations and improvements made by Lessee and all of Lessee’s Personal
Property, to the extent required to maintain the then current license of such
Leased Property.




14.6           Damage Near End of
Term.   Notwithstanding any provisions of Section 14.2 or
14.3 appearing to the contrary, if damage to or destruction of a Leased Property
occurs during the last twelve (12) months of the Continuing Initial Term,
Litchfield Initial Term or any Renewal Term, and if such damage or destruction
cannot be fully repaired and restored within six (6) months immediately
following the date of loss as reasonably estimated by Lessor, then Lessee shall
have the option, in lieu of restoring such Leased Property to substantially the
same (or better) condition as existed immediately before the damage or
destruction, to purchase such Leased Property from Lessor for a price equal to
the Minimum Purchase Price at the time of the damage or destruction
occurred.  If Lessee fails to exercise such option by written Notice
to Lessor within thirty (30) days following the occurrence, or if Lessee elects
not to restore, or if Lessee elects to restore but fails to commence or complete
the restoration within the time limits specified in this Article XIV, then
Lessee shall be deemed to have elected to purchase such Leased Property for the
price set forth above.  Lessee shall complete the purchase within (i)
one hundred eighty (180) days of the occurrence if Lessee elects not to restore
or (ii) sixty (60) days after the end of the Reconstruction Period in the event
Lessee elects, but fails, to restore the affected Leased Property.  In
any such purchase, Lessee shall receive a credit for any Net




45


Proceeds
received and retained by Lessor, less such amounts as may be necessary to cure
any default by Lessee.




14.7           Waiver.  Except
as provided elsewhere herein, Lessee hereby waives any statutory or common law
rights of termination which may arise by reason of any damage to or destruction
of all or any portion of the Leased Properties.




14.8           Procedure for Disbursement
of Insurance Proceeds Equal to or Greater Than The Self-Administered
Amount.  In the event Lessee restores or repairs a Leased
Property pursuant to any Subsection of this Article XIV and if the Net Proceeds
equal or exceed the Self-Administered Amount, the restoration or repair shall be
performed in accordance with the following procedures:




(i)           The
restoration or repair work shall be done pursuant to a written proposal and, if
applicable, plans and specifications, in either case approved by Lessor, and
Lessee shall cause to be prepared and presented to Lessor a certified
construction statement, acceptable to Lessor, showing the total cost of the
restoration or repair; to the extent such cost exceeds the available insurance
proceeds, the amount of such excess cost shall be paid, in cash, by Lessee, to
Lessor, before any disbursement is made by Lessor pursuant hereto (which
insurance proceeds and any additional funds paid by Lessee to Lessor are
hereinafter called the “Construction
Funds”).




(ii)           The
Construction Funds shall be made available to Lessee as the restoration and
repair work progresses pursuant to certificates of an architect acceptable to
Lessor, which certificates shall be in form and substance reasonably acceptable
to Lessor and subject to a ten percent (10%) holdback until the architect
certifies that the work is fifty percent (50%) complete after which, so long as
there is no uncured Event of Default and so long as the architect certifies work
is proceeding in accordance with schedule and budget, there shall be no further
retainage. Any funds paid by Lessee to Lessor to pay all excess costs shall be
disbursed prior to disbursement of any insurance proceeds. The architect shall
be selected by Lessee, but in the judgment of Lessor, reasonably exercised,
shall be highly qualified in the design and construction of nursing homes, or of
the type of property for which the restoration or repair work is being
done.




(iii)           There
shall be delivered to Lessor, with such certificates, sworn statements and lien
waivers in an amount at least equal to the amount of Construction Funds to be
paid out to Lessee pursuant to each architect’s certificate and dated as of the
date of the disbursement to which they relate.




(iv)           There
shall be delivered to Lessor such other evidence as Lessor may reasonably
request, from time to time, during the restoration and repair, as to the
progress of the work, compliance with the approved plans and specifications, the
cost of restoration and repair and the total amount needed to complete the
restoration and repair.




(v)           There
shall be delivered to Lessor such other evidence as Lessor may reasonably
request, from time to time, showing that there are no liens against such Leased
Property arising in connection with the restoration and repair and that the cost
of such




46


restoration
and repair at least equals the total amount of Construction Funds then disbursed
to Lessee hereunder.




(vi)           If
such Construction Funds are at any time reasonably determined by Lessor not to
be adequate for completion of the restoration and repair, Lessee shall
immediately pay any deficiency to Lessor to be held and disbursed as
Construction Funds and prior to any other funds then held by Lessor for
disbursement pursuant hereto.




(vii)           Construction
Funds may be disbursed by Lessor to Lessee or to the persons entitled to receive
payment thereof from Lessee.  Lessor may make such disbursement in
either case directly or through a third party escrow agent, such as, but not
limited to, a title insurance company, or its agent, as Lessor may determine in
its sole discretion.  Any excess Construction Funds shall be paid to
Lessee upon completion of the restoration or repair.




(viii)                      In
the event Lessee at any time shall fail to promptly and fully perform the
conditions and covenants set out in subparagraphs (i) through (vi) above, and
such failure is not corrected within twenty (20) days of written Notice thereof,
or in the event during the Reconstruction Period an Event of Default occurs
hereunder, Lessor may, at its option, immediately cease making any further
payments to Lessee for such restoration and repair until cured.




14.9           Insurance Proceeds Paid to
Facility Mortgagee.  Notwithstanding anything herein to the
contrary, in the event that any Facility Mortgagee is entitled to any insurance
proceeds, or any portion thereof, under the terms of any Facility Mortgage, such
proceeds shall be applied, held and/or disbursed in accordance with the terms of
the Facility Mortgage.  In the event that the Facility Mortgagee
elects to apply the insurance proceeds to the indebtedness secured by the
Facility Mortgage, Lessee shall either (i) restore such Facility to
substantially the same (or better) condition as existed immediately before the
damage or destruction, or (ii) offer to acquire such Facility from Lessor for
the Minimum Purchase Price within the time periods provided for in this Master
Lease.  In such case, Lessee shall receive a credit against the
purchase price for amounts applied to pay the Facility
Mortgage.  Lessor shall make commercially reasonable efforts to cause
the Net Proceeds to be applied to the restoration of such
Facility.  If Lessee fails to make the election or if Lessee elects
not to restore, or if Lessee fails to commence or complete the restoration
within the time limits specified in this Article XIV, then Lessee shall be
deemed to have elected to purchase the affected Leased Property.




14.10                      Termination of Master Lease;
Abatement of Rent. In the event Lessee purchases the affected Leased
Property pursuant to this Article XIV as a result of damage or to destruction of
all or any portion of the Leased Property, then (i) this Master Lease shall
terminate as to such Leased Property upon payment of the purchase price set
forth herein, (ii) the Base Rent due hereunder from and after the effective date
of such termination shall be reduced by an amount determined by multiplying a
fraction, the numerator of which shall be the Minimum Purchase Price for the
affected Leased Property and the denominator of which shall be the Minimum
Purchase Price for all of the Leased Properties then subject to the terms of
this Master Lease by the Base Rent payable under this Master Lease immediately
prior to the effective date of the termination of this Master Lease as to the
affected Leased Property, (iii) provided that Lessee is




47


not then
in default under this Master Lease and then only to the extent not previously
applied by Lessor, Lessor shall remit to Lessee all Net Proceeds pertaining to
such Leased Property being held by Lessor and (iv) Lessor shall retain any claim
which Lessor may have against Lessee for failure to insure such Leased Property
as required by Article XIII.  Unless this Master Lease shall terminate
pursuant to this Article XIVas to the
affected Leased Property, this Master Lease shall remain in full force and
effect and Lessee’s obligation to make rental payments and to pay all other
charges required thereunder shall remain unabated during any period required for
repair and restoration.




ARTICLE
XV




15.1           Condemnation Article
Definitions.




15.1.1                      “Condemnation” or
“Taking” means
(i) the exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor, or (ii) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending.




15.1.2                      “Date of Taking” means
the date the Condemnor has the right to possession of a Leased Property being
condemned.




15.1.3                      “Award” means all
compensation, sums or anything of value awarded, paid or received on a total or
partial Condemnation.




15.1.4                      “Condemnor” means any
public or quasi-public authority, or private corporation or individual, having
the power of condemnation.




15.2           Parties’ Rights and
Obligations.  If during the Term there is any Taking of all or
any part of a Leased Property or any interest in this Master Lease by
Condemnation, the rights and obligations of the parties to this Master Lease
shall be determined by this Article XV.




15.3           Total
Taking.  If title to the fee of the whole of a Leased Property
shall be taken or condemned by any Condemnor, this Master Lease shall cease and
terminate as to such Leased Property as of the Date of Taking by said
Condemnor.  If title to the fee of less than the whole of such Leased
Property shall be so taken or condemned, which nevertheless renders such Leased
Property Unsuitable for Its Primary Intended Use, Lessee and Lessor shall each
have the option by written Notice to the other, at any time prior to the taking
of possession by, or the date of vesting of title in, such Condemnor, whichever
first occurs, to terminate this Master Lease as to such Leased Property as of
the date so determined.  Upon such date so determined, if such Notice
has been given, this Master Lease shall thereupon cease and terminate as to such
Leased Property.  In either of such events, all Base Rent and
Additional Charges paid or payable by Lessee hereunder shall be apportioned as
to the affected Leased Property as of the date this Master Lease shall have been
so terminated as aforesaid.  In the event of any such termination, the
provisions of Section 15.4 shall apply.




15.4           Allocation of Portion of
Award.  The Condemnation Award made with respect to all or any
portion of a Leased Property or for loss of rent shall be the property of and
payable to Lessor to the extent of the Minimum Purchase Price.  To the
extent that the laws of the State




48


permit
Lessee to make a claim which does not have the effect, directly or indirectly,
of reducing Lessor’s claim, for Lessee’s leasehold interest, moving expenses, or
for loss of goodwill or Lessee’s business, Lessee shall have the right to pursue
such claim in the Condemnation proceeding and shall be entitled to the Award
therefor (“Lessee’s Leasehold
Award”).  Lessee hereby assigns to Lessor its interest in
Lessee’s Leasehold Award to the extent of the difference between the total
Condemnation Award and the Minimum Purchase Price. Any Award made for the taking
of Lessee’s Personal Property, or for removal and relocation expenses of Lessee
in any such proceedings shall be the sole property of and payable to Lessee
(“Lessee’s Personal Property
Award”).  In any Condemnation proceedings, Lessor and Lessee
shall each seek its own Award in conformity herewith, at its own
expense.  To assure that Lessor is made whole first from the
Condemnation Award, the total of the Condemnation Award payable to Lessor and
Lessee’s Leasehold Award shall be allocated in the following order of
priority:




(i)           To
Lessor, to the extent of theMinimum Purchase Price
(plus the amount of any additional capital investments made by Lessor in such
Leased Property)as
of the date the Award is paid to Lessor;




(ii)           To
Lessor, to the extent of Lessor’s costs incurred, including reasonable legal
fees, in connection with obtaining the Award; and




(iii)           To
Lessor and Lessee, in the ratio of seventy five percent (75%) to Lessor and
twenty five percent (25%) to Lessee.




The
provisions of this Section 15.4 shall not apply in the event Lessee purchases
the Leased Property pursuant to this Article XV but, in such event, the
provisions of Section 15.8 shall control with respect to the disposition of the
Condemnation Award.




15.5           Partial
Taking.  If title to the fee of less than the whole of a Leased
Property shall be so taken or condemned, Lessee shall give Lessor Notice of such
partial taking or condemnation within five (5) Business Days of the occurrence
thereof.  If such Leased Property is still suitable for its Primary
Intended Use, or if Lessee or Lessor shall be so entitled, but shall not elect
to terminate this Master Lease with respect to such Leased Property as provided
in Section 15.3 hereof, Lessee shall with all reasonable dispatch restore the
untaken portion of the Leased Improvements on such Leased Property so that such
Leased Improvements shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Leased Improvements existing immediately prior to such
Condemnation or Taking.  Lessee shall commence the restoration of the
Facility on such Leased Property within sixty (60) days of the Partial Taking,
and shall complete the restoration within the Reconstruction Period following
such Partial Taking.  Lessor shall contribute to the cost of
restoration such portion of the Condemnation Award payable to Lessor, if any,
together with severance and other damages awarded for taken Leased Improvements,
provided, however, the amount of such contribution shall not exceed the cost of
restoration.  As long as no Event of Default has occurred hereunder,
if the Award is in an amount less than the Self-Administered Amount, Lessor
shall pay the same to Lessee.  As long as no Event of Default has
occurred hereunder, if the Award is in an amount more than the Self-Administered
Amount, Lessor shall make the portion of the Award to which it is entitled
available to Lessee in the same manner as is provided in Section 14.9 for
insurance proceeds in excess of the Self-Administered




49


Amount.  The
Base Rent shall be reduced by reason of such Partial Taking to an amount agreed
upon by Lessor and Lessee.  If Lessor and Lessee cannot agree upon a
new Base Rent, then the Base Rent for such Facility shall be proportionately
reduced in accordance with the number of licensed beds no longer operable at
such Facility solely by reason of the Partial taking.  If Lessee fails
to make the election or if it elects not to restore, or if it fails to commence
or complete the restoration within the time limits specified in this Section
15.5, then Lessee shall be deemed to have elected to purchase such affected
Leased Property for a purchase price equal to the Minimum Purchase Price. If
Lessee fails to make the election to terminate this Lease as to the affected
Leased Property or if it is required to restore the affected Leased Property but
thereafter fails to commence or complete the restoration within the time periods
specified in this Section 15.5, then Lessee shall be deemed to have elected to
purchase such affected Leased Property for a purchase price equal to the Minimum
Purchase Price. Lessee shall complete the purchase within (i) one hundred eighty
(180) days of the Partial Taking if Lessee elects not to restore or (ii) sixty
(60) days after the end of the Reconstruction Period in the event Lessee elects,
but fails, to restore the affected Leased Property.  In any such
purchase, Lessee shall receive a credit for the portion of any Award retained by
Lessor.




15.6           Temporary
Taking.  The Taking of a Leased Property, or any part thereof,
by military or other public authority shall constitute a Taking by condemnation
only when the use and occupancy by the Condemnor has continued for longer than
six (6) months.  During any such six (6) month period, all the
provisions of this Master Lease shall remain in full force and
effect.  In the event of any Temporary Taking as in this Section 15.6
described, the entire amount of any Award made for such Taking allocable to the
Term of this Master Lease, whether paid by way of damages, rent or otherwise,
shall be paid to Lessee, net of any amount required to cure any then uncured
Event of Default.  Lessee covenants that upon the termination of any
such period of temporary use or occupancy as set forth in this Section 15.6, it
will restore such Leased Property as nearly as may be reasonably possible to the
condition existing immediately prior to such Taking.  If any Temporary
Taking continues for longer than six (6) months, such Taking shall be considered
a Total Taking governed by Section 15.3, and the parties shall have the
rights provided thereunder.




15.7           Condemnation Awards Paid to
Facility Mortgagee.  Notwithstanding anything herein to the
contrary, in the event that any Facility Mortgagee is entitled to any
Condemnation Award, or any portion thereof, under the terms of any Facility
Mortgage, such award shall be applied, held and/or disbursed in accordance with
the terms of the Facility Mortgage.  In the event that the Facility
Mortgagee elects to apply the Condemnation Award to the indebtedness secured by
the Facility Mortgage in the case of a Taking as to which the restoration
provisions of Section 15.5 apply, this Master Lease shall terminate as of the
date of the Taking as to the affected Leased Property, unless within fifteen
(15) days of the notice from the Facility Mortgagee Lessor agrees to make
available to Lessee for restoration of such Leased Property funds equal to the
amount applied by the Facility Mortgagee. Unless the Taking is such as to
entitle Lessor or Lessee to terminate this Master Lease as to the affected
Leased Property and Lessor or Lessee, as the case may be, shall elect to
terminate this Master Lease as to the affected Leased Property in the time and
in the manner provided, Lessor shall disburse such funds to Lessee as provided
in Section 14.9 and Lessee shall restore such Leased Property (as nearly as
possible
under the circumstances) to a complete architectural unit of the same general
character and condition as such Leased Property existing immediately prior to
such Taking.




50




15.8.                      Termination of Master Lease;
Abatement of Rent. In the event Lessee purchases the affected Leased
Property pursuant to this Article XV as a result of the Taking of all or any
portion of the Leased Property, then (i) this Master Lease shall terminate as to
such Leased Property upon payment of the purchase price set forth herein, (ii)
the Base Rent due hereunder from and after the effective date of such
termination shall be reduced by an amount determined by multiplying a fraction,
the numerator of which shall be the Minimum Purchase Price for the affected
Leased Property and the denominator of which shall be the Minimum Purchase Price
for all of the Leased Properties then subject to the terms of this Master Lease
by the Base Rent payable under this Master Lease immediately prior to the
effective date of the termination of this Master Lease as to the affected Leased
Property and (iii) provided that Lessee is not then in default under this Master
Lease and then only to the extent not previously applied by Lessor, Lessor shall
remit to Lessee the entire Award pertaining to such Leased Property being held
by Lessor. Unless this Master Lease shall terminate pursuant to this Article XV
as to the affected Leased Property, this Master Lease shall remain in full force
and effect and Lessee’s obligation to make rental payments and to pay all other
charges required thereunder shall remain unabated during any period required for
repair and restoration required as a result of such Taking.




ARTICLE
XVI




16.1           Events of
Default.  If any one or more of the following events
(individually, an “Event of Default”)
occurs, then Lessee will be in default under this Master Lease and Lessor shall
have the rights and remedies hereinafter provided:




16.1.1                      If
any Lessee fails to make payment of Rent under this Master Lease when the same
becomes due and payable and such failure is not cured within a period of two (2)
Business Days after Notice thereof from Lessor, provided that Lessee shall be
entitled to such Notice and may avail itself of such cure period no more than
two (2) times in any Lease Year; or




16.1.2                      If
any Lessee or Guarantor:




(a)           admits
in writing its inability to pay its debts generally as they become
due,




(b)           files
a petition in bankruptcy or a petition to take advantage of any insolvency
law,




(c)           makes
a general assignment for the benefit of its creditors,




(d)           consents
to the appointment of a receiver of itself or of the whole or any substantial
part of its property, or




(e)           files
a petition or answer seeking reorganization or arrangement under the Federal
Bankruptcy Laws or any other applicable law or statute of the United States of
America or any State thereof; or








51


of
competent jurisdiction enters an order or decree appointing a receiver of a
Lessee or Guarantor or of the whole or substantially all of such Lessee’s or
Guarantor property, or approving a petition filed against any Lessee or
Guarantor or seeking reorganization or arrangement of any Lessee or Guarantor
under the Federal Bankruptcy Laws or any other applicable law or statute of the
United States of America or any State thereof, and such judgment, order or
decree is not vacated or set aside or stayed within sixty (60) days from the
date of the entry thereof; or




16.1.4                      If
any Lessee or Guarantor is liquidated or dissolved, or begins proceedings toward
liquidation or dissolution, or has filed against it a petition or other
proceeding to cause it to be liquidated or dissolved and the proceeding is not
dismissed within thirty (30) days thereafter, or, in any manner, permits the
sale or divestiture of substantially all of its assets except in connection with
a dissolution or liquidation following or related to a merger or transfer of all
or substantially all of the assets and liabilities of such Lessee with or to its
parent corporation or with or to another direct or indirect wholly owned
subsidiary of its parent corporation; or




16.1.5                      If
the estate or interest of any Lessee in the Leased Properties leased by it or
any part thereof is levied upon or attached in any proceeding and the same is
not vacated or discharged within thirty (30) days after commencement thereof
(unless such Lessee is in the process of contesting such lien or attachment in
good faith in accordance with Section 12.1 hereof); or




16.1.6                      If,
except as a result of damage, destruction or a Partial or Total Taking or
Temporary Taking, any Lessee voluntarily ceases operations on any of the
applicable Leased Properties for a period in excess of thirty (30) days;
or




16.1.7                      If
with respect to more than ten percent (10%) of the Facilities then subject to
the terms of this Master Lease either (i) the licenses to operate such
Facilities for the Primary Intended Use are permanently revoked or are suspended
and not reinstated within sixty (60) days thereafter or are reinstated subject
to conditions not approved by Lessor in its sole but reasonable discretion or
(ii) an order is imposed terminating the right of the applicable Lessee to
operate or accept patients, which order is not promptly stayed and promptly
cured; or




16.1.8                      If
any Lessee defaults, or permits a default, under any Facility Mortgage, related
documents or obligations thereunder by which such Lessee is bound or to which
Lessee has agreed to become bound, which default is not cured within the
applicable time period; or




16.1.9                      If
a default occurs under the Guaranty which default is not cured within any
applicable cure period; or




16.1.10                   
If any Lessee transfers, by means not expressly provided for in this Master
Lease, the operational control or management of the Facility leased by such
Lessee without the prior written consent of Lessor; or




52


16.1.11                       If
any obligation of any Lessee to repay borrowed money in excess of Two Million
Dollars ($2,000,000) is accelerated by the creditor thereof after default or any
other remedy available to such creditor or obligee is exercised because of such
default; or




16.1.12                       A
default occurs under any contract or agreement or other lease between Lessor (or
any of its Affiliates) and Lessee (or any of its Affiliates), including, but not
limited to, the Amended Security Agreement and the Letter of Credit Agreement,
which is not cured within applicable cure periods, provided Lessor elects to
treat such default as an Event of Default; and provided further that nothing
herein shall be construed as including within the scope hereof a default under
any contract or agreement between an Affiliate of Lessor and an Affiliate of
Lessee relating to properties located outside of the United States;
or




16.1.13                       If
any Lessee fails to observe or perform any other term, covenant or condition of
this Master Lease and the failure is not cured by such Lessee within a period of
thirty (30) days after Notice thereof from Lessor, unless the failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
the failure shall not be deemed to continue if Lessee proceeds promptly and with
due diligence to cure the failure and diligently completes the curing thereof,
provided, however, that Lessee completes the cure prior to either (x) the time
that the same causes a default under any provision of the Facility Mortgage by
which Lessee is bound or to which Lessee has agreed to be bound or under any
other lease to which Lessee is subject or (y) the time that the same results in
civil or criminal penalties to any Lessor, any Lessee or any Affiliates of
either, or to any Leased Property.




If any
Event of Default occurs, Lessor may terminate this Master Lease by giving Lessee
not less than ten (10) days’ Notice, whereupon as provided herein, the Term of
this Master Lease shall terminate and all rights of Lessee hereunder shall
cease.  The Notice provided for herein shall be in lieu of and not in
addition to any notice required by the laws of the State as a condition to
bringing an action for possession of the Facilities or to recover damages under
this Master Lease.  In addition thereto, Lessor shall have all rights
at law and in equity available as a result of Lessee’s breach.




Notwithstanding
anything herein to the contrary, upon the occurrence of an Event of Default as
set forth in Section 16.1.2., 16.1.3, 16.1.9 or 16.1.10, Lessor may
terminate this Master Lease immediately without Notice of any kind.




Lessee
will, to the extent permitted by law, be liable for the payment, as Additional
Charges, of costs of and expenses incurred by or on behalf of Lessor as a
consequence of an Event of Default, including, without limitation, reasonable
attorneys’ fees (whether or not litigation is commenced, and if litigation is
commenced, including fees and expenses
incurred in appeals and post-judgment proceedings) as a result of any default of
Lessee hereunder.  No Event
of Default (other than a failure to make payment of money) shall be deemed to
exist under Section 16.1 during any time the curing thereof is prevented by
an




53


Unavoidable
Delay, provided that upon the cessation of the Unavoidable Delay, Lessee
remedies the default without further delay.




16.2           Certain
Remedies.  If an Event of Default has occurred, and whether or
not this Master Lease has been terminated pursuant to Section 16.1, Lessee
shall, to the extent permitted by law, if required by Lessor so to do,
immediately surrender to Lessor all of the Leased Properties pursuant to the
provisions of Section 9.1.7 and quit the same, and Lessor may enter upon and
repossess all of the Leased Properties by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Lessee and all other persons and any and
all Personal Property from the Leased Properties subject to rights of any
residents or patients and to any requirement of law.  Lessor shall not
have the right to exercise its remedies as to less than all of the Leased
Properties since such Leased Properties constitute a single integrated economic
unit as stated in Section 1.2.




16.3           Damages.  Neither
(i) the termination of this Master Lease pursuant to Section 16.1, (ii) the
repossession of the Leased Properties, (iii) the failure of Lessor to relet the
Leased Properties, (iv) the reletting of all or any portion of any of the Leased
Properties, nor (v) the inability of Lessor to collect or receive any
rentals due upon any such reletting, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting.  In the event of any termination, Lessee
shall be liable for the payment to Lessor of all Rent due and payable to and
including the date of the termination, including without limitation all interest
and late charges payable under Section 3.4 hereof and thereafter for the payment
to Lessor at Lessor’s option, as and for liquidated and agreed current damages
for such default, either:




(1)
            the
      sum of:




(a)           the
worth at the time of award of the unpaid Base Rent and Additional Charges which
had been earned at the time of termination,




(b)           the
worth at the time of award of the amount by which the unpaid Base Rent and
Additional Charges which would have been earned after termination until the time
of award exceeds the amount of the rental loss that Lessee proves was avoided or
could have been reasonably avoided,




(c)           the
worth at the time of award of the amount by which the unpaid Base Rent and
Additional Charges for the balance of the Term after the time of award exceeds
the amount of such rental loss that Lessee proves could be avoided,
and




(d)           intentionally
omitted, and




(e)           any
other amount necessary to compensate Lessor for all the detriment proximately
caused by Lessee’s failure to perform its obligations under the terminated Lease
or which in the ordinary course of things would be likely to result
therefrom.
  In making
the above determinations, the “worth at the time of award” shall be determined
using the lowest rate of capitalization (highest present worth) applicable at
the time of the determination and allowed by applicable laws of the
State.  If the laws of the State do not


54


provide
for a rate of capitalization, then the worth at the time of award shall be
computed by discounting such amount at the Federal Reserve Discount rate for the
State, applicable at the time of the award, plus one percent
(1%).  Lessor’s net income from its operation of the Leased Property,
if any, shall be included in the determination of amounts of rental loss that
Lessee proves could reasonably be or were avoided.





OR





(2)           without
termination of Lessee’s right to possession of the Leased Property, each
installment of the Rent and other sumspayable by Lessee to Lessor as the same
becomes due and payable, which Rent and other sums shall bear interest at the
maximum annual rate permitted by the law of the State from the date when due
until paid, and Lessor may enforce, by action or otherwise, any other term or
covenant of this Master Lease.




16.4           Waiver.  If
this Master Lease is terminated pursuant to Section 16.1, Lessee waives, to
the extent permitted by applicable law, (i) any right of reentry, repossession
or redesignation, (ii) any right to a trial by jury in the event of summary
proceedings to enforce the remedies set forth in this Article XVI, and (iii) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt.  Acceptance of Rent at any time does not
prejudice or remove any right of Lessor as to any right or remedy.  No
course of conduct shall be held to bar Lessor from literal enforcement of the
terms of this Master Lease.




16.5           Application of
Funds.  Any payments received by Lessor during the existence or
continuance of any Event of Default (and any payment made to Lessor rather than
Lessee due to the existence of an Event of Default, shall be applied to Lessee’s
obligations in the order which Lessor may determine or as may be prescribed by
the laws of the State.




16.6           Availability of
Remedies.  Lessor may exercise its remedies hereunder to the
maximum extent permitted by the laws of the State. It shall not be a defense in
any proceeding brought in connection with this Master Lease that with respect to
other leases or contracts to which Lessor (or Lessor’s Affiliates) and Lessee
(or Lessee’s Affiliates) are parties, Lessor or its Affiliates have sought
different remedies in different states or in the State.




ARTICLE
XVII




17.1           Rights to Cure
Default.




17.1.1                      Lessor’s
Rights.  If Lessee fails to make any payment or to perform any
act required to be made or performed under this Master Lease, and fails to cure
the same within the relevant time periods provided in Section 16.1, without
further Notice to or demand upon Lessee, and without waiving or releasing any
obligation of Lessee or waiving or releasing any default, Lessor may (but shall
be under no obligation to) at any time thereafter make such payment or perform
such act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon all or any part of any Leased Property for such
purpose and take all such action thereon as, in Lessor’s reasonable opinion, may
be necessary or appropriate therefor, provided, however, that if Notice is
required under Section 16 but Lessor reasonably determines that the giving of




55


the
required Notice before making such payment or taking such action would risk
material loss to the Facilities, then Lessor will give such Notice as is
practical under the circumstances.  No such entry shall be deemed an
eviction of Lessee.  All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, together with a late charge thereon (to the extent
permitted by law) at the Overdue Rate from the date on which such sums or
expenses are paid or incurred by Lessor, shall be paid by Lessee to Lessor on
written demand.  The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination of
this Master Lease.




17.1.2                      Lessee’s
Rights.  If Lessor fails to make any payment or to perform any
act expressly required under this Master Lease, and fails to cure the same
within the relevant time periods provided in Section 33.1 upon Notice to Lessor
but without waiving or releasing any obligation of Lessor, Lessee may (but shall
be under no obligation to) at any time thereafter make such payment or perform
such act for the account and at the expense of Lessor, and may, take all such
action thereon as may be reasonably necessary or appropriate
therefor.  All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses) so
incurred, shall be paid by Lessor to Lessee following written
demand.  The obligations of Lessor and the rights of Lessee contained
in this Article shall survive the expiration or earlier termination of this
Master Lease.







ARTICLE
XVIII




18.1           Holding
Over.  Except as provided in Sections 18.2 and 18.3, if Lessee
shall for any reason remain in possession of any Leased Property after the
expiration or earlier expiration of the Term, such possession shall be as a
month-to-month tenant during which time Lessee shall pay as rental each month,
two (2) times the aggregate of (i) one-twelfth (1/12th) of the aggregate Base
Rent payable with respect to the affected portion of the Leased Property during
the last Lease Year of the preceding Term, (ii) all Additional Charges related
to the affected portion of the Leased Property accruing during the month, and
(iii) all other sums, if any, payable by Lessee pursuant to the provisions of
this Master Lease with respect to the affected portion of the Leased
Property.  During such period of month-to-month tenancy, Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Master Lease, but shall have no rights thereunder other than the right,
to the extent given by law to month-to-month tenancies, to continue its
occupancy and use of such Leased Property until the month-to-month tenancy is
terminated.  Except as provided in Section 18.2, nothing contained
herein shall constitute the consent, express or implied, of Lessor to the
holding over of Lessee after the expiration or earlier termination of this
Master Lease. For purposes hereof, the Base Rent to be allocated
to the affected Leased Property(ies) shall be determined by multiplying a
fraction, the numerator of which shall be the Minimum Purchase Price of the
affected Leased Property(ies) and the denominator of which shall be the Minimum
Purchase Price of all of the Leased Properties subject to the terms of this
Master Lease on the last day of the Term, by the Base Rent payable hereunder on
the last day of the Term.




56




18.2           Continuing
Clean-Up.  If on the last day of the Term of this Master Lease
Lessee is obligated to complete a Clean-Up of any Leased Property which Clean-Up
was commenced prior to the last day of the Term of this Master Lease, then at
the option of Lessor either (i) Lessee shall remain in possession of such Leased
Property subject to the terms of this Master Lease, for such period as may
reasonably be required for Lessee to diligently complete the Clean-Up, which
period, unless otherwise agreed by Lessor and Lessee, shall not exceed three
hundred sixty-five (365) consecutive days, or (ii) Lessee shall vacate the
Leased Premises on the last day of the Term of this Master Lease as elsewhere
required herein and at such time pay to Lessor the amount reasonably required to
complete the Clean-Up after the expiration of the Term, together with the
reasonably estimated Fair Market Rental Value of such Leased Property to be lost
by Lessor during the remaining period of Clean-Up assuming a diligent effort to
complete such Clean-Up.  If Lessor elects alternative “(i)” in the
preceding sentence, the Base Rent for such Leased Property shall be one hundred
five percent (105%) of the Base Rent allocated to the affected portion of the
Leased Property for the Lease Year during which the last day of the Term of such
occurred, and Lessee shall not be deemed to be holding over pursuant to Section
18.1 hereof. For purposes hereof, the Base Rent to be allocated to the affected
Leased Property(ies) shall be determined by multiplying a fraction, the
numerator of which shall be the Minimum Purchase Price of the affected Leased
Property(ies) and the denominator of which shall be the Minimum Purchase Price
of all of the Leased Properties subject to the terms of this Master Lease on the
last day of the Term, by the Base Rent payable hereunder on the last day of the
Term.




18.3           Post Termination Transition.In the event Lessee remains in possession of all or any portion of the
Leased Properties after the expiration or earlier termination of this Master
Lease at the request of Lessor pending the transition of all or any portion of
the Leased Properties to Lessor or its designee pursuant to Section 34.2 hereof,
the Rent due from Lessee hereunder shall be equal to the Rent paid by Lessee
immediately prior to the expiration or earlier termination of this Master Lease
with respect to such Leased Property(ies).




18.4           Indemnity.  If
Lessee fails to surrender any Leased Property in a timely manner and in
accordance with the provisions of Section 9.1.7 upon the expiration or
termination of this Master Lease, in addition to any other liabilities to Lessor
accruing therefrom, Lessee shall indemnify and hold Lessor, 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 any rental paid by Lessee and any claims by any
proposed new tenant founded on such failure.  The provisions of this
Section 19.3 shall survive the expiration or termination of this Master
Lease.




ARTICLE
XIX
  19.1           Subordination.  Upon
written request of Lessor, any Facility Mortgagee, or the beneficiary of any
deed of trust of Lessor, Lessee will subordinate its rights in writing (i) to
the lien of any mortgage, deed of trust or the interest of any lease in which
Lessor is the lessee and to all modifications, extensions, substitutions thereof
(or, at Lessor’s option, cause the lien of said mortgage, deed of trust or the
interest of any lease in which Lessor is the lessee to be subordinated to
the  Lease), and (ii) to all advances made or hereafter to be
made  thereunder.  In




57




connection
with any such request, Lessor shall provide Lessee with a Non-Disturbance
Agreement reasonably acceptable to such mortgagee, beneficiary or lessor
providing that if such mortgagee, beneficiary or lessor acquires such Leased
Property by way of foreclosure or deed in lieu of foreclosure  (or
termination of any lease in which Lessor is the Lessee), that such mortgagee,
beneficiary or lessor will not disturb Lessee’s possession under its Lease and
will recognize Lessee’s rights thereunder provided that no Event of Default has
occurred thereunder.  Lessee agrees to consent to amend this Master
Lease as reasonably required by a Facility Mortgagee; Lessee shall be deemed to
have unreasonably withheld or delayed its consent to changes or amendments to
this Master Lease requested by the holder of a mortgage or deed of trust or such
similar financing instrument encumbering Lessor’s fee interest in such Leased
Property if such changes do not materially (i) alter the economic terms of this
Master Lease, (ii) diminish the rights of Lessee, or (iii) increase the
obligations of Lessee, provided that Lessee shall also have received the
Non-Disturbance Agreement provided for in this Section.




19.2           Attornment.  If
any proceedings are brought for foreclosure, or if the power of sale is
exercised under any mortgage or deed of trust made by Lessor encumbering any
Leased Property, or if a lease in which Lessor is the lessee is terminated,
Lessee shall attorn to the purchaser or lessor under such lease upon any
foreclosure or deed in lieu thereof, sale or lease termination and recognize the
purchaser or lessor as Lessor under this Master Lease, provided that the
purchaser or lessor acquires and accepts such Leased Property subject to this
Master Lease. For purposes hereof, the Base Rent to be allocated to the
affected Leased Properties shall be determined by multiplying a fraction, the
numerator of which shall be the Minimum Purchase Price of the affected Leased
Property and the denominator of which shall be the Minimum Purchase Price of all
of the Leased Properties subject to the terms of this Master Lease immediately
prior to such foreclosure or the conveyance of title to the affected Leased
Property(ies) by deed in lieu of foreclosure, by the Base Rent payable hereunder
immediately prior to such foreclosure or the conveyance of title to the affected
Leased Property(ies) by deed in lieu of foreclosure.




19.3           Estoppel
Certificate.  Lessee and Lessor each agree, upon not less than
ten (10) days prior Notice from the other (“Requesting Party”),
to execute, acknowledge and deliver to the other, a statement in writing in
substantially the same form as Exhibit H attached
hereto (with such changes thereto as may reasonably be requested by the person
relying on such certificate) (“Estoppel
Certificate”).  It is intended that any Estoppel Certificate
delivered pursuant hereto may be relied upon by the Requesting Party, any
prospective tenant or purchaser of any Leased Property, any mortgagee or
prospective mortgagee, or by any other party who may reasonably rely on such
statement.  Lessee’s failure to deliver the Estoppel Certificate
within such time shall constitute an Event of Default, and Lessor’s failure to
deliver the Estoppel Certificate within such time shall be subject to the
provisions of Section 33.1, below.  If the Estoppel Certificate is not
delivered within the ten (10) day period, then, in addition, the Requesting
Party is authorized to execute and deliver a certificate to the effect that (i)
this Master Lease is in full force and effect without
modification, and (ii) the other party is not in breach or default of any of its
obligations under this Master Lease.




58




ARTICLE
XX




20.1           Risk of
Loss.  Except as otherwise specifically provided for herein,
during the Term of this Master Lease, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Properties in consequence of the
damage thereto or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or otherwise, or in consequence of foreclosures, attachments, levies
or executions (other than those caused by Lessor and those claiming from,
through or under Lessor) is assumed by Lessee, and, in the absence of gross
negligence, willful misconduct or material breach of this Master Lease by Lessor
pursuant to Section 33.1, Lessor shall in no event be answerable or accountable
therefor nor shall any of the events mentioned in this Section entitle Lessee to
(i) terminate this Master Lease or (ii) to any abatement of Rent except as
specifically provided in this Master Lease.




ARTICLE
XXI




21.1           Lessee
Indemnification.  Notwithstanding the existence of any
insurance or self-insurance provided for in Article XIII, and without regard to
the policy limits of any such insurance or self-insurance, Lessee will protect,
indemnify, save harmless and defend Lessor, its principals, officers, directors
and agents and employees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys’ fees and expenses), to the extent permitted by
law, imposed upon or incurred by or asserted against Lessor by reason
of:  (i) any accident, injury to or death of persons or loss of or
damage to property occurring on or after the Possession Date on or about any
Leased Property or adjoining sidewalks which are under Lessee’s control,
including without limitation any claims of malpractice, (ii) any use, misuse,
non-use, condition, maintenance or repair by Lessee of any Leased Property,
(iii) the failure to pay any Impositions which are the obligations of Lessee to
pay pursuant to the applicable provisions of this Master Lease, (iv) any failure
on the part of Lessee to perform or comply with any of the terms of this Master
Lease, including, but not limited to, a breach of Lessee’s representations or
warranties set forth in Section 8.1, and (v) the nonperformance of any
contractual obligation, express or implied, assumed or undertaken by Lessee or
any party in privity with Lessee with respect to any Leased Property or any
business or other activity carried on with respect to any Leased Property during
the period commencing on the Possession Date and continuing through the Term or
thereafter during any time in which Lessee or any such other party is in
possession of any Leased Property or thereafter to the extent that any conduct
by Lessee or any such person (or failure of such conduct thereby if the same
should have been undertaken during such time of possession and leads to such
damage or loss) causes such loss or claim.  Any amounts which become
payable by Lessee under this Section shall be paid within ten (10) days after
liability therefor on the part of Lessee is determined by litigation or
otherwise, and if not timely paid, shall bear a late charge (to the extent
permitted by law) at the Overdue Rate from the date of such determination to the
date of payment.  Nothing herein shall be construed as indemnifying
Lessor against its own grossly negligent acts or omissions or willful
misconduct.




Lessor
Indemnification




59


asserted
against Lessee by reason of (i) a breach of Lessor’s representations or
warranties set forth in Section 8.2 or (ii) Lessor’s gross negligence or willful
misconduct.




21.3           Survival.  The
liability of each indemnifying party under the provisions of this Article for a
claim arising out of events occurring during the Term shall survive any
termination of this Master Lease.  The respective representations and
warranties made in this Master Lease by or on behalf of the parties hereto shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the other party to this Master Lease or any officer, director or
employee of, or person controlling or under common control with, such
party.




ARTICLE
XXII




22.1           General Prohibition against
Assignment.  Lessee shall not voluntarily, involuntarily or by
operation of law, assign, mortgage or otherwise encumber all or any part of
Lessee’s interest in this Master Lease or in any Leased Property or sublet the
whole or any part of any Leased Property or enter any other arrangement (other
than a management agreement which shall be governed by Section 8.6 above) under
which any Facility is operated by or licensed to be operated by an entity other
than Lessee (any and all of which are herein referred to as a “Transfer”), except as
specifically permitted hereunder or consented to in advance by Lessor in
writing, which consent shall not be unreasonably withheld or delayed (provided
that the proposed transferee does not fall within the prohibited conditions set forth in Exhibit
G). Consent to any subletting or assignment shall not be deemed to
be consent to any further subletting or assignment.  In the event of
any such Transfer, Lessor may collect rent and other charges from the assignee,
subtenant or other occupant (any and all of which are herein referred to as a
“Transferee”)
and apply the amounts collected to the rent and other charges herein reserved,
but no Transfer or collection of rent and other charges shall be deemed to be a
waiver of Lessor’s rights to enforce Lessee’s covenants under this Master Lease
or the acceptance of the Transferee as lessee, or a release of Lessee from the
performance of any covenants on the part of Lessee to be
performed.  Notwithstanding any Transfer, Lessee and any Guarantor
shall remain fully liable for the performance of all terms, covenants and
provisions of this Master Lease.  Any violation of this Master Lease
by any Transferee shall be deemed to be a violation of this Master Lease by
Lessee.  Lessee’s incidental space sharing arrangements (by lease
agreement or otherwise) with third parties for beauty shop and similar services
shall not be deemed to constitute a Transfer.  Notwithstanding any
provision of this Master Lease to the contrary, each Lessee shall have the
right, upon notice to Lessor, to transfer its interest under this Master Lease
(whether by assignment, merger or otherwise) to any entity that is an Affiliate
of Sun so long as (i) such Affiliate is duly licensed under applicable State law
to operate the affected portion of the Leased Properties and, if applicable,
certified to participate in Medicare or Medicaid in connection with its
operations thereat and (ii) such Affiliate agrees in writing to be bound by the
terms of this Master Lease and Sun acknowledges in writing that such transfer
shall not impair or in any way exonerate Sun’s obligations as Guarantor pursuant
to the terms of the Guaranty.




Corporate or Partnership
Transactions  60


other
equity interests, by Lessee, any Guarantor or any manager which is an Affiliate
of Lessee or any Guarantor or the members or stockholders of record of any of
them as of the date of this Master Lease, which results in a change in the
voting control of such entity, shall constitute a Transfer, provided, however,
that Lessor’s consent shall not be required with respect to Lessee’s transfer of
all or substantially all of its assets and liabilities to, or its merger or
consolidation with, its parent corporation or a subsidiary, direct or indirect,
of its parent corporation, but (i) the obligations of any Guarantor shall remain
in full force and effect notwithstanding such transfer, merger or consolidation,
and (ii) no such transfer, merger or consolidation shall diminish or in any way
adversely affect any of Lessor’s cross-default and cross-collateralization
rights with respect to any other lease and this Master Lease.  If
Lessee, any Guarantor of this Master Lease, or any manager which is an Affiliate
of Lessee or any Guarantor is a joint venture, partnership or other association,
then the sale, issuance or transfer, cumulatively or in one transaction, within
any five (5) year period of either voting control or of a twenty percent (20%)
or greater interest in, or the termination of, such joint venture, partnership
or other association, shall constitute a Transfer.  The provisions of
this Section 22.2 shall not apply to transaction involving the securities of any
Guarantor so long as such Guarantor is a reporting company under Section 12(g)
of the Securities Act of 1934, as amended or its stock is traded on the New York
Stock Exchange or other national securities market, nor to any transaction
involving the securities of Lessee if, after giving effect to such transaction,
such Guarantor retains voting control over Lessee.




22.3           Subordination and
Attornment.  Lessee shall insert in any sublease permitted by
Lessor provisions to the effect that (i) such sublease is subject and
subordinate to all of the terms and provisions of this Master Lease and to the
rights of Lessor thereunder, (ii) if this Master Lease terminates before the
expiration of such sublease, the sublessee thereunder will, at Lessor’s option,
attorn to Lessor and waive any right the sublessee may have to terminate the
sublease or to surrender possession thereunder, as a result of the termination
of  this Master Lease, and (iii) if the sublessee receives a written
Notice from Lessor or Lessor’s assignee, if any, stating that an Event of
Default has occurred under this Master Lease, the sublessee shall thereafter be
obligated to pay all rentals accruing under said sublease directly to the party
giving such Notice, or as such party may direct.  All rentals received
from the sublessee by Lessor or Lessor’s assignees, if any, as the case may be,
shall be credited against the amounts owing by Lessee under this Master
Lease.




22.4           Sublease
Limitation.  No sublease of any Leased Property is permitted,
except as specifically set forth in attached Exhibit
G.  If a sublease of any Leased Property is permitted under
attached Exhibit
G, nonetheless, Lessee shall not sublet such Leased Property on any basis
such that the rental to be paid by the sublessee thereunder would be based, in
whole or in part, on either (i) the income or profits derived by the business
activities of the sublessee, or (ii) any other formula such that any portion of
the sublease rental received by Lessor would fail to qualify as “rents from real
property” within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.  The parties agree that this paragraph
shall not be deemed waived or modified
by implication, but may be waived or modified only by an instrument in writing
explicitly referring to this paragraph by number.




61




ARTICLE
XXIII




23.1           Officer’s Certificates and
Financial Statements.  Lessee will furnish and will cause any
Guarantor to furnish the following statements to Lessor:




(a)           Within
ninety-five (95) days after the end of Lessees’ Fiscal Years or concurrently
with the filing by Sun of its annual report on Form 10K with the SEC, whichever
is later:  (i) Sun’s Financial Statements; (ii) Financials for each of
the Facilities for the fiscal year last completed (and, if any such Financials
are thereafter provided to a Guarantor for such Fiscal Year, a copy thereof
within fifteen (15) days after the same are so provided) in each case certified
by an Executive Officer of Lessee; (iii) an Officer’s Certificate of Lessee
stating that Lessee is not in default in the performance or observance of any of
the terms of this Master Lease, or if Lessee is in default, specifying all such
defaults, the nature thereof, and the steps being taken to remedy the same and
(iv) a report with respect to the financial statements from Sun’s accountants,
which report shall be unqualified as to going concern and scope of audit of Sun
and its subsidiaries and shall provide in substance that (a) such consolidated
financial statements present fairly the consolidated financial position of Sun
and its subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in conformity with GAAP and
(b) that the examination by Sun’s accountants in connection with such
consolidated financial statements has been made in accordance with generally
accepted auditing standards;




(b)           Within
fifty (50) days after the end of each of Lessee’s Fiscal Year quarters or
concurrently with the filing by Sun of its quarterly report on Form 10Q with the
SEC, whichever is later (i) a copy of any and all Financials for such period,
and (ii) an Officer’s Certificate of each Lessee, stating that Lessee is not in
default of any covenant set forth in Article VIII of this Master Lease, or if
Lessee is in default, specifying all such defaults, the nature thereof and the
steps being taken to remedy the same;




(c)           Upon
Lessor’s request from time to time, such additional information and unaudited
quarterly financial information concerning the Leased Properties and Lessee as
Lessor may require for its on-going filings with the Securities and Exchange
Commission, under both the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, including, but not limited to, 10-Q
Quarterly Reports, 10-K Annual Reports and registration statements to be filed
by Lessor during the Term of this Master Lease, subject to the conditions that
neither Lessee nor Guarantor shall be required to disclose information that is
material non-public information or is subject to the quality assurance immunity
or is subject to attorney-client privilege or the attorney work product
doctrine;




(d)           Within
forty (40) days after the end of each month, a financial report for each of the
Facilities for such month, including detailed statements of income and expense
and detailed operational statis­tics regarding occupancy rates, patient mix
and patient rates by type for each Facility;




62




(e)           Within
thirty (30) days of receipt thereof, copies of surveys performed by the
appropriate governmental agencies for licensing or certification purposes, and
any plan of correction as approved by the State;




(f)           Prompt
Notice to Lessor of any action, proposal or investigation by any agency or
entity, or complaint to such agency or entity, (any of which is called a “Proceeding”), known
to Lessee, the result of which Proceed­ing would reasonably be expected to
be to (i) revoke or suspend or terminate or modify in a way adverse to Lessee,
or fail to renew or fully continue in effect, any license or certificate or
operating authority pursuant to which Lessee carries on any part of the Primary
Intended Use of all or any portion of the Leased Properties, or (ii) suspend,
terminate, adversely modify, or fail to renew or fully continue in effect any
cost reimbursement or cost sharing program by any state or federal governmental
agency, including but not limited to Medicaid or Medicare or any successor or
substitute therefor, if the effect thereof is or reasonably could be anticipated
to be materially adverse to Lessee or the Leased Properties, or (iii) seek
return of or reimbursement for any funds previously advanced or paid pursuant to
any such program, if the effect thereof is or reasonably could be anticipated to
be materially adverse to Lessee or the Leased Properties, or (iv) impose any bed
hold, limitation on patient admission or similar restriction on the Leased
Properties, or (iv) prosecute any party with respect to the operation of any
activity on the Leased Properties or enjoin any party or seek any civil penalty
in excess of Twenty Thousand Dollars ($20,000.00) in respect
thereof;




(g)           As
soon as it is prepared in a Lease Year, a capital and operating budget for
each  Facility for that and the following Lease Year; and




(h)           Within
fifteen (15) days of Lessee’s receipt thereof, copies of Medicaid rate
letters.




23.2           Public Offering
Information.  Lessee specifically agrees that Lessor may
include financial information and such information concerning the operation of
the Facilities which does not violate the confidentiality of the
facility-patient relationship and the physician-patient privilege under
applicable laws, in offering memoranda or prospectuses, or similar publications
in connection with syndications, private placements or public offerings of
Lessor’s securities or interests, and any other reporting requirements under
applicable Federal and State Laws, including those of any successor to
Lessor.  Unless otherwise agreed by Lessee or Guarantor, Lessor shall
not revise or change the wording of information previously publicly disclosed by
Lessee or Guarantor and furnished to Lessor pursuant to Section 23.1 or this
Section 23.2.  Lessee agrees to provide such other reasonable
information necessary with respect to Lessee and its Leased Property to
facilitate a public offering or to satisfy SEC or regulatory disclosure
requirements.  Lessor shall provide to Lessee a copy of any
information prepared by Lessor to be published, and Lessee shall have a
reasonable period of time (not to exceed three (3) days) after receipt of such
information to notify Lessor of any corrections.




Lessor ’ s
Obligations




63


Properties.
Lessor further agrees (i) to maintain the confidentiality of such non-public
information; provided, however, Lessor shall have the right to share such
information with its accountants, attorneys and other consultants provided such
disclosure is not prohibited by applicable state or federal securities laws and
(ii) that it shall not engage in any transactions with respect to the stock or
other equity or debt securities of Sun based on any such non-public
information.




ARTICLE
XXIV




24.1           Lessor’s Right to
Inspect.  Upon reasonable advance notice to Lessee, Lessee
shall permit Lessor and its authorized representatives to inspect its Leased
Property during usual business hours.  Lessor shall take care to
minimize any disturbance of or inconvenience to any residents of any Leased
Property, except in the case of emergency, and to conduct such inspections in
compliance with applicable laws governing the confidentiality of patient
information, including the Health Insurance Portability and Accountability
Act.




ARTICLE
XXV




25.1           No
Waiver.  No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term.  No waiver of any breach shall
affect or alter this Master Lease, which shall continue in full force and effect
with respect to any other then existing or subsequent breach.




ARTICLE
XXVI




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




ARTICLE
XXVII




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




ARTICLE
XXVIII


28.1           No Merger of
Title.  There shall be no merger of this Master Lease or of the
leasehold estate created thereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (i) this Master Lease or the




64




leasehold
estate created hereby or any interest in this Master Lease or such leasehold
estate, and (ii) the fee estate in each Leased Property.




28.2           No
Partnership.  Nothing contained in this Master Lease shall be
deemed or construed to create a partnership or joint venture between Lessor and
Lessee or to cause either party to be responsible in any way for the debts or
obligations of the other or any other party, it being the intention of the
parties that the only relationship hereunder is that of lessor and
lessee.




ARTICLE
XXIX




29.1           Conveyance by
Lessor.  If Lessor or any successor owner of any Leased
Property conveys such Leased Property in accordance with the terms hereof other
than as security for a debt, Lessor or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Lessor under this Master Lease arising or accruing from and after the date of
such conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner upon Lessor’s delivery
to the new owner of any prepaid Rent then held by Lessor with respect to such
Leased Property.




ARTICLE
XXX




30.1           Quiet
Enjoyment.  So long as Lessee pays all Rent as it becomes due
and complies with all of the terms of this Master Lease and performs its
obligations thereunder, Lessee shall peaceably and quietly have, hold and enjoy
the Leased Properties hereby leased for the Term, free of any claim or other
action by Lessor or anyone claiming by, through or under Lessor, but subject to
all liens and encumbrances of record as of the Commencement Date or thereafter
provided for in this Master Lease or consented to by Lessee.  Except
as otherwise provided in this Master Lease, no failure by Lessor to comply with
the foregoing covenant shall give Lessee any right to cancel or terminate this
Master Lease or abate, reduce or make a deduction from or offset against the
Rent or any other sum payable under such  Lease, or to fail to perform
any other obligation of Lessee.  Lessee shall, however, have the
right, by separate and independent action, to pursue any claim it may have
against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Article.




ARTICLE
XXXI




31.1           Notices.  Any
notice, request or other communication to be given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage prepaid
and return receipt requested, by hand delivery or express courier service, by
facsimile transmission or by an overnight express service to the following
address:




To
Lessee:                            c/o
Sun Healthcare Group, Inc.


101 Sun Avenue, NE


Albuquerque,
NM  87109




Fax Number: 505-468-4998
 Attention:
General Counsel
 Fax Number:
505-468-4747


65








With a copy
to:                   
SunBridge Healthcare Corporation


(that shall
not                       18831
Von Karman, Suite 400


constitute
notice)                 Irvine,
CA  92612


Attention:  General
Counsel


Fax
Number:  949-255-7055





And with a copy
to:            The
Nathanson Group PLLC


(that shall
not                       One
Union Square


constitute
notice)                600
University Street, Suite 2000


Seattle, WA 98101


Attn:  Randi S.
Nathanson


Fax
Number:  206-623-1738





To
Lessor:                             c/o
Omega Healthcare Investors, Inc.


9690
Deereco Road,  Suite 100


Timonium,
MD 21093


Attn.:
Daniel J. Booth


Telephone
No.: (410) 427-1700


Facsimile
No.:  (410) 427-8800




And with
copy
to                 Doran
Derwent, PLLC


(which shall not
            125
      Ottawa Ave., Suite 420


constitute
      notice):
            Grand
      Rapids, Michigan 49503


Attn:
      Mark E. Derwent


Telephone
No.: (616) 451-8690


Facsimile
No.: (616) 451-8697




or to
such other address as either party may hereafter designate. Notice shall be
deemed to have been given on the date of delivery if such delivery is made on a
Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender.  If Lessee has vacated the Leased
Properties, Lessor’s Notice may be posted on the door of a Leased
Property.




ARTICLE
XXXII




32.1           Right of FirstOpportunity. Except
as otherwise specifically provided herein, in the event Lessor determines that
it wants to sell the Non-Litchfield Facilities at any time during the Initial
Continuing Term or any Renewal Term, Lessor shall first in writing offer to
enter into negotiations for such sale with the applicable Lessee or any
Affiliate of such Lessee (a “Seller’s Notice”). If the
applicable Lessee or an Affiliate thereof (“Buyer”) shall within
ten (10) days from receipt of Seller’s Notice give Seller Notice ( a “Buyer’s Notice”) that it
wishes to enter into good faith negotiations for the purchase of the Leased
Properties (a “Notice of Interest”)
within the above-described ten (10) day period, Seller and Buyer shall enter
into good faith negotiations for a period of thirty (30) days from Seller’s
receipt of the Notice of Interest (the “Negotiation Period”)
for the sale and purchase of the Leased Properties. If during the




66


Negotiation
Period a written agreement with respect to the purchase and sale of the Leased
Properties (a “Purchase Agreement”)
is executed by Seller and Buyer, Seller shall sell and Buyer shall purchase the
Leased Properties on the terms and conditions set forth in the Purchase
Agreement.  If (i) a Notice of Interest is not given as set forth
above, then, for a period of one (1) year after the expiration of the time
within which a Notice of Interest was required to be given, or (ii) a Notice of
Interest is given but Seller and Buyer do not execute a Purchase Agreement
during the Negotiation Period, for a period of one (1) year from the expiration
of the Negotiation Period, if Seller in its sole discretion continues to desire
to sell all, but not less than all, of the Leased Properties, Seller shall be
free to sell all but not less than all of the Leased Properties to any third
party for a Cash Price that is not less than ninety eight percent (98%) of a
Cash Price offered by written notice to Seller by Buyer during the Negotiation
Period, free from any claim of any right to purchase the Leased Properties by
Buyer, Sun or any Affiliate of Buyer or Sun but subject in each instance to the
rights of the Lessee under this Master Lease, including under this Section 32
with respect to future sales of the Leased Properties.  For purposes
of the preceding sentence, a “Cash Price” shall be the amount to be
received by Seller in cash or equivalent upon the closing of the sale net of
prorations and expenses to be borne by Seller.  If the Leased
Properties are not sold within such one (1) year period, before entering into
negotiations with any third party for the sale of the Leased Properties Seller
shall first offer to enter into negotiations for the sale thereof to Buyer
pursuant to the process described above.  The foregoing right of first
offer (i) is not assignable by Lessee except to an Affiliate of Lessee, (ii)
shall simultaneously and automatically terminate upon termination of this Master
Lease, (iii) shall not under any circumstances be extended, modified or in any
way altered except by a writing executed by Lessor and Lessee and (iv) shall not
apply in the event of either (A) a sale by Omega of all or substantially all of
the assets of it and its subsidiaries or (B) a sale/leaseback transaction by
Omega with respect to the Leased Properties for financing
purposes.




32.2           Appraisers.  If
it becomes necessary to determine the Fair Market Rental of the Leased Property
for any purpose of this Lease, Lessor and Lessee shall first attempt to agree on
such Fair Market Rental.  If Lessor and Lessee are not able to so
agree within a reasonable period of time not to exceed forty-five (45) days,
then Lessor and Lessee shall attempt to agree upon a single appraiser to make
such determination.  If Lessor and Lessee are unable to agree upon a
single arbitrator within thirty (30) days thereafter, then the party required or
permitted to give Notice of such required determination shall include in the
Notice the name of a person selected to act as appraiser on its
behalf.  Within ten (10) days after such Notice, Lessor (or Lessee, as
the case may be) shall by Notice to Lessee (or Lessor, as the case may be)
appoint a second person as appraiser on its behalf.  The appraisers
thus appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) and experienced in
appraising nursing home properties, shall, within forty-five (45) days after the
date of the Notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Rental thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
has been so appointed, or if two appraisers have been so appointed but only one
such appraiser has made such deter­mination within fifty (50) days after the
making of Lessee’s or Lessor’s request, then the determination of such appraiser
shall be final and binding upon the parties.  If two appraisers have
been appointed and have made their determinations within the respective
requisite periods set forth above and if the difference between the amounts so
determined does not exceed ten percent (10%) of the lesser of such amounts, then
the Fair




67


Market
Rental shall be an amount equal to fifty percent (50%) of the sum of the amounts
so determined.  If the difference between the amounts so determined
exceeds ten percent (10%) of the lesser of such amounts, then such two
appraisers shall have twenty (20) days to appoint a third
appraiser.  If no such appraiser has been appointed within such twenty
(20) days or within ninety (90) days of the original request for a determination
of Fair Market Rental, whichever is earlier, either Lessor or Lessee may apply
to any court having jurisdiction to have such appointment made by such
court.  Any appraiser appointed by the original appraisers or by such
court shall be instructed to determine the Fair Market Rental within forty-five
(45) days after appointment of such appraiser.  The determination of
the appraiser which differs most in terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and the average of
the sum of the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Rental of the Leased Property, as the case
may be.




This
provision for determining by appraisal shall be specifically enforceable to the
extent such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law.  Lessor and Lessee shall each pay the fees
and expenses of the appraiser appointed by it and each shall pay one-half (1⁄2) of
the fees and expenses of the third appraiser and one-half (1⁄2) of all other costs
and expenses incurred in connection with each appraisal.




ARTICLE
XXXIII




33.1           Breach by
Lessor.  Lessor shall not be in breach of this Master Lease
unless Lessor fails to observe or perform any term, covenant or condition of
this Master Lease on its part to be performed and such failure continues for a
period of thirty (30) days after Lessor receives written Notice from Lessee
specifying such failure and the necessary curative action.  If the
failure cannot with due diligence be cured within a period of thirty (30) days,
the failure shall not be deemed to continue if Lessor, within said thirty (30)
day period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof, such additional time not to exceed
thirty (30) days.  The time within which Lessor shall be obligated to
cure any such failure shall also be subject to extension of time due to the
occurrence of any Unavoidable Delay.




33.2           Compliance With Facility
Mortgages.  Lessee covenants and agrees that it will duly and
punctually observe, perform and comply with all of the terms, covenants and
conditions (including, without limitation, covenants requiring the keeping of
books and records and delivery of Financial Statements) of any Facility
Mortgage(s) and that it will not directly or indirectly do any act or suffer or
permit any condition or thing to occur which would or might constitute a default
under the Facility Mortgage.  Anything hereof to the contrary
notwithstanding, Lessee shall be obligated to conform to the additional
reporting and other requirements of a Facility Mortgage which are not also
requirements hereunder, only if Lessee is specifically made aware of such
additional requirements and consents thereto in advance.  Lessee shall
have no liability for any payments of principal or interest under any Facility
Mortgage.




68




ARTICLE
XXXIV




34.1           Facility Trade
Names.  If this Master Lease is terminated by reason of an
Event of Default or Lessor exercises its option to purchase Lessee’s Personal
Property pursuant to Section 35.1, Lessor shall be permitted to use the name(s)
under which any Facility has done business during the Term (the “Facility Trade
Names”); provided, however, that nothing herein shall be construed as
granting Lessor any right to use the name “SunBridge” or “Sun” or “Mediplex”or
“Harborside” or “Peak” any variation thereof. Lessee shall not, after any
termination of this Master Lease, use any Facility Trade Name in the same market
in which any of the Facilities is located in connection with any business that
competes with any Facility.




34.2           Transfer of Operational
Control of the Facilities. Upon the expiration or earlier
termination of the Term other than as a result of the purchased of the Leased
Properties by Lessee pursuant to Section 32,




(a)           Lessee
shall enter into one or more OTAs in the form of Exhibit E hereto with
respect to the Leased Properties and shall transfer operational control of the
Facilities to Lessor or Lessor’s nominee pursuant to the terms of such
OTAs,




(b)           To the extent permitted by law, Lessee
shall provide all necessary information requested by Lessor or its nominee for
the preparation and filing of any and all necessary applications or
notifications of any federal or state governmental authority having jurisdiction
over a change in the operational control of the Leased Properties, and Lessee
shall use its commercially reasonable efforts to cause the operating healthcare
licenses held by Lessee to be transferred to Lessor or to Lessor’s nominee or shall cooperate in the
efforts of Lessor or Lessor’s nominee to secure operating
healthcare licenses with respect to the Leased Properties in its own
name,




(c)           Lessee
shall engage only in transactions or other activities with respect to the Leased
Properties which are in the ordinary course of business and shall perform all
maintenance and repairs reasonably necessary to keep the Leased Properties in
satisfac­tory operating condition and repair, and shall maintain the
supplies and foodstuffs at levels which are consistent and in compliance with
all health care regulations, and shall not sell or remove any Personal Property
except in the ordinary course of business; provided, however, that (i) Lessee
shall have no obligation to make any Material Capital Improvements to any of the
Leased Properties unless Lessor agrees to pay for the cost thereof and (ii)
Lessee shall have no liability for any damage which may be suffered by it or
Lessor as a result of the failure of Lessee to make any such Material Capital
Improvements; provided, further, that nothing herein shall affect any claims
which Lessor may have against Lessee in the event this Master Lease was
terminated as a result of an Event of Default,




(d)            To
more fully preserve and protect Lessor’s rights under this Section 34.2, Lessee
does hereby make, constitute and appoint Lessor its true and lawful
attorney-in-fact, for it and in its name, place and stead to execute and deliver
all such instruments and documents, and to do all such other acts and things, as
Lessor may deem to be necessary or desirable to protect and preserve the rights
granted under this Section




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34.2,
including, without limitation, the preparation, execution and filing with the
Board of Health of the State or other appropriate agency of the State or
department any and all required “Letters of Responsibility” or similar
documents.  Lessee further hereby grants to Lessor the full power and
authority to appoint one or more substitutes to perform any of the acts that
Lessor is authorized to perform under this Section 34.2, with a right to revoke
such appointment of substitution at pleasure.  The power of attorney
granted pursuant to this Section is coupled with an interest and therefore is
irrevocable.  Any person dealing with Lessor may rely upon the
representation of Lessor relating to any authority granted by this power of
attorney, including the intended scope of the authority, and may accept the
written certificate of Lessor that this power of attorney is in full force and
effect.  Photographic or other facsimile reproductions of this Master
Lease may be made and delivered by Lessor, and may be relied upon by any person
to the same extent as though the copy were an original.  Anyone who
acts in reliance upon any representation or certificate of Lessor, or upon a
reproduction of the Lease, shall not be liable for permitting Lessor to perform
any act pursuant to this power of attorney.  Notwithstanding the
foregoing, Lessor shall not exercise this power of attorney  until,
and only during the continuance of, an uncured Event of Default under this
Master Lease.  Lessor shall provide to Lessee copies of any writing as
to which Lessor has exercised the power of attorney.




34.3           Intangibles and Personal
Property.  Notwithstanding any other provision hereof but
subject to Section 6.4 relating to the security interest in favor of Lessor,
Lessor’s Personal Property shall not include goodwill nor shall it include any
other intangible personal property that is severable from Lessor’s “interests in
real property” within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto.  All of Lessor’s Personal Property is
leased to Lessee pursuant to the terms hereof.




ARTICLE
XXXV




35.1           Arbitration.   Except
with respect to (i) the payment of Rent, and (ii) any proceedings for possession
of any Leased Property, or (iii) valuation questions that are to be resolved by
appraisal as set forth in Section 33, hereof, in case any controversy arises
between the parties hereto as to any of the requirements of this Master Lease or
the performance thereof, and the parties are unable to settle the controversy by
agreement or as otherwise provided herein, the controversy shall be resolved by
arbitration.  The arbitration shall be conducted by three arbitrators
selected in accordance with the procedures of the American Arbitration
Association and in accordance with its rules and procedures.  The
decision of the arbitrators shall be final, binding and enforceable and judgment
may be entered thereon in any court of competent jurisdiction.  The
decision shall set forth in writing the basis for the decision.  In
rendering the decision and award, the arbitrators shall not add to, subtract
from, or otherwise modify the provisions of this Master Lease.  The
expense of the arbitration shall be divided between Lessor and Lessee unless
otherwise specified in the award.  Each party in interest shall pay
the fees and expenses of its own counsel.  Lessor and Lessee shall
attempt to agree on a location for the arbitration, and if they are unable to
agree within a reasonable period of time, then the arbitration shall be
conducted in Baltimore, Maryland.  In any arbitration, the parties
shall be entitled to conduct discovery in the same manner as permitted under
Federal Rules of Civil Procedure 26 through 37.  No provision in this
Article shall limit the right of any party to this Master Lease to




70


obtain
provisional or ancillary remedies from a court of competent jurisdiction before,
after, or during the pendency of any arbitration, and the exercise of any such
remedy does not waive the right of either party to arbitration.




ARTICLE
XXXVI




36.1           Indemnification of
Lessor.  Except with respect to matters as to which Sun is
entitled to indemnification pursuant to Section 36.2, Sun hereby agrees to
indemnify each Lessor Indemnified Party against any Proceeding, that it may
incur in connection with the issuance by Sun to Omega and subsequent sale by
Omega of the Conversion Shares arising out of or based upon (i) any untrue or
alleged untrue statement of a material fact by Sun or any of its affiliates or
any person acting on its or their behalf contained in any of the Registration
Statement or any Prospectus filed by Sun with respect to the Conversion Shares
or in any Sun SEC filing incorporated by reference in either the Registration
Statement or any Prospectus filed by Sun with respect to the Conversion Shares
or (ii) any omission or alleged omission to state therein any material fact
necessary in order to make the statements by Sun or any of its affiliates
or any person acting on its or their behalf contained in any of the
Registration Statement or any Prospectus filed by Sun with respect to the
Conversion Shares or in any Sun SEC filing incorporated by reference in either
the Registration Statement or any Prospectus filed by Sun with respect to the
Conversion Shares, in the light of the circumstances under which they were made,
not misleading.  Sun hereby agrees to reimburse each Lessor
Indemnified Party for any reasonable legal or other expenses incurred by such
Lessor Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of, or is based upon, the gross
negligence or willful misconduct of Lessor in connection
therewith.   Furthermore, the foregoing indemnity rights will not
take effect unless and until the total amount of the indemnification in the
aggregate is ten thousand dollars ($10,000) or greater.




36.2           Indemnification of
Sun.  Except with respect to matters as to which Lessor is
entitled to indemnification pursuant to Section 36.1, Lessor hereby agrees to
indemnify Sun against any Proceeding, that it may incur in connection with the
issuance by Sun to Omega and subsequent sale by Omega of the Conversion Shares
arising out of or based upon (i) any untrue or alleged untrue statement of a
material fact by Lessor or any of its affiliates or any person acting on its or
their behalf included with the express written consent of Lessor in any of the
Registration Statement or any Prospectus filed by Sun with respect to the
Conversion Shares or in any Sun SEC filing incorporated by reference in any of
the Registration Statement or any Prospectus filed by Sun with respect to the
Conversion Shares or (ii) any omission or alleged omission to state any material
fact necessary in order to make the statements by Lessor or any of its
affiliates or any person acting on its or their behalf included with the express
written consent of Lessor in any of the Registration Statement or any Prospectus
filed by Sun with respect to the Conversion Shares or in any Sun SEC filing
incorporated by reference in the Registration Statement or any Prospectus filed
by Sun with respect to the Conversion Shares, in the light of the circumstances
under which they were made, not misleading.  Lessor hereby agrees to
reimburse Sun for any reasonable legal or other expenses incurred by such Sun in
investigating or defending any such Proceeding; provided, however, that the
foregoing indemnity shall not apply to any Proceeding to the extent that it
arises out of, or is based upon, the gross negligence or willful misconduct of
Sun in connection therewith.  Furthermore, the foregoing indemnity




71


rights
will not take effect unless and until the total amount of the indemnification in
the aggregate is ten thousand dollars ($10,000) or greater.




36.3           Conduct of
Claims.




36.3.1                      Whenever
a claim for indemnification shall arise under this Section 36, the party seeking
indemnification (the “Indemnified Party”),
shall notify the party from whom such indemnification is sought (the “Indemnifying Party”)
in writing of the Proceeding and the facts constituting the basis for such claim
in reasonable detail;




36.3.2                      Such
Indemnifying Party shall have the right to retain the counsel of its choice in
connection with such Proceeding and to participate at its own expense in the
defense of any such Proceeding; provided, however, that counsel to the
Indemnifying Party shall not (except with the consent of the relevant
Indemnified Party) also be counsel to such Indemnified Party.  In no
event shall the Indemnifying Party be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from its own counsel for
all Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances; and




36.3.3                      No
Indemnifying Party shall, without the prior written consent of the Indemnified
Parties (which consent shall not be unreasonably withheld), settle or compromise
or consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification could be
sought under this Section unless such settlement, compromise or consent (A)
includes an unconditional release of each Indemnified Party from all liability
arising out of such litigation, investigation, proceeding or claim and (B) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any Indemnified Party.




36.7.            Survival of the
Representations, Warranties, etc.  The respective
representations, warranties, and agreements made in the Existing Sun Master
Lease by or on behalf of the parties hereto with respect to the issuance and
subsequent resale of the Conversion Shares shall remain in full force and
effect, regardless of any investigation made by or on behalf of the other party
to this Master Lease or any officer, director or employee of, or person
controlling or under common control with, such party and will survive the
amendment and restatement of the Existing Sun Master Lease.





ARTICLE
XXXVII




37.1           Survival, Choice of
Law.  Anything contained elsewhere to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to the date of termination of this Master Lease shall survive such
termination.  If any late charges provided for in
any  provision of this Master Lease are based upon a rate in excess of
the maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate.  Neither this
Master Lease nor any provision thereof may be changed, waived,




72


discharged
or terminated except by an instrument in writing and in recordable form signed
by Lessor and Lessee.  All of the terms and provisions of this Master
Lease shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.  The headings in this Master
Lease are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Master Lease shall be governed by and construed
in accordance with the laws of the state of Maryland, except as to matters
which, under applicable procedural conflicts of laws rules require the
application of laws of the applicable State.




LESSEE
CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE
STATES OF MARYLAND, AND AGREES THAT ALL DISPUTES CONCERNING THIS MASTER LEASE BE
HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF MARYLAND. LESSEE
FURTHER CONSENTS TO IN PESONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS
OF EACH STATE WITH RESPECT TO ANY ACTION COMMENCED BY LESSOR SEEKING TO RETAKE
POSSESSION OF ANY OR ALL OF THE LEASED PROPERTIES. LESSEE AGREES THAT SERVICE OF
PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF
THE STATE OF MARYLAND, AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE
STATES OF MARYLANDOR, TO THE EXTENT
APPLICABLE IN ACCORDANCE WITH THE TERMS HEREOF, LOCATED IN THE
STATES.




37.2           Limitation on
Recovery.  Lessee specifically agrees to look solely to
Lessor’s interest in the Leased Properties covered by this Master Lease for
recovery of any judgment from Lessor or Omega, it being specifically agreed that
no constituent shareholder, member, manager, officer or director of Lessor shall
ever be personally liable for any such judgment or for the payment of any
monetary obligation to Lessee.  Furthermore, neither Lessor (original
or successor) nor Omega shall ever be liable to Lessee for any indirect or
consequential damages suffered by Lessee from whatever cause.




37.3           Consents.  Whenever
the consent or approval of Lessor is required hereunder, Lessor may in its sole
discretion and without reason withhold that consent or approval unless otherwise
specifically provided.  Lessee’s consent with respect to Legal
Requirements shall not be deemed to be unreasonably withheld or delayed if
Lessee determines that the requested covenant, agreement, restriction or
encumbrance to be created by Lessor would materially and adversely affect
Lessee’s leasehold rights hereunder.




37.4           Counterparts.  This
Master Lease may be executed in separate counterparts, each of which shall be
considered an original when each party has executed and delivered to the other
one or more copies of this Master Lease.




37.5           Options
Personal.  The renewal options granted to the Lessee in this
Master Lease are granted solely to the Lessee and are not assignable or
transferable except in connection with a transfer
or assignment of this Master Lease as permitted in Article XXII.  Any
attempt to assign or transfer such options shall be void and of no force and
effect.




73


37.6           Rights
Cumulative.  Except as provided herein to the contrary, the
respective rights and remedies of the parties specified in this Master Lease
shall be cumulative and in addition to any rights and remedies not specified in
this Master Lease.




37.7           Entire
Agreement.  There are no oral or written agreements or
representations between the parties hereto affecting this Master Lease. Except
as otherwise provided in Article XXXVI, this Master Lease supersedes and cancels
any and all previous negotiations, arrangements, representations, brochures,
agreements and understandings, if any, between Lessor and Lessee with respect to
this Master Lease including, but not limited to, the Existing Sun Master Lease
and any and all documents executed in contemplation thereof or pursuant thereto,
including the Forbearance Agreement dated as of October 13, 1999 among Lessor,
Lessees, Sun and certain Affiliates thereof (the “Forbearance
Agreement”).  Lessor and Lessee acknowledge and agree that the
Harborside Master Lease has been terminated and the Peak Litchfield Lease has
expired according to its terms.




37.8           Amendment in
Writing.  No provision of this Master Lease may be amended
except by an agreement in writing signed by Lessor and Lessee.




37.9           Severability.  If
any provision of this Master Lease or the application of such provision to any
person, entity or circumstance is found invalid or unenforceable by a court of
competent jurisdiction, such determination shall not affect the other provisions
of this Master Lease and all other provisions of this Master Lease shall be
deemed valid and enforceable.




37.10                      Successors.  The
term “Lessor” shall mean only the owner or owners at the time in question of fee
title to the Leased Properties.  In the event of any transfer of the
Lessor’s  interest in this Master Lease, Lessor named in this Master
Lease (and in case of any subsequent transfers, the then grantor) shall be
relieved from and after the date of the transfer of all liability as respects
Lessor’s obligations to be performed thereafter.  Any funds in the
hands of Lessor or the then grantor at the time of the transfer, in which Lessee
has an interest, shall be delivered to the grantee.  All rights and
obligations of Lessor and Lessee under this Master Lease shall extend to and
bind the respective heirs, executors, administrators and the permitted
concessionaires, successors, subtenants and assignees of the
parties.  If there is more than one (1) Lessee under this Master
Lease, each shall be bound jointly and severally by the terms, covenants and
agreements contained therein.




37.11                      Time of the
Essence.  Time is of the essence of all provisions of this
Master Lease of which time is an element.




ARTICLE
XXXVIII




38.1           Commissions.  Each
party represents and warrants to the other that no real estate commission,
finder’s fee or the like is due and owing to any person in connection with this
Master Lease.  Each party agrees to save, indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations for
brokerage, finder’s fees or the like in connection with this Master Lease or the
transactions contemplated hereby, asserted by any person on
the basis of any statement or act alleged to have been made or taken by the
indemnifying party.




74




ARTICLE
XXXIX




39.1           Memorandum of
Lease.  Lessor and Lessee shall, promptly upon the request of
either, enter into a short form memorandum of this Master Lease, in form
suitable for recording under the laws of the State, in which reference to
the  Lease, and all options contained therein, shall be made. Lessee
shall pay all costs and expenses of recording such memorandum.




ARTICLE
XL




40.1           Security Deposit.
Guarantor
previously delivered a Security Deposit in the amount of Three Hundred Sixty Two
Thousand Five Hundred Dollars ($362,500) to Lessor in the form of a Letter of
Credit, which Lessor had been holding as security for the full and faithful
performance by Lessee of each and every term, provision, covenant and condition
of this Master Lease (the “Peak
L/C”).  In addition, pursuant to the Harborside Master Lease,
the Harborside Lessee had delivered a Security Deposit in the amount of Eight
Hundred Thirty Seven Thousand Five Hundred Dollars ($837,500) to Lessor in the
form of a Letter of Credit (the “Harborside L/C” and
together with the Peak L/C, the “LCs”), which Lessor
had been holding as security for the full and faithful performance by the
Harborside Lessee of each and every term, provision, covenant and condition of
the Harborside Master Lease.  Lessor and Lessee acknowledge and agree
that from and after the Effective Date, the LCs shall be subject to the terms
and conditions of the Letter of Credit Agreement, and shall be held by Lessor as
security for the full and faithful performance by the Lessee of each and every
term, provision, covenant and condition of this Master Lease.  If at
any time the Security Deposit is in the form of cash, it shall be deposited by
Lessor into an account which shall earn interest, which interest shall be added
to, and become part of, the Security Deposit.  The Security Deposit
shall not be considered an advance payment of Rent (or of any other sum payable
to Lessor under this Lease) or a measure of Lessor’s damages in case of a
default by Lessee.  The Security Deposit shall not be considered a
trust fund, and Lessee expressly acknowledges and agrees that Lessor is not
acting as a trustee or in any fiduciary capacity in controlling or using the
Security Deposit.  Lessor shall have no obligation to maintain the
Security Deposit separate and apart from Lessor’s general and/or other
funds.  The Security Deposit, less any portion thereof applied as
provided in the Letter of Credit Agreement or in Section 40.2 shall be returned
to Lessee within sixty (60) days following the expiration of the
Term.




40.2           Application of Security
Deposit.  Upon the occurrence and during the continuance of an
Event of Default, Lessor may, but shall not be required to, in addition to and
not in lieu of any of the rights and remedies available to Lessor, use and apply
all or any part of the Security Deposit to the payment of any sum in default, or
any other sum, including, but not limited to, any damages or deficiency in
reletting the Leased Properties, which Lessor may expend or be required to
expend by reason of the existence of such Event of Default.  Whenever,
and as often as, Lessor has applied any portion of the Security Deposit to cure
(in whole or in part) an Event of Default, Lessee shall, within ten (10) days
after Notice from Lessor, deliver a new letter of credit to Lessor (or, at
Lessor’s option, deposit additional money with Lessor) sufficient to restore
the Security Deposit to the full amount originally provided or paid, and
Lessee’s failure to do so shall constitute an Event of Default hereunder without
any further Notice.


75




40.3           Transfer of Security
Deposit.  If Lessor transfers its interest under this Lease,
Lessor shall assign the Security Deposit to the new lessor and thereafter Lessor
shall have no further liability for the return of the Security Deposit, and
Lessee agrees to look solely to the new lessor for the return of the Security
Deposit.  The provisions of the preceding sentence shall apply to
every transfer of assignment of Lessor’s interest under this
Lease.  Lessee agrees that it will not assign or encumber or attempt
to assign or encumber the Security Deposit and that Lessor, its successors and
assigns, may return the Security Deposit to the least Lessee in possession at
the last address for Notice given by such Lessee and that Lessor shall
thereafter be relieved of any liability therefor, regardless of one or more
assignments of this Lease or any such actual or attempted assignment or
encumbrances of the Security Deposit.






SIGNATURES
ON FOLLOWING PAGE




76
 Signature
Pages
 SECOND
AMENDED AND RESTATED MASTER LEASE


IN
WITNESS WHEREOF, the parties hereby execute this Second Amended and Restated
Master Lease effective as of the day and year first set forth
above.




LESSOR:




DELTA
INVESTORS I, LLC, a Maryland limited liability company, and


DELTA
INVESTORS II, LLC, a Maryland limited liability company


OHI
ASSET, LLC, a Delaware limited liability company


OHI ASSET
(CA), LLC, a Delaware limited liability company


OHI ASSET
(CO), LLC, a Delaware limited liability company


OHI ASSET
(ID), LLC, a Delaware limited liability company





By:
            OMEGA
      HEALTHCARE INVESTORS, INC., a Maryland corporation, Its
    Member




By:          
/s/ Daniel
J. Booth


Name:      Daniel
J. Booth


Title:        Chief
Operating Officer




OHIMA,
INC., a Massachusetts corporation







By:           /s/
Daniel J. Booth


Name:     
Daniel J. Booth


Title:       Chief
Operating Officer




OMEGA:




OMEGA
HEALTHCARE INVESTORS, INC., a Maryland corporation









By:           /s/
Daniel J. Booth


Name:      Daniel
J. Booth


Title:        Chief
Operating Officer




STATE OF
MARYLAND  )


) ss.


COUNTY OF
BALTIMORE                  )





This instrument was acknowledged before
me on the 8th day of February, 2008, by Daniel J. Booth, the COO of OHIMA,
Inc., a Massachusetts corporation, and Omega Healthcare Investors, Inc., a
Maryland corporation, the sole member of Delta Investors I, LLC, a Maryland
limited liability company, Delta Investors II, LLC, a Maryland limited liability
company, OHI Asset, LLC, a Delaware limited liability company, OHI Asset (CA),
LLC, a Delaware limited liability company, OHI Asset (CO), LLC, a
Delaware


Signature
Page -  1 of 4
 
 Signature
Pages
 SECOND
AMENDED AND RESTATED MASTER LEASE


limited
liability company, OHI Asset (ID), LLC, a Delaware limited liability company, on
behalf of said corporations and companies.





/s/ Judith A. Jacobs


Notary Public, Baltimore County,
Maryland


My commission expires: May 1,
2008


Signature
Page - 2 of 4
 
 Signature
Pages
 SECOND
AMENDED AND RESTATED MASTER LEASE







LESSEE:




SUNBRIDGE
CARE ENTERPRISES, INC., a Delaware corporation


SUNBRIDGE
CIRCLEVILLE HEALTH CARE CORP., an Ohio corporation


SUNBRIDGE
BECKLEY HEALTH CARE CORP., a West Virginia corporation


SUNBRIDGE
PUTNAM HEALTH CARE CORP., a West Virginia corporation


SUNBRIDGE
BRASWELL ENTERPRISES, INC., a California corporation


SUNBRIDGE
MEADOWBROOK REHABILITATION CENTER, a California corporation


SUNBRIDGE
REGENCY REHAB HOSPITALS, INC., a California corporation


SUNBRIDGE
DUNBAR HEALTH CARE CORP., a West Virginia corporation


SUNBRIDGE
MARION HEALTH CARE CORP., an Ohio corporation


SUNBRIDGE
SALEM HEALTH CARE CORP., a West Virginia corporation


SUNBRIDGE
REGENCY-NORTH CAROLINA, INC., a North Carolina corporation


SUNBRIDGE
HEALTHCARE CORPORATION, a New Mexico corporation


SUNBRIDGE
SAN BERNARDINO REHABILITATION HOSPITAL, INC., a California
corporation


SUNBRIDGE
SHANDIN HILLS REHABILITATION CENTER, a California corporation


SUNBRIDGE
REGENCY-TENNESSEE, INC., a Tennessee corporation


FALMOUTH
HEALTHCARE, LLC, a Delaware limited liability company


MASHPEE
HEALTHCARE, LLC, a Delaware limited liability company


WAKEFIELD
HEALTHCARE, LLC, a Delaware limited liability company


WESTFIELD
HEALTHCARE, LLC, a Delaware limited liability company


PEAK
MEDICAL COLORADO NO. 2, INC., a Delaware corporation


PEAK
MEDICAL OF IDAHO, INC., a Delaware corporation


PEAK
MEDICAL OF BOISE, INC., a Delaware corporation







By:           /s/
Mike Berg


Name:     
Mike Berg


Title:        Secretary




SUN /
GUARANTOR:




SUN
HEALTHCARE GROUP, INC., a Delaware corporation




By:           /s/
Mike Berg


Name:      Mike
Berg


Title:        Secretary


Signature
Page - 3  of 4
 
 Signature
Pages
 SECOND
AMENDED AND RESTATED MASTER LEASE


GUARANTOR:




PEAK
MEDICAL CORPORATION


HARBORSIDE
HEALTHCARE CORPORATION




By:           /s/
Mike Berg


Name:      Mike
Berg


Title:        Secretary




STATE
OF NEW
MEXICO                
)


) ss.


COUNTY OF
B
ERNALILLO            
)





This instrument was acknowledged before
me on the 11th day of February, 2008, by Mike Berg, the Secretary of Sun
Healthcare Group, Inc., a Delaware corporation, Peak Medical Corporation, a
Delaware corporation, Harborside Healthcare Corporation, a Delaware corporation,
SunBridge Care Enterprises, Inc., a Delaware corporation, SunBridge Circleville
Health Care Corp., an Ohio corporation, SunBridge Beckley Health Care Corp., a
West Virginia corporation, SunBridge Putnam Health Care Corp., a West Virginia
corporation, SunBridge Braswell Enterprises, Inc., a California corporation,
SunBridge Meadowbrook Rehabilitation Center, a California corporation, SunBridge
Regency Rehab Hospitals, Inc., a California corporation, SunBridge Dunbar Health
Care Corp., a West Virginia corporation, SunBridge Marion Health Care Corp., an
Ohio corporation, SunBridge Salem Health Care Corp., a West Virginia
corporation, SunBridge Regency-North Carolina, Inc., a North Carolina
corporation, SunBridge Healthcare Corporation, a New Mexico corporation,
SunBridge San Bernardino Rehabilitation Hospital, Inc., a California
corporation, SunBridge Shandin Hills Rehabilitation Center, a California
corporation, SunBridge Regency-Tennessee, Inc., a Tennessee corporation,
Falmouth Healthcare, LLC, a Delaware limited liability company, Mashpee
Healthcare, LLC, a Delaware limited liability company, Wakefield Healthcare,
LLC, a Delaware limited liability company, Westfield Healthcare, LLC, a Delaware
limited liability company, Peak Medical Colorado No. 2, Inc., a Delaware
corporation, Peak Medical of Idaho, Inc., a Delaware corporation, and Peak
Medical of Boise, Inc., a Delaware corporation, on behalf of said corporations
and companies.





/s/ Elisa Buteau


Notary Public, Bernalillo County,
New Mexico


My commission expires:
12/12/09







Signature
Page - 4 of 4
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE


Schedules




I             Original
Master Leases




II              Future
Transition Facilities




Exhibits




A              List
of Facilities




B              Legal
Descriptions




C              Minimum
Purchase Price




D              Permitted
Encumbrances




E              Form
of Operations Transfer Agreement




F             Omitted




G              Provisions
Governing Transfer




H              Form
of Estoppel Certificate




Page
-  1 of 1
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE


Schedule
II





Future
Transition Facilities and Allocated Rent Amounts





Amounts
below are as of January 1, 2007








Facility
            
            Monthly
            
            
            AnnualContinental Rehab Hospital
      (CA)
            
            $
            81,436.85
            
            
            $
            977,242.19SunHealth Robert H. Ballard Rehab Hospital
      (CA)
            
            $
            53,405.43
            
            
            $
            640,865.15Total
      (all three facilities)
            
            $
            134,842.27
            
            
            $
            1,618,107.34


Schedule
III - Page 1 of 1
 
 Signature
Page to
 SECOND
AMENDED AND RESTATED MASTER LEASE


Exhibit
A





Facilities




1.
              Facility
      Name:
              Continental
      Rehab HospitalFacility
      Address:
              555
      Washington Street, San Diego, CALandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Regency Rehab Hospitals, Inc.Primary
      Intended Use:
              Rehabilitation
      Hospital2.
              Facility
      Name:
              Meadowbrook
      ManorFacility
      Address:
              3951
      East Blvd, Los Angeles, CALandlord:
              OHI
      Asset (CA), LLCTenant:
              SunBridge
      Meadowbrook Rehabilitation CenterPrimary
      Intended Use:
              Skilled
      Nursing Facility3.
              Facility
      Name:
              Sierra
      Vista Rehabilitation CenterFacility
      Address:
              3455
      East Highland Avenue, Highland, CALandlord:
              OHI
      Asset (CA), LLCTenant:
              SunBridge
      Braswell Enterprises, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility4.
              Facility
      Name:
              SunBridge
      Care & Rehab for CirclevilleFacility
      Address:
              1155
      Atwater Avenue, Circleville, OHLandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Circleville Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility5.
              Facility
      Name:
              SunBridge
      Care & Rehab for HomesteadFacility
      Address:
              1900
      E. Main Street, Lancaster, OHLandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Care Enterprises, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility6.
              Facility
      Name:
              SunBridge
      Care & Rehab for PutnamFacility
      Address:
              300
      Seville Road, Hurricane, W. VALandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Putnam Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility7.
              Facility
      Name:
              SunBridge
      Pine Lodge Care & RehabFacility
      Address:
              405
      Stanford Road, Beckley, W. VALandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Beckley Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility8.
              Facility
      Name:
              SunBridge
      Care & Rehab for
Emmett


H -1
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE


Facility
      Address:
              501
      W. Idaho Blvd., Emmett, IDLandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility9.
              Facility
      Name:
              SunBridge
      Care & Rehab for MilfordFacility
      Address:
              10
      Veterans Memorial Drive, Milford, MALandlord:
              Delta
      Investors I, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility10.
              Facility
      Name:
              Laurel
      ParkFacility
      Address:
              1425
      Laurel Avenue, Pomona, CALandlord:
              OHI
      Asset (CA), LLCTenant:
              SunBridge
      Braswell Enterprises, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility11.
              Facility
      Name:
              Olive
      VistaFacility
      Address:
              2350
      Culver Court, Pomona, CALandlord:
              OHI
      Asset (CA), LLCTenant:
              SunBridge
      Braswell Enterprises, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility12.
              Facility
      Name:
              Shandin
      Hills Behavior Therapy CenterFacility
      Address:
              4164
      North 4th
      Avenue, San Bernardino, CALandlord:
              OHI
      Asset (CA), LLCTenant:
              SunBridge
      Shandin Hills Rehabilitation CenterPrimary
      Intended Use:
              Skilled
      Nursing Facility13.
              Facility
      Name:
              SunHealth
      Robert H. Ballard Rehab HospitalFacility
      Address:
              1760
      West 16th
      Street, San Bernardino, CALandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      San Bernardino Rehab Hospital, Inc.Primary
      Intended Use:
              Rehabilitation
      Hospital14.
              Facility
      Name:
              SunBridge
      Care & Rehab for LexingtonFacility
      Address:
              877
      Hill Everhart Road, Lexington, NCLandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Regency-North Carolina, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility15.
              Facility
      Name:
              SunBridge
      Care & Rehab for MarionFacility
      Address:
              524
      Jamesway, Marion, OhioLandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Marion Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility




H-2
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE




16.
              Facility
      Name:
              SunBridge
      Care & Rehab for DunbarFacility
      Address:
              501
      Caldwell Lane, Dunbar, W. VALandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Dunbar Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility17.
              Facility
      Name:
              SunBridge
      Care & Rehab for ParkersburgFacility
      Address:
              1716
      Gihon Road, Parkersburg, W. VALandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Care Enterprises, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility18.
              Facility
      Name:
              SunBridge
      Care & Rehab for SalemFacility
      Address:
              146
      Water Street, Salem, W. VALandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Salem Health Care Corp.Primary
      Intended Use:
              Skilled
      Nursing Facility19.
              Facility
      Name:
              Ballard
      Care & RehabilitationFacility
      Address:
              1760
      West 16th
      Street, Seattle, WALandlord:
              Delta
      Investors II, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility20.
              Facility
      Name:
              SunBridge
      Care & Rehab – ShoalsFacility
      Address:
              500
      John Aldridge Drive, Tuscumbia, ALLandlord:
              OHI
      Asset, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility21.
              Facility
      Name:
              SunBridge
      Care & Rehab – TuscumbiaFacility
      Address:
              813
      Keller Lane, Tuscumbia, ALLandlord:
              OHI
      Asset, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility22.
              Facility
      Name:
              SunBridge
      Care & Rehab for DecaturFacility
      Address:
              1350
      14th
      Avenue SE, Decatur, ALLandlord:
              OHI
      Asset, LLCTenant:
              SunBridge
      Healthcare CorporationPrimary
      Intended Use:
              Skilled
      Nursing Facility23.
              Facility
      Name:
              SunBridge
      Care & Rehab for Merry WoodFacility
      Address:
              280
      Mt. Hebron Road, Elmore, ALLandlord:
              OHI
      Asset, LLC


H-3
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE


Tenant:
            SunBridge
      Healthcare CorporationPrimary
      Intended Use:
            Skilled
      Nursing Facility24.
            Facility
      Name:
            SunBridge
      Care & Rehab for Muscle ShoalsFacility
      Address:
            200
      Alabama Avenue, Muscle Shoals, ALLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Healthcare CorporationPrimary
      Intended Use:
            Skilled
      Nursing Facility25.
            Facility
      Name:
            SunBridge
      Care & Rehab for AlleghanyFacility
      Address:
            179
      Combs Street, Sparta, NCLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-North Carolina, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility26.
            Facility
      Name:
            SunBridge
      Care & Rehab for Mount OliveFacility
      Address:
            228
      Smith Chapel Road, Mount Olive, NCLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-North Carolina, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility27.
            Facility
      Name:
            SunBridge
      Care & Rehab for Siler CityFacility
      Address:
            900
      West Dolphin Street, Siler City, NCLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-North Carolina, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility28.
            Facility
      Name:
            SunBridge
      Care & Rehab for TriadFacility
      Address:
            700
      North Elm Street, High Point, NCLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-North Carolina, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility29.
            Facility
      Name:
            SunBridge
      Care & Rehab for LaFolletteFacility
      Address:
            155
      Davis Road, La Follette, TNLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-Tennessee, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility30.
            Facility
      Name:
            SunBridge
      Care & Rehab for MaynardvilleFacility
      Address:
            215
      Richardson Way, Maynardsville, TNLandlord:
            OHI
      Asset, LLCTenant:
            SunBridge
      Regency-Tennessee, Inc.Primary
      Intended Use:
            Skilled
      Nursing Facility31.
            Facility
      Name:
            Idaho
      Falls Care Center


H-4
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE




Facility
      Address:
              3111
      Channing Way, Idaho Falls, IdahoLandlord:
              OHI
      Asset (ID), LLCTenant:
              Peak
      Medical of Idaho, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility32.
              Facility
      Name:
              Twin
      Falls Care CenterFacility
      Address:
              674
      Eastland Drive, Twin Falls, IdahoLandlord:
              OHI
      Asset (ID), LLCTenant:
              Peak
      Medical of Idaho, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility33.
              Facility
      Name:
              Falmouth
      Nursing & Rehabilitation CenterFacility
      Address:
              359
      Jones Road, Falmouth, MALandlord:
              OHIMA,
      Inc.Tenant:
              Falmouth
      Healthcare, LLCPrimary
      Intended Use:
              Skilled
      Nursing Facility34.
              Facility
      Name:
              Mashpee
      Nursing & Rehabilitation CenterFacility
      Address:
              161
      Falmouth Road, Rte 128, Mashpee, MALandlord:
              OHIMA,
      Inc.Tenant:
              Mashpee
      Healthcare, LLCPrimary
      Intended Use:
              Skilled
      Nursing Facility35.
              Facility
      Name:
              Wakefield
      Nursing & Rehabilitation CenterFacility
      Address:
              1
      Bathol Street, Wakefield, MALandlord:
              OHIMA,
      Inc.Tenant:
              Wakefield
      Healthcare, LLCPrimary
      Intended Use:
              Skilled
      Nursing Facility36.
              Facility
      Name:
              Westfield
      Nursing & Rehabilitation CenterFacility
      Address:
              60
      East Silver Street, Westfield, MALandlord:
              OHIMA,
      Inc.Tenant:
              Westfield
      Healthcare, LLCPrimary
      Intended Use:
              Skilled
      Nursing Facility37.
              Facility
      Name:
              Capitol
      Care CenterFacility
      Address:
              8211
      Ustick Road, Boise, IDLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical of Boise, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility38.
              Facility
      Name:
              Cheyenne
      Mountain Care CenterFacility
      Address:
              835
      Tenderfoot Hill Road, Colorado Springs, COLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical Colorado No. 2, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility


H-5
 
 List
of Exhibits and Schedules to
 SECOND
AMENDED AND RESTATED MASTER LEASE


39.
              Facility
      Name:
              Cheyenne
      Place Retirement CenterFacility
      Address:
              945
      Tenderfoot Hill Road, Colorado Springs, COLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical Colorado No. 2, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility40.
              Facility
      Name:
              Mesa
      Manor Care CenterFacility
      Address:
              2901
      North 12th Street, Grand Junction, COLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical Colorado No. 2, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility41.
              Facility
      Name:
              Pikes
      Peak Care CenterFacility
      Address:
              2719
      North Union Boulevard, Colorado Springs, COLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical Colorado No. 2, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility42.
              Facility
      Name:
              Pueblo
      Extended Care CenterFacility
      Address:
              2611
      Jones Avenue, Pueblo, COLandlord:
              OHI
      Asset (CO), LLCTenant:
              Peak
      Medical Colorado No. 2, Inc.Primary
      Intended Use:
              Skilled
      Nursing Facility




H-6