THIRD
AMENDED AND RESTATED MASTER LEASE AGREEMENT




BY




VENTAS
REALTY, LIMITED PARTNERSHIP


AND




VENTAS
FRAMINGHAM, LLC,




AS
LANDLORD




AND




SUMMERVILLE
3, LLC,


SUMMERVILLE
5 LLC,


SUMMERVILLE
14 LLC,


SUMMERVILLE
15 LLC,


SUMMERVILLE
16 LLC,


SUMMERVILLE
17 LLC,


SW
ASSISTED LIVING, LLC,


SUMMERVILLE
AT MENTOR, LLC,


SUMMERVILLE
AT HERITAGE PLACE, LLC,


SUMMERVILLE
AT ATHERTON COURT LLC,


SUMMERVILLE
AT BARRINGTON COURT LLC,


SUMMERVILLE
AT ROSEVILLE GARDENS LLC,


AND


SUMMERVILLE
AT GOLDEN POND LLC,





AS
TENANT



















DATED
AS OF JULY 25, 2008












TABLE
OF CONTENTS




1
              Leased
      Property; Term; Joint and Several Liability; Limitation on
      Rights.
              21.1
              Leased
      Property
              21.2
              Term
              31.3
              Joint
      and Several Liability; Limitation on Rights
              41.4
              Medicare;
      Medicaid; CON
              41.5
              Amended
      and Restated Lease
              42
              Definitions
              53
              Rent.
              
              63.1
              Fixed
      Rent.
              63.2
              Additional
      Rent
              83.3
              Escrow
      Deposits
              103.4
              Security
      Deposit.
              113.5
              Net
      Lease
              143.6
              Emeritus
      Guaranty
              144
              Impositions.
              144.1
              Payment
      of Impositions
              144.2
              Notice
      of Impositions
              154.3
              Adjustment
      of Impositions
              155
              No
      Affect or Impairment, etc
              156
              Premises;
      Tenant's Personal Property.
              166.1
              Ownership
      of the Premises
              166.2
              Tenant's
      Personal Property
              166.3
              Landlord's
      Personal Property
              167
              Condition
      and Use of Each Leased Property.
              167.1
              Condition
      of Each Leased Property
              167.2
              Use
      of Each Leased Property.
              177.3
              Authorization
      Collateral
              177.4
              Granting
      of Easements, etc
              188
              Negative
      and Affirmative Covenants of Tenant.
              188.1
              Negative
      Covenants
              188.2
              Affirmative
      Covenants
              228.3
              Authorization
      Non-Compliance
              259
              Maintenance
      of Facilities.
              269.1
              Maintenance
      and Repair.
              269.2
              Encroachments
              2710
              Tenant's
      Representations and Warranties
              27
  
  10.1
              Organization
      and Good Standing
              2710.2
              Power
      and Authority
              2810.3
              Enforceability
              2810.4
              Consents
              2810.5
              No
      Violation
              2810.6
              Reports
      and Statements
              2810.7
              No
      Default
              2810.8
              Adverse
      Matters
              2810.9
              Certification
              2910.10
              No
      Reimbursement Audits or Appeals
              2910.11
              No
      Recoupments Efforts
              2910.12
              Professional
      Liability Reserves
              2910.13
              Primary
      Intended Use
              2910.14
              Compliance
      with Laws
              2910.15
              Ownership
      of Authorizations
              3010.16
              Third
      Party Payor Programs
              3011
              Alterations.
              3011.1
              Alterations
              3011.2
              Construction
      Requirements for all Alterations
              3011.3
              Capital
      Expenditures Account.
              3211.4
              Annual
      Capital Expenditure Budget
              3512
              Liens
              
              3613
              Permitted
      Contests
              3614
              Insurance.
              3714.1
              General
      Insurance Requirements
              3714.2
              Policies;
      Certificates
              3914.3
              Blanket
      and Loss Limit Policies
              3914.4
              Additional
      Insured; No Separate Insurance
              3914.5
              Policy
      Requirements
              4014.6
              Evidence
      of Compliance
              4014.7
              Foreclosure;
      Transfer
              4014.8
              Insurance
      Company
              4014.9
              Terrorism
              4115
              Damage
      and Destruction.
              4115.1
              Notice
      of Casualty
              4115.2
              Substantial
      Destruction
              4115.3
              Partial
      Destruction
              4215.4
              Restoration.
              4215.5
              Disbursement
      of Insurance Proceeds
              4315.6
              Insufficient
      Proceeds/Risk of Loss
              4315.7
              Excess
      Proceeds
              4315.8
              Landlord's
      Inspection
              44
  
  15.9
              Not
      Trust Funds
              4415.10
              Waiver
              4415.11
              Facility
      Mortgagee
              4416
              Condemnation.
              4416.1
              Parties'
      Rights and Obligations
              4416.2
              Total
      Taking
              4416.3
              Partial
      Taking
              4516.4
              Restoration
              4516.5
              Temporary
      Taking
              4517
              Default.
              4517.1
              Events
      of Default
              4517.2
              Remedy
      Election
              4817.3
              Certain
      Remedies
              4917.4
              Damages
              4917.5
              Waiver;
      Mitigation
              5017.6
              Application
      of Funds
              5017.7
              Nature
      of Remedies
              5117.8
              No
      Mediation or Arbitration
              5117.9
              Deletion
      of Properties
              5117.10
              Purchase
      Agreements
              5217.11
              Three
      Year Loan
              5318
              Landlord's
      Right to Cure Tenant's Default
              5419
              Holding
      Over
              5420
              Subordination.
              5520.1
              Subordination
              5520.2
              Attornment
              5520.3
              Mortgagee
      Cure Rights
              5520.4
              Modifications
              5621
              Property
      and Accounts Collateral.
              5621.1
              Landlord's
      Security Interest
              5621.2
              Accounts
      Receivable Financing
              5722
              Risk
      of Loss
              5723
              Indemnification
              5724
              Assignment;
      Sublease.
              5824.1
              Assignment;
      Sublease.
              5824.2
              Attornment
              6324.3
              Sublease
      Limitation
              6424.4
              Release
              64
  
  25
              Financial
      Statements and Reporting.
              6425.1
              Maintenance
      of Books and Records
              6425.2
              Annual
      Financial Information
              6425.3
              Quarterly
      Financial Information
              6525.4
              Certifications
      of Compliance
              6525.5
              Annual
      Budgets
              6525.6
              Monthly
      Financial Information
              6525.7
              Authorizations
              6625.8
              Actuarial
      Reports
              6625.9
              Notices/Inspection
      Reports from Governmental Authorities
              6625.10
              Financial
      Statements of Guarantor
              6625.11
              Estoppel
      Certificates
              6625.12
              Supplemental
      Information
              6725.13
              Quarterly
      Meetings; Facility Level Meetings and Reviews
              6725.14
              Format
              6726
              Landlord's
      Right to Inspect
              6727
              No
      Waiver
              6828
              Single
      Lease
              6829
              Acceptance
      of Surrender
              6830
              No
      Merger of Title
              6831
              Conveyance
      by Landlord
              6832
              Quiet
      Enjoyment
              6933
              Notices
              6934
              General
      REIT Provisions
              7035
              Transfer
      of Tenant's Personal Property
              7036
              Compliance
      With Environmental Laws.
              7136.1
              Hazardous
      Substances
              7136.2
              Remediation;
      Notification
              7136.3
              Indemnity
              7236.4
              Environmental
      Inspection
              7236.5
              Removal
              7237
              Operational
      Transfer.
              7337.1
              Exercise;
      Transfer of Authorizations.
              7337.2
              Reasonable
      Assistance
              7437.3
              Facility
      Termination; Limited Term Contraction Right; Limited Extended Operation by
      Tenant.
              75
  
  37.4
              Use
      of Tenant's Names
              7638
              Non-Recourse
              7639
              Combination
      of Leases
              7739.1
              Section
      39 Lease
              7739.2
              Additional
      Properties
              7739.3
              Combination
      Lease
              7939.4
              Section
      39 Date
              7939.5
              Additional
      Actions
              8040
              New
      Lease
              8040.1
              New
      Lease Terms
              8040.2
              Amendments
      to this Lease
              8140.3
              Effective
      Date
              8240.4
              Other
      Undertakings
              8241
              Intentionally
      Omitted.
              8242
              Miscellaneous.
              8242.1
              Survival
              8242.2
              Non-Business
      Day Payments
              8242.3
              Brokers
              8242.4
              Headings
              8342.5
              Counterparts
              8342.6
              Integration;
      Modification; Interpretation
              8342.7
              Time
      of Essence
              8342.8
              Force
      Majeure
              8342.9
              Severability;
      Maximum Rate
              8442.10
              Governing
      Law; Venue
              8442.11
              Waiver
      of Trial by Jury
              8442.12
              Waivers;
      Forbearance
              8442.13
              Binding
      Character
              8543
              Renewal
      Options.
              8543.1
              Exercise
      of Renewal Options
              8543.2
              Renewal
      Terms
              8543.3
              Fair
      Market Rental Determination
              8543.4
              Intentionally
      Omitted.
              8543.5
              Other
      Leases
              8544
              Option
      to Purchase and Right of First Offer.
              8644.1
              Option
      Terms
              8644.2
              Other
      Leases with Option Provision
              8644.3
              Right
      of First Offer
              8745
              Special
      Purpose Entity Obligations
              89
  
  46
              Memorandums
      of Lease
              8947
              Confidentiality.
              8947.1
              Confidentiality
              8947.2
              Permitted
      Disclosures
              8947.3
              Information
              9047.4
              Excluded
      Information
              9147.5
              Injunctive
      Relief
              9147.6
              Suspension
      Period
              9147.7
              Disclosure
      Notice
              9148
              State
      Specific Provisions
              9148.1
              Connecticut.
              9148.2
              California.
              9249
              Intentionally
      Omitted.
              9550
              Restrictive
      Covenants
              95







LIST OF
SCHEDULES AND EXHIBITS


Schedule
      1
            -
            Facilities,
      Tenants and LandlordsSchedule
      3.1.1
            -
            Wiring
      InstructionsSchedule
      3.1.2
            -
            Fixed
      Rent Amounts and Rent EscalationsSchedule
      7.3
            -
            Authorization
      CollateralSchedule
      10.4
            -
            ConsentSchedule
      10.8
            -
            Adverse
      MattersSchedule
      10.13
            -
            Primary
      Intended UsesSchedule
      11.3.1
            -
            Section
      11.3.1 ExampleSchedule
      17.1.13
            -
            Licensed
      Beds / Licensed UnitsExhibit
      A
            -
            Addresses
      of the Leased PropertiesExhibits
      A-1 through A-14
            -
            Legal
      Descriptions of the LandExhibit
      B
            -
            DefinitionsExhibit
      C
            -
            Base
      Year Patient RevenuesExhibit
      D
            -
            Officer’s
      CertificateExhibit
      E
            -
            Estoppel
      CertificatesExhibit
      F
            -
            Subordination
      of Management AgreementExhibit
      G
            -
            AppraisalsExhibit
      H
            -
            Option
      to PurchaseExhibit
      I
            -
            Special
      Purpose Entity ObligationsExhibit
      J
            -
            Restrictive
      CovenantsExhibit
      K
            -
            Lease
      GuarantyExhibit
      L
            -
            Emeritus
      Guaranty











THIRD AMENDED AND RESTATED
MASTER LEASE
AGREEMENT




This
THIRD AMENDED AND
RESTATED MASTER LEASE
AGREEMENT(this agreement, as it may be amended, restated, renewed,
supplemented, extended or replaced by the parties hereto from time to time, this
“Lease”) is made and
entered into as of July 25, 2008 (the “Effective Date”), between
VENTAS REALTY, LIMITED
PARTNERSHIP, a Delaware limited partnership (“VR Landlord”), andVENTAS FRAMINGHAM, LLC, a
Delaware limited liability company (“Farmingham Landlord”, and
together with VR Landlord, and their respective successors and assigns,
individually and collectively, “Landlord”), and each of the
entities identified on Schedule
1 attached hereto, as the same may be modified (including the addition of
other tenants) from time to time pursuant to Section17, Section39 or Section40 of this Lease (together
with their permitted successors and assigns, individually and collectively,
“Tenant”).






RECITALS:




WHEREAS, Landlord owns the
real property described by the common addresses set forth on Exhibit A attached hereto
and legally described in Exhibits A-1 through A-14 attached hereto;
and




WHEREAS, SW Assisted Living,
LLC; Summerville at Mentor, LLC; Summerville at Heritage Place, LLC; Summerville
at Barrington Court LLC; Summerville at Atherton Court LLC; Summerville at
Roseville Gardens LLC; and Summerville at Golden Pond LLC (collectively, the
“Mentor Tenants”)
entered into that certain Second Amended and Restated Master Lease Agreement
dated as of April 20, 2006 (the “Mentor Master Lease”),
pursuant to which VR Landlord leased to the Mentor Tenants those certain
Facilities set forth, along with the corresponding Tenant, on Schedule 1 as Facility Nos. 1
through 7 (collectively, the “Mentor Properties”) located on
the real property legally described in, respectively, Exhibits A-1 through A-7attached hereto;
and




WHEREAS, Summerville 3, LLC;
Summerville 5 LLC; Summerville 14 LLC; Summerville 15 LLC; Summerville 16 LLC;
and Summerville 17 LLC (collectively, the “Farm Pond Tenants”) entered
into that certain Second Amended and Restated Master Lease Agreement – Farm Pond
dated as of March 24, 2006 (the “Farm Pond Master Lease”),
pursuant to which Landlord leased to the Farm Pond Tenants those certain
Facilities set forth, along with the corresponding Tenant, on Schedule 1 as Facility Nos. 8
through 14 (collectively, the “Farm Pond Properties”) located
on the real property legally described in, respectively, Exhibits A-8 through A-14attached hereto;
and




WHEREAS, Summerville Senior
Living, Inc., a Delaware corporation (“Summerville”, and together
with its permitted successors and assigns, the “Previous Guarantor”) entered into that
certain Guaranty dated as of April 20, 2006, and that certain Second Amended and
Restated Indemnification Agreement dated as of March 24, 2006 (collectively, the
“Previous Guaranties”),
each for the benefit of Landlord; and




WHEREAS, Landlord alleged that
events of default arose under the Mentor Master Lease, the Farm Pond Master
Lease and the Previous Guaranties as set forth in that certain letter (the
“Forbearance Letter”)
dated May 10, 2007 from VR Landlord to the Previous Guarantor




1


(the
alleged events of default, as described in the Forbearance Letter, are referred
to herein as the “Forbearance
Events”); and




WHEREAS, Previous Guarantor,
formerly the indirect owner of each Tenant, and certain other persons and
entities entered into that certain Agreement and Plan of Merger dated as of
March 29, 2007 with Emeritus Corporation (“Emeritus,” and collectively
with its affiliates, successors and assigns, the “Purchaser”) pursuant to which,
through a series of transactions, Purchaser acquired Previous Guarantor and
thereby, indirectly, all of the interests of the Previous Guarantor, direct and
indirect, in each Tenant (the “Acquisition”);
and




WHEREAS, the Mentor Master
Lease created certain option rights relative to the Mentor Properties and the
Farm Pond Master Lease created certain right of first offer rights relative to
the Farm Pond Properties, but such option and right of first offer rights were
personal to Tenant, not transferable and not applicable upon the occurrence of
an Event of Default under such leases; and




WHEREAS, Landlord is willing
to waive any claim of default with respect to the Forbearance Events and allow
the aforesaid option and right of first offer rights to remain in this Lease and
not to be terminated, notwithstanding the Acquisition and the existence of the
Forbearance Events, subject to Tenant’s entry into, and the terms and conditions
of, this Lease; and




WHEREAS, Landlord and Tenant
desire to combine,
amend and restate the Mentor Master Lease and Farm Pond Master Lease in
order to document Landlord’s waiver of any claim of default with
respect tothe Forbearance Events, as requested by Previous Guarantor and
Purchaser, to document certain terms that Landlord will require as consideration
for its aforesaid waiver and as conditions precedent thereto and otherwise as a
result of the Forbearance Events and to document certain other agreements
between Landlord and Tenant relative to the combination of the Mentor Master
Lease and Farm Pond Master Lease; and




WHEREAS, Landlord desires to
lease the Premises to Tenant, and Tenant desires to lease the Premises from
Landlord; and




WHEREAS, as of the Effective
Date, Emeritus (together with its permitted successors and assigns, the “Emeritus Guarantor”) is
entering into a Guaranty for the benefit of Landlord (as amended, restated,
renewed, supplemented, extended or replaced from time to time, the “Emeritus Guaranty”) in the form
attached hereto as Exhibit
L; and




NOW, THEREFORE,Landlord and
Tenant hereby agree upon the leasing and demising of the Premises by Landlord to
Tenant, and combine, amend and restate the Mentor Master Lease and the Farm Pond
Master Lease, upon the terms and conditions of this Lease.




1.  Leased
Property; Term; Joint and Several Liability; Limitation on
Rights.




1.1  Leased
Property.  Effective as of the Commencement Date applicable to
each Leased Property as set forth on Schedule 1, upon and
subject to Section1.3 below and to the other
terms and conditions hereinafter set forth, Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, all of the following:




2


1.1.1  Land.  The
parcels of land more particularly described in Exhibits A-1 through A-14 attached hereto, together
with all easements and interests appurtenant thereto (collectively, the “Land”; each parcel of Land
described in such Exhibits
A-1 through A-14,
as amended from time to time, together with such appurtenances with respect to
such parcel, being referred to herein as a “Leased Land”);




1.1.2  Leased
Improvements.  All buildings, structures, Fixtures (as
hereinafter defined) and other improvements of every kind, including, but not
limited to, alleyways, sidewalks, utility pipes, conduits and lines, parking
areas and roadways appurtenant to such buildings and structures situated upon
the Land as of the date hereof and Alterations upon the Land (collectively, the
“Leased Improvements”);




1.1.3  Intangible
Property.  The interest, if any, of Landlord in and to any of
the following intangible property owned by Landlord in connection with the Land
and the Leased Improvements (collectively, the “Intangibles”): (i) to the
extent assignable or transferable, the interest, if any, of Landlord in and to
each and every guaranty and warranty concerning the Leased Improvements,
including, without limitation, any roofing, air conditioning, heating, elevator
and other guaranty or warranty relating to the construction, maintenance or
repair of the Leased Improvements or any portion thereof; and (ii) the interest,
if any, of Landlord in and to all Authorizations to the extent the same can be
assigned or transferred in accordance with applicable law; and




1.1.4  Landlord’s
Personal Property.  All tangible personal property owned by
Landlord and located at the Land or the Leased Improvements (together with any
replacements thereof pursuant to Section6.3 below, “Landlord’s Personal
Property”).




SUBJECT,
HOWEVER, to the Permitted Encumbrances (as hereinafter defined).




1.2  Term.  Landlord
hereby leases the Premises to Tenant for (i) an initial term (the “Initial Term”), as to each
Leased Property, commencing as of the Commencement Date applicable to such
Leased Property as set forth on Schedule 1 and expiring
at midnight on the expiration date set forth on Schedule 1as to such Leased
Property (the “Initial
Expiration Date”) and (ii) as to each Leased Property, the Extended Terms
provided for in Section43, unless this Lease is
sooner terminated as provided herein.  In the case of each Leased
Property, the Initial Term applicable thereto, as extended pursuant to Section43 hereof and as revised
as to such Leased Property pursuant to any applicable Landlord Contraction(s)
(as defined below), is referred to as the “Term” for such Leased
Property.  Landlord shall have the limited right to contract the Term
(each, a “Landlord
Contraction”) as to each Leased Property in order to facilitate an
Operational Transfer pursuant to Section37.In the case of
each Leased Property, the Initial Expiration Date applicable thereto, as
extended pursuant to Section43 hereof and as revised
as to such Leased Property pursuant to any applicable Landlord Contraction(s),
is herein referred to as the “Expiration Date” for such
Leased Property.  Landlord and Tenant acknowledge and agree that (i)
as provided on Schedule 1 and/or on
account of any Landlord Contraction(s) as to a particular Leased Property(ies),
individual Leased Properties will have applicable thereto different Expiration
Dates and (ii) Tenant may be obligated to operate a particular Leased
Property(ies) beyond the Expiration Date(s) applicable thereto in accordance
with Section37.




3


1.3  Joint and
Several Liability; Limitation on Rights.  Notwithstanding
anything contained herein to the contrary, if there is at any time more than one
person or entity constituting the “Tenant” hereunder, each such person or entity
shall be jointly and severally liable for the payment and performance of all
obligations and liabilities of Tenant hereunder, including, without limitation,
the obligations and liabilities of each other Tenant hereunder, including,
without limitation, each such other Tenant’s obligation to pay Rent hereunder;
provided, however, that, without limitation of the joint and several nature of
the obligations of each Tenant hereunder, the possessory and leasehold rights
that are created by this Lease shall be limited and confined in the case of each
Tenant to the applicable Facility(ies) identified as being leased to and to be
operated by such Tenant on Schedule 1 attached hereto,
the Leased Land on which such Facility is located and the Intangibles and
Landlord’s Personal Property that specifically relate to such Leased
Land.  If there is at any time more than one person or entity
constituting “Landlord” hereunder, then, subject to and without limitation of
Section31 and Section38 hereof, each such
person or entity shall be jointly and severally liable for the payment and
performance of all obligations and liabilities of Landlord
hereunder.




1.4  Medicare;
Medicaid; CON.  Tenant acknowledges that, at present, assisted
living facilities and independent living facilities do not participate in
Medicare or, except in the case of the Golden Pond Property, Medicaid, and are
not regulated or inspected by Governmental Authorities or other Persons
administering Third Party Payor Programs to the same degree and extent as
hospitals and/or skilled nursing facilities (e.g. through the issuance of
certificates of need, periodic surveys of the quality of care, issuance of
deficiency reports, assignment of deficiency ratings of a particular scope or
severity or constituting immediate jeopardy events, etc.), and agrees that, in
the event that, during the Term, any of the Leased Properties determines to
participate in Medicare or, other than the Golden Pond Property, Medicaid,
and/or becomes subject to increased levels of regulation or inspection by
Governmental Authorities or any of the other aforesaid Persons, Landlord shall
be entitled from time to time to impose, and Tenant shall be obligated to comply
with, such additional covenants and other obligations relating to the Leased
Properties and Tenant’s leasing and operation thereof as Landlord or its
Affiliates customarily impose upon tenants entering into new leases with
Landlord or its Affiliates for properties like the Leased Properties and/or as
Landlord from time to time determines, in its reasonable discretion, are
consistent with the practices of commercial landlords entering into new leases
for properties like the Leased Properties.




1.5  Amended
and Restated Lease.  This Lease combines, amends and restates
the Mentor Master Lease and Farm Pond Master Lease in their entirety and shall
govern and control as to all events, acts, omissions, liabilities and
obligations first occurring, arising or accruing from and after the Effective
Date.




1.5.1  Without
limitation of the other provisions of this Section1.5, the terms of the
Mentor Master Lease and the Farm Pond Master Lease shall continue to govern and
control as to all events, acts, omissions, liabilities and obligations
occurring, arising and accruing prior to the Effective Date, provided that, in
the event that (i) prior to the Effective Date, (a) a default or breach of the
terms of the Mentor Master Lease or the Farm Pond Master Lease shall have
occurred, (b) any act, event or omission to act shall have occurred, or
circumstance shall have arisen, relative to any Legal Requirement,
Authorization, or Permitted Encumbrance affecting any of the Leased Properties
that is or is potentially adverse to Landlord or Tenant, or (c) any casualty or
condemnation shall have occurred relative to any of the Leased




4


Properties,
and (ii) as of the Effective Date, such default or breach remains uncured or
such act, event, omission to act or circumstance continues to be adverse or
potentially adverse to Landlord or Tenant or such casualty or condemnation has
not been fully repaired and restored with all claims on account thereof finally
settled and paid and with the affected Leased Property re-opened for use in
accordance with its Primary Intended Use and the other provisions of this Lease,
the provisions of this Lease relative to cure periods, whether and when an Event
of Default shall be deemed to have occurred, rights and remedies on account of
any breach or default or Event of Default, contest rights, Lease enforcement
rights, casualty, condemnation, insurance and indemnification shall govern and
control.  Subject to the foregoing, (x) any breach or default that
occurred, arose or accrued under the Mentor Master Lease or the Farm Pond Master
Lease prior to the Effective Date and was not cured prior to such date is, and
shall be deemed to be, a breach or default under this Lease, to which the cure
periods, rights and remedies and other provisions of this Lease referenced in
the preceding sentence shall be applicable, and (y) with respect to any breach
or default described in subsection (x) above, although the cure periods, rights
and remedies and other provisions of this Lease referenced in the preceding
sentence shall be applicable, the portion of any cure period under the Mentor
Master Lease or the Farm Pond Master Lease that has elapsed as of the Effective
Date shall be counted in determining whether and when the applicable cure period
under this Lease has expired (for example, if (A) a breach or default occurs
under the Mentor Master Lease prior to the Effective Date, (B) such breach or
default remains uncured as of the Effective Date, (C) Tenant receives from
Landlord a written notice of default relative thereto prior to the Effective
Date, and (D) by the terms of this Lease, for a breach or default of the nature
assumed in this example a cure period of thirty (30) days following Tenant’s
receipt of written notice of default is allowed prior to such breach or default
becoming an Event of Default under this Lease, then, as to such breach or
default, an Event of Default shall occur if such breach or default is not cured
on or prior to the thirtieth (30th) day following Tenant’s receipt of the
aforesaid notice of default, notwithstanding that such notice was received prior
to the Effective Date).




1.5.2  Each of
Landlord and Tenant hereby represents and warrants to the other party that, as
of the Effective Date, it has not issued to such other party any notice of
default under this Lease by such other party that has not been cured or, as and
to the extent set forth in Section24.1.8, waived by the
issuing party.




2.  Definitions.  For
all purposes of this Lease, except as otherwise expressly provided or unless the
context otherwise requires, (i) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP, (ii) all
references in this Lease to designated “Sections”, “Subsections” and other
subdivisions are to the designated Sections, Subsections and other subdivisions
of this Lease, (iii) the words “herein”, “hereof” and “hereunder” and other
words of similar import mean and refer to this Lease as a  whole and
not to any particular Section, Subsection or other subdivision, (iv) the terms
defined in Exhibit B
attached hereto have the meanings assigned to them in such exhibit and include
the plural as well as the singular and (v) without limitation of the definition
of “Unit” set forth in Exhibit
B attached hereto, all references in this Lease to “licensed beds” or
words of similar import mean and refer, in the case of each Leased Property, to
licensed beds or licensed units, and all references in this Lease to
“operational beds” or words of similar import mean and refer, in the case of
each Leased Property, to operational beds or operational units, in each case as
applicable depending upon, and to the extent, if any, affected by, the
particular licensing measure used by the responsible Governmental Authorities in
regulating Facilities operated for the Primary




5


Intended
Use that is applicable to such Leased Property (e.g. in some states, assisted
living facilities are issued licenses for a specified number of beds and in
other states they are issued licenses for a specified number of
units).




3.  Rent.




3.1  Fixed
Rent.




3.1.1  Rental
Payments.  Tenant shall pay
to Landlord, in advance and without demand, on or prior to the fifth (5th) day
of each calendar month (or the next Business Day, if such 5th day is
not a Business Day) during the Term, in lawful money of the United States of
America, by wire transfer and pursuant to the wiring instructions attached
hereto as Schedule3.1.1, or at such place,
by such means or to such Person(s) as Landlord from time to time may designate
in writing, the Fixed Rent (and Additional Rent in those instances described in
Section3.3 below) payable in
respect of such month.  Landlord may, by written notice to Tenant at
any time and from time to time, elect to require that Rent (or portions thereof
designated by Landlord) owing hereunder be paid to a lock box.  Fixed
Rent (and Additional Rent in those instances described in Section3.3 below)shall be paid in equal,
consecutive monthly installments; provided, however, that the
last monthly payment of Fixed Rent (and the aforesaid Additional Rent) shall be
prorated as to any partial month.




3.1.2  Rental
Amounts.  Fixed Rent as of the Effective Date shall equal
Fifteen Million Nine Hundred Sixty Seven Thousand One Hundred Thirty Eight and
2/100 Dollars ($15,967,138.02) in aggregate, and, without limitation of Section 1.3 or Section 28 hereof, such
Fixed Rent shall be allocated or attributed for certain purposes of this Lease
to the Leased Properties in the respective amounts set forth in Schedule 3.1.2 attached
hereto.  Commencing upon the date, as to each Tenant and its
respective Leased Property, set forth in Schedule 3.1.2 (the “Rent Escalation Date”), and
upon the applicable Rent Escalation Date of each calendar year thereafter during
the applicable Term, the Fixed Rent applicable to each Leased Property for the
ensuing Lease Year shall be an amount equal to the sum of (x) the Prior Period
Fixed Rent applicable to such Lease Year and such Leased Property, plus (y) the
product of (a) the Prior Period Fixed Rent applicable to such Lease Year and
such Leased Property and (b) provided the Rent Escalation Condition has been
satisfied with respect to such Lease Year for the Premises, the amount equal to
the greater of:




3.1.2.1  In the
case of any Lease Year of the Initial Term of this Lease as it applies to any
Leased Property, (1) the percentage amount applicable to such Leased Property as
set forth on Schedule 3.1.2(the “Minimum Rent
Escalation Amount”)or (2) seventy-five
percent (75%) of the CPI Increase, expressed as a percentage, for the Lease Year
for which such calculation is being performed.




3.1.2.2  In the
case of any Lease Year of the first or second Extended Term of this Lease as it
applies to any Mentor Property, (1) the Minimum Rent Escalation Amount or (2)
seventy-five percent (75%) of the CPI Increase, expressed as a percentage, for
the Lease Year for which such calculation is being performed, provided, however,
that, in the case of the first Lease Year of any Extended Term of this Lease as
it applies to any Mentor Property, the Fixed Rent for such Lease Year shall
equal the greater of (i) the aforesaid sum of (x) plus (y) referenced above
(with the product referenced in (y) calculated as




6


described
in this Section3.1.2.2) for such Lease
Year or (ii) the Fair Market Rental as determined in accordance with Section43.2 and Section43.3 hereof.




3.1.2.3  In the
case of any Lease Year of the first or second Extended Term of this Lease as it
applies to any Farm Pond Property, (1) the Minimum Rent Escalation Amount or (2)
seventy-five percent (75%) of the CPI Increase, expressed as a percentage, for
the Lease Year for which such calculation is being performed, provided, however,
that (A) in the case of the first Lease Year of the first Extended Term of this
Lease as it applies to any Farm Pond Property, the Fixed Rent for such Lease
Year shall equal one hundred five percent (105%) of the Prior Period Fixed Rent
for such Lease Year, and (B) in the case of the first Lease Year of the second
Extended Term of this Lease as it applies to any Farm Pond Property, the Fixed
Rent for such Lease Year shall equal the greater of (i) one hundred three
percent (103%) of the Prior Period Fixed Rent for such Lease Year or (ii) the
Fair Market Rental as determined in accordance with Section43.2and Section43.3hereof.




3.1.2.4  Notwithstanding
anything contained herein to the contrary, if the Rent Escalation Condition
fails with respect to any one or more Lease Years applicable to any Leased
Property(ies), the Fixed Rent determined for the next Lease Year with respect to
which the Rent Escalation Condition is satisfied shall be determined as if the
Rent Escalation Condition had been satisfied for all previous Lease Years and as
to all Leased Properties and the Fixed Rent had been escalated pursuant to, and
in accordance with, the terms of this Section3.1.2for all prior Lease
Years and as to all Leased Properties.  By way of illustration only,
if:  (I) the Rent Escalation Condition has failed for both the Lease
Year commencing as of October 1, 2009 and the Lease Year commencing as of
October 1, 2010; but (II) the Rent Escalation Condition is satisfied for
the Lease Year commencing as of October 1, 2011, the Fixed Rent for the
Lease Year commencing as of October 1, 2011 shall be determined, and the
Fixed Rent for all other Lease Years shall be adjusted in mid-Lease Year as of
October 1, 2011, as if the Rent Escalation Condition for the two preceding
Lease Years commencing October 1 (and all other prior Lease Years
commencing on a different calendar date) had been satisfied as to all Leased
Properties such that, for example, the Fixed Rent for the Lease Year commencing
as of October 1, 2011 shall include, and be determined on the basis of, the
escalations for all prior Lease Years which would have occurred pursuant to this
Section3.1.2had the Rent Escalation
Condition for all prior Lease Years and as to all Leased Properties been
satisfied.




3.1.3  Fixed
Rent Determinations.  Promptly after the publication of the
Cost of Living Index for the month that is one (1) month prior to the month
containing the last day of any Lease Year (e.g., the month of August, in the
case of a Lease Year ending on September 30), Landlord shall calculate the CPI
Increase and the Fixed Rent applicable to each Leased Property that has its
applicable Lease Year ending on the aforesaid last day for the next Lease Year
and submit such determination of Fixed Rent applicable to such Leased
Property(ies) for Tenant’s approval, which determination shall be deemed
approved, absent written notice from Tenant setting forth with reasonable
specificity and detail any manifest errors in such determination by Landlord
within thirty (30) days after its submission to Tenant.  In the event
Landlord and Tenant are unable to determine Fixed Rent applicable to such Leased
Property(ies) for any Lease Year on or prior to the commencement of such Lease
Year, Tenant shall pay Fixed Rent applicable to such Leased Property(ies) for
such Lease Year assuming an increase over the Prior Period Fixed Rent applicable
to such Lease Year and such Leased Property(ies) calculated




7


pursuant
to the applicable Minimum Rent Escalation Amount for each such Leased Property
until the correct Fixed Rent applicable to such Leased Property(ies) is
determined for such Lease Year.  If the Fixed Rent applicable to such
Leased Property(ies) ultimately determined for any such Lease Year exceeds the
assumed amount, Tenant shall pay any deficiency, together with interest thereon
at the Prime Rate, with the first installment of Fixed Rent owing after such
determination is made.  If the Fixed Rent applicable to such Leased
Property(ies) ultimately determined for any such Lease Year is less than the
assumed amount, any excess amounts paid by Tenant on account of the Fixed Rent
for such Lease Year shall be credited against the next installment(s) of Fixed
Rent due and owing hereunder.  At either party’s written request,
following the determination of Fixed Rent for a particular Lease Year and
applicable to a particular Leased Property(ies), both parties shall, not later
than five (5) Business Days after the non-requesting party’s receipt of such
request, execute and enter into a written instrument memorializing the amount of
the Fixed Rent for the Premises and the respective amounts thereof that are
applicable to each Leased Property.




3.2  Additional
Rent.  In addition to Fixed Rent, Tenant shall pay and
discharge as and when due and payable the following (collectively “Additional Rent”) (any costs
or expenses paid or incurred by Landlord on behalf of Tenant that constitute
Additional Rent shall be reimbursed by Tenant to Landlord within fifteen (15)
days after the presentation by Landlord to Tenant of invoices
therefor):




3.2.1  Impositions.  Subject
to the escrow provisions contained in Section3.3below and to the
provisions of Section13 below, Tenant shall pay
all Impositions when due, and regardless of the period to which they relate, and
in any event 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.  Tenant shall, promptly upon request, furnish to Landlord
copies of official receipts or other satisfactory evidence of 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), Tenant may exercise the option to pay same
(and any accrued interest on the unpaid balance of such Imposition) in
installments (provided no such installments shall extend beyond the Term) and,
in such event, shall pay such installments during the Term before any fine,
penalty, premium, further interest or cost may be added thereto.




3.2.2  Utility
Charges.  Tenant shall pay any and all charges for electricity,
power, gas, oil, water, sanitary and storm sewer, refuse collection, medical
waste disposal and other utilities used or consumed in connection with each
Leased Property during the Term.  In the event Landlord is billed
directly by any utility company for any utilities or services supplied to Tenant
during the Term, Landlord shall send Tenant the bill and, provided Tenant
receives the bill on a timely basis from Landlord, Tenant shall pay the same
before it is due.  Landlord shall have no obligation or liability with
respect to any interruption or failure in the supply of any such
utilities.




3.2.3  Insurance
Premiums.  Tenant shall pay all premiums for the insurance
coverage required to be maintained pursuant to Section14hereof.




3.2.4  Other
Charges.  Tenant shall pay all other amounts, liabilities,
obligations, costs and expenses paid or incurred with respect to the ownership,
repair, replacement, restoration, maintenance and operation of the
Premises.




8


3.2.5  Late
Payment of Rent.  If any installment of Fixed Rent or
Additional Rent (but only as to those Additional Rent payments that are payable
directly to Landlord or Landlord’s agent or assignee) shall not be paid on its
due date, Tenant shall pay to Landlord for such overdue installment, on demand,
(i) interest computed at the Overdue Rate on the amount of such installment,
from the due date of such installment to the date of payment thereof, plus (ii)
an administrative fee of One Thousand Dollars ($1,000.00).  In the
event of any failure by Tenant to pay any Additional Rent when due, Tenant shall
in addition promptly pay and discharge, as Additional Rent, every fine, penalty,
interest and cost that may be added for non-payment or late payment of such
items.




3.2.6  Consent
Expenses.  Tenant shall pay, as Additional Rent, on behalf of
Landlord, or reimburse Landlord for, any and all actual, reasonable
out-of-pocket costs or expenses paid or incurred by Landlord, including, without
limitation, reasonable attorneys’ fees, in connection with any of the following
activities undertaken by or on behalf of Landlord under this
Lease:  (i) any inspections performed by Landlord or any of Landlord’s
Representatives pursuant to any inspection rights granted hereunder relative to
any restoration work performed on account of any Casualty or Condemnation; (ii)
any inspections performed by Landlord or any of Landlord’s Representatives of
one or more Leased Properties pursuant to any inspection rights granted
hereunder (other than the inspection rights referenced in subsection (i) above)
(provided, however, that Tenant’s payment/reimbursement obligation pursuant to
this subsection (ii) shall be limited to Two Thousand Dollars ($2,000.00) in the
aggregate each calendar year during the Term); (iii) the review, execution,
negotiation or delivery of any consent, waiver, estoppel, subordination
agreement or approval requested of Landlord by Tenant hereunder, including,
without limitation, any request for consent to Alterations, any so-called
“landlord’s waiver”, or the negotiation or approval of the terms of, or any
instruments associated with, any AR Financing; (iv) the review by Landlord or
Landlord’s Representatives of any Plans and Specifications or Restoration Plans
and Specifications; (v) the review by Landlord or Landlord’s Representatives of
any request by Tenant for any other approval or consent hereunder, or any waiver
of any obligation of Tenant hereunder; (vi) any assistance provided by Landlord
in connection with a permitted contest pursuant to Section13; and (viii) any other
negotiation, request or other activity comparable to any of the foregoing
(collectively, such expenses, “Consent
Expenses”).  Tenant shall reimburse Landlord for (or pay on
behalf of Landlord) any Consent Expenses within twenty (20) days after the
presentation by Landlord to Tenant of invoices therefor.




3.2.7  Further
Obligations.  Without limitation of Tenant’s other obligations
under this Section3.2, in the case of the
Barrington Court Property, the Atherton Court Property, the Somer Park Property,
or the Golden Pond Property, Tenant shall pay and discharge, or cause to be paid
and discharged, as and when due and payable any Impositions, utility charges of
the nature referenced in Section3.2.2 above, insurance
premiums and/or other amounts, liabilities, obligations, costs and expenses
relating to such Leased Property, in each of the foregoing cases to the extent
the same relate to periods prior to the date such Leased Property became part of
the Premises.




9


3.3  Escrow
Deposits.  As of the Effective Date, Tenant shall pay such
additional amounts as are necessary pursuant to this Section3.3 so that Tenant is in
compliance with this Section3.3 as of the Effective
Date.




3.3.1  Escrow.  Tenant
shall, on the fifth (5th) day of
each calendar month during the Term applicable to each Leased Property (or the
next Business Day, if such 5th day is
not a Business Day), pay to and deposit with Landlord a sum equal to (i) one
twelfth (1/12th) of the Impositions to be levied, charged, filed, assessed or
imposed upon or against such Leased Property during the twelve (12) months from
and after the Effective Date (or any subsequent twelve (12) month period), plus
(ii) a sum equal to the product of (x) one-twelfth (1/12th) of the premiums for
the insurance policies required pursuant to Section14hereof that are payable
during such twelve (12) month period times (y) a fraction, the numerator of
which equals the Fixed Rent applicable to such Leased Property and the
denominator of which equals the aggregate Fixed Rent for the
Premises.  If the amount of the aforesaid Impositions to be levied,
charged, filed, assessed or imposed, or the aforesaid insurance premiums to be
paid, during such twelve (12) month period (or any subsequent twelve (12) month
period hereunder) cannot be determined as of the Effective Date (or the
commencement of any subsequent twelve (12) month period), such amount for the
purpose of computing the deposit to be made by Tenant hereunder shall be
estimated by Landlord with an appropriate adjustment to be promptly made between
Landlord and Tenant as soon as such amount becomes
determinable.  Landlord may, at its option, from time to time require
that any particular deposit be greater than one-twelfth (1/12th) of the
estimated Imposition and/or insurance premium amount payable during any twelve
(12) month period, if such additional deposit is required to provide a
sufficient fund from which to make payment of all Impositions on or before the
next due date of any installment thereof, or to make payment of any required
insurance premiums not later than the due date thereof.  Tenant shall
deliver to Landlord copies of all notices, demands, claims, bills and receipts
in relation to the Impositions and insurance premiums promptly upon receipt
thereof by Tenant.  The actual or estimated amounts on account of
Impositions and insurance premiums shall be adjusted annually as to each Leased
Property.




3.3.2  Landlord’s
Deposit.  The escrow deposits made by Tenant pursuant to this
Section3.3 shall be deposited by
Landlord in an account (the “Escrow Account”) of Landlord
or with any Facility Mortgagee, in the sole discretion of Landlord, and may be
commingled with other assets of Landlord or such Facility
Mortgagee.  Landlord shall not be liable to Tenant or any other Person
for any consequent loss of principal or interest on funds held in the Escrow
Account.  Furthermore, neither Landlord nor any Facility Mortgagee
shall bear responsibility for the financial condition of, nor any act or
omission by, any Lending Institution at which the Escrow Account is
located.  The interest from deposits into the Escrow Account shall be
retained in the Escrow Account to be applied in accordance with the terms of
this Section3.3.




3.3.3  Use of
Deposits.  Tenant shall pay any and all Impositions and
insurance premiums when due and regardless of whether or not the funds then held
in the Escrow Account are sufficient to reimburse Tenant
therefor.  The sums deposited by Tenant under this Section3.3 shall be held by
Landlord or any Facility Mortgagee, and, provided that no default or Event of
Default by Tenant exists hereunder, shall be used to reimburse Tenant for any
Impositions and/or insurance premiums, as applicable, paid by Tenant, upon
delivery by Tenant to Landlord or such Facility Mortgagee, as applicable, of
documentation evidencing the payment




10


of such
Impositions and/or insurance premiums, which reimbursement shall be provided
within five (5) Business Days after the presentation of such evidence (if
Landlord is holding the Escrow Account) or within five (5) Business Days after
Landlord’s receipt of the appropriate reimbursement funds from the Facility
Mortgagee that is holding the Escrow Account (if a Facility Mortgagee is holding
the Escrow Account).  If Tenant fails to pay any Impositions or
insurance premiums when due and owing hereunder to the applicable taxing
authority or insurance carrier, Landlord or any Facility Mortgagee may, but
shall not be obligated to, pay such Impositions or insurance premiums from any
funds in the Escrow Account.  Upon the occurrence of any Event of
Default, Landlord or any Facility Mortgagee may apply any funds held in the
Escrow Account to cure such Event of Default or on account any damages suffered
or incurred by Landlord in connection therewith.  Relative to the
foregoing, provided that (i) no default or Event of Default by Tenant exists
hereunder, (ii) Tenant provides to Landlord, not less than twenty (20) days in
advance of the applicable due date, (x) clear and detailed instructions relative
to the payee, place, amount and required manner of payment of the Impositions
and/or insurance premiums referenced above and (y) originals or copies, as
necessary, of the applicable invoices or bills and (iii) there are sufficient
funds in the Escrow Account to pay the applicable invoices or bills, Landlord
agrees to make, or if a Facility Mortgagee is holding the Escrow Account
Landlord agrees to cooperate reasonably with Tenant to attempt to arrange for
the Facility Mortgagee to make, direct payment of such invoices and bills from
the Escrow Account, rather than require Tenant first to make payment thereof and
then seek reimbursement.




3.3.4  Deficits.  Landlord
shall have no liability whatsoever to Tenant if any deposits held by Landlord
under this Section3.3 are not sufficient to
reimburse Tenant for any Imposition or insurance premium paid by
Tenant.  Landlord may change its estimate of any Imposition or
insurance premium for any period on the basis of a change in an assessment or
tax rate or of a prior miscalculation or for any other good faith
reason.  In such event, Tenant shall deposit with Landlord the amount
in excess of the sums previously deposited with Landlord for the applicable
period within ten (10) days after Landlord’s request therefor.




3.3.5  Transfers;
Refund.  In connection with any assignment of the Landlord’s
interest under this Lease, the assigning Landlord or any predecessor shall have
the right, and the obligation, to transfer all amounts deposited pursuant to the
provisions of this Section3.3 and still in its
possession to such assignee and, upon such transfer, the assigning Landlord or
any such predecessor, as the case may be, transferring the deposits shall
thereupon be completely released from all liability with respect to such
deposits so transferred, and Tenant shall look solely to said assignee in
reference thereto.  As of the applicable Expiration Date for each
Leased Property, any sums held by Landlord under this Section3.3allocable to such Leased
Propertyshall be
returned to Tenant, only as and when the conditions of Section 3.4.3 for the
return of the Security Deposit relative to such Leased Property have been met
and provided that any and all Impositions or insurance premiums due and owing
hereunder with respect to such Leased Property have been paid in
full.




3.4  Security
Deposit.




3.4.1  Cash
Security Deposit; Application.  Unless Landlord has made the LC
Election, Tenant shall pay (or shall have paid) to Landlord upon the Effective
Date an amount equal to $10,501,585.52 (subject to increase as described in
Section3.4.3 below and subject to
Section3.4.4 hereof, the “Security Amount”) as security
(together with any Coverage Based Security Deposit under Section8.2.5, the “Security Deposit”) for the
full and faithful




11


performance
by Tenant of each and every term, provision, covenant and condition of this
Lease.  Upon the occurrence of an Event of Default, Landlord may, but
shall not be required to, use, apply or retain the whole or any part of the
Security Deposit (whether by drawing upon any Letter of Credit or applying any
cash Security Deposit held by it) for the payment of any Rent in default or for
any other sum that Landlord may expend or be required to expend by reason of
Tenant’s default, including any damages or deficiency in the reletting of the
Premises, whether such damages or deficiency accrue before or after summary
proceedings or other re-entry by Landlord.  Tenant shall not be
entitled to any interest on the Security Deposit and Landlord may commingle the
Security Deposit with its other funds.  In case of a sale or transfer
of the Premises by Landlord, or any cessation of Landlord’s interest therein,
whether in whole or in part, Landlord may pay over or refund to Tenant any
unapplied part of the Security Deposit (or, in the case of any such partial
transfer or cessation, such portion as Landlord allocates to such part of the
Premises, in its reasonable discretion) or transfer any Letter of Credit if the
LC Election has been made, with any fees incident to such transfer being paid by
Tenant (which transfer, in the case of any such partial transfer or cessation,
shall require Tenant to cause any Letter of Credit to be reissued as separate
Letters of Credit satisfying the requirements of Section3.4.2 as to the remaining
Leased Properties) to the successor owner of the Premises, and from and after
such payment or refund, Landlord shall be relieved of all liability with respect
thereto.  The provisions of the preceding sentence shall apply to
every subsequent sale or transfer of the Premises or any part
thereof.




3.4.2  LC
Election.  At any time, and from time to time, Landlord or
Tenant may elect (such election, a “LC Election”), in its sole
discretion and by written notice to the other party, to cause Tenant to post the
Security Deposit in the form of an irrevocable, standby Letter of Credit with a
face value of the full Security Amount (the “Letter of
Credit”).  Within ten (10) days after notice of an LC Election,
Tenant shall deliver to Landlord a Letter of Credit satisfying the requirements
of this Section3.4.2in the place and stead
of the cash Security Deposit, whereupon Landlord shall return any unapplied
portion of a cash Security Deposit then held by Landlord.  The Letter
of Credit shall: (i) be in form and substance acceptable to Landlord in its
reasonable discretion; (ii) name Landlord as its sole beneficiary; (iii)
expressly allow Landlord to draw upon it at any time, or from time to time, in
whole or in part, by delivering to the issuer, at an office of the issuer
located in New York, New York, Louisville, Kentucky or Chicago, Illinois, a
written notice that Landlord is entitled to draw thereon pursuant to the terms
of this Lease; (iv) be issued by an FDIC-insured Lending Institution that is
reasonably satisfactory to Landlord, but shall in all events have a credit
rating of “AA” (or the equivalent) or higher from one of the Rating Agencies;
and (v) be expressly unconditional, irrevocable and fully
transferable.  The Letter of Credit (and any renewals or replacements
thereof) shall be for a term of not less than one (1) year.  Tenant
agrees that it shall from time to time, as necessary, renew or replace the
original and any subsequent Letter of Credit not less than thirty (30) days
prior to its stated expiration date so that it will remain in full force and
effect until the later of sixty (60) days after the last day of any Term under
this Lease or the date on which Tenant’s obligations under this Lease are
satisfied in full.  If Tenant fails to furnish such renewal or
replacement at least 30 days prior to the stated expiration date of the Letter
of Credit, Tenant may immediately draw upon such Letter of Credit.  If
the credit ratings test set forth in subsection (iv) above shall at any time
cease to be satisfied as to the issuer of the Letter of Credit, Landlord may,
upon five (5) days written notice to Tenant, draw upon such Letter of
Credit.  Without limitation of Landlord’s right thereafter to make a
LC Election, Landlord shall hold the proceeds of any such draw upon the Letter
of Credit as a portion of the Security Deposit




12


pursuant
to the terms of this Lease.  Any renewal of or replacement for the
original or any subsequent Letter of Credit shall be in an amount not less than
the Security Amount and shall otherwise meet the requirements for the original
Letter of Credit as set forth above.




3.4.3  Increase;
Restoration of Security Deposit.  Tenant, within ten (10) days
after the occurrence of any increase in the Fixed Rent due hereunder or within
ten (10) days after an increase in the required Security Amount as provided in
Section3.4.4 hereof, as
applicable, shall deposit with Landlord cash in, or increase the face amount of
the Letter of Credit by, the amount necessary to ensure that the Security
Deposit hereunder (exclusive of any Coverage Based Security Deposit) then equals
the Required Number of Months of annual Fixed Rent based upon the increased
Fixed Rent due hereunder or the required Security Amount as provided in Section3.4.4 hereof, as
applicable.  In the event the Security Deposit (or any portion
thereof) is applied (or drawn upon from time to time in full or partial amounts
in the case of the Letter of Credit and any renewals or replacements thereof) by
Landlord on account of any Event(s) of Default by Tenant hereunder or as
otherwise expressly provided in this Section3.4, Tenant shall
replenish said Security Deposit in full, within ten (10) days after demand
therefor, by paying to Landlord the amount so applied or, in the case of the
Letter of Credit, restoring the Letter(s) of Credit to its (their) full
amount.  Tenant’s failure to timely increase the Security Deposit, or
to timely replenish and restore the Security Deposit, after demand as aforesaid
shall be an Event of Default.  If: (i) no Event of Default has
occurred and is continuing hereunder and (ii) Tenant has fully performed
and satisfied all of its obligations under the Lease (including, without
limitation and as applicable, its obligations relative to any Operational
Transfer(s)), then the Security Deposit, or the remaining unapplied portion
thereof, shall be paid or returned to Tenant within sixty (60) days after the
expiration or termination of this Lease and the surrender of all of the Premises
to Landlord in the condition required hereunder; provided, however, that
Landlord may retain an amount, as it shall reasonably determine, to secure the
payment of any Rent, the amount of which Landlord is then unable to determine
finally (and Landlord shall return any such retained amount to Tenant promptly
following the final determination of such Rent amount and the full payment to
Landlord of such Rent).  If this Lease is terminated or expires with
respect to a Leased Property, but not all of the Premises, and: (x) no Event of
Default has occurred and is continuing hereunder and (y) Tenant has fully
performed and satisfied all of its obligations under the Lease (including,
without limitation and as applicable, its obligations relative to any
Operational Transfer(s)) with respect to such terminated or expired Leased
Property, then, subject to and without limitation of Section3.4.4 hereof, the
unapplied portion of the Security Deposit (exclusive of any Coverage Based
Security Deposit) that exceeds the required Security Amount (after such giving
effect to such expiration or termination), if any, shall be paid or returned to
Tenant within sixty (60) days after the expiration or termination of this Lease
as it applies to such Leased Property and the surrender of such Leased Property
to Landlord in the condition required hereunder; provided, however, that
Landlord may retain an amount, as it shall reasonably determine, to secure the
payment of any Rent, the amount of which Landlord is then unable to determine
finally (and Landlord shall return any such retained amount to Tenant promptly
following the final determination of such Rent amount and the full payment to
Landlord of such Rent).  The Security Deposit shall not be deemed an
advance payment of Rent or a measure of Landlord’s damages for any default
hereunder by Tenant, nor shall it be a bar or defense to any action that
Landlord may at any time commence against Tenant.




13


3.4.4  Security
Amount.  Notwithstanding anything to the contrary contained in
this Section3.4 and notwithstanding
any provisions of this Section3.4 describing or defining
the Security Amount in terms of a Required Number of Months or referencing the
increasing of the Security Amount due to increases in the amount of Fixed Rent
and notwithstanding any provisions of Section3.4.3 hereof providing for
a partial return of the Security Deposit upon the termination of this Lease as
it applies to a part or all of the Premises, unless and until the closings occur
under all five (5) of the Purchase Agreements (as defined in Section17.10 hereof) in
accordance with the terms of the Purchase Agreements, the Security Amount
required hereunder shall initially equal $10,501,585.52, with such required
amount to increase by two percent (2%) on each October 1 during the Term
(e.g. $10,501,585.52 as of the Effective Date, $10,711,617.23 as of
October 1, 2008, $10,925,849.57 as of October 1, 2009,
etc.).  Nothing contained in this Section3.4.4 shall limit Tenant’s
obligations relative to the making of any required Coverage Based Security
Deposit.




3.5  Net
Lease.  The Rent shall be paid absolutely net to Landlord, free
of all Impositions, utility charges, operating expenses, insurance premiums or
any other charges or expenses in connection with the Premises, without any
rights of deduction, set-off or abatement, so that this Lease shall yield to
Landlord the full amount of the installments of Fixed Rent, throughout the Term.
This Lease is intended to be and shall be construed as an absolutely net lease
pursuant to which Landlord shall not, under any circumstances or conditions,
whether presently existing or hereafter arising, and whether foreseen or
unforeseen by the parties, be required to make any payment or expenditure of any
kind whatsoever or be under any other obligation or liability whatsoever, except
as expressly set forth herein.




3.6  Emeritus
Guaranty.  On the Effective
Date, Tenant shall cause to be delivered to Landlord the Emeritus Guaranty made
by the Emeritus Guarantor guaranteeing all of Tenant’s obligations under this
Lease and assuming and replacing the Previous Guarantor’s obligations under the
Previous Guaranties and Landlord shall cause to be delivered to Previous
Guarantor a release of the Previous Guaranties made by Landlord releasing all of
Previous Guarantor’s obligations under the Previous Guaranties, whether arising
or accruing prior to, or from and after, the Effective Date (but such release
shall not impair the liability of the Emeritus Guarantor as aforesaid on account
of its assumption of the Previous Guarantor’s obligations under the Previous
Guaranties).




4.  Impositions.




4.1  Payment
of Impositions.  Subject to Section13 relating to permitted
contests, Tenant shall pay all Impositions payable during the Term as set forth
in Section3.2.1 and for any tax
period occurring during the Term, irrespective of whether the Impositions for
such tax period are due and payable after the Term.  Tenant’s
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof.  If any refund shall be due from any taxing authority in
respect of any Imposition paid by Tenant during the Term, the same shall be paid
over to or retained by Tenant but only if no Event of Default shall have
occurred hereunder and be continuing.  If an Event of Default shall
exist hereunder, such refund shall be paid over to and retained by
Landlord.  If Tenant nevertheless receives such refund, Tenant shall,
upon receipt, immediately pay such refund over to Landlord in
full.  Any such funds retained by Landlord due to an Event of Default
shall be applied to amounts due and owing to Landlord under this Lease, as
Landlord shall determine in its sole discretion, and, if funds remain after such
application, such funds shall




14


continue
to be held by Landlord for application on account of additional amounts due and
owing to Landlord under this Lease as the same arise.  In the event
any Governmental Authority classifies any property covered by this Lease as
personal property, Tenant shall file any personal property tax returns that are
required with respect thereto.  Subject to the terms of Section13, Tenant may, upon
notice to Landlord, at Tenant’s option and at Tenant’s sole cost and expense,
protest, appeal, or institute tax contests to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant’s expense as aforesaid,
shall cooperate with Tenant in such protest, appeal, or other action to the
extent required by law and reasonably requested by Tenant.




4.2  Notice of
Impositions.  Landlord or Landlord’s designee shall use
reasonable efforts to give prompt notice to Tenant of all Impositions payable by
Tenant hereunder of which Landlord at any time has knowledge (which notice shall
be deemed properly given if given pursuant to Section33 hereof or by an e-mail
notification to Tenant at jcalhoun@emeritus.com and swalling@emeritus.com),
provided, however, that any failure by Landlord to provide such notice to Tenant
shall in no way relieve Tenant of its obligation to timely pay the
Impositions.  Tenant shall deliver to Landlord, not more than five (5)
days prior to the due date of each Imposition, copies of the invoice for such
Imposition, the check delivered for payment thereof and an original receipt
evidencing such payment or other proof of payment satisfactory to
Landlord.




4.3  Adjustment
of Impositions.  Any Imposition imposed in respect of the
tax-fiscal period during which the Term terminates or expires shall be adjusted
and prorated between Landlord and Tenant, whether or not such Imposition is
imposed before or after such termination or expiration, and Tenant’s obligation
to pay its prorated share thereof shall survive such termination or
expiration.




5.  No Affect
or Impairment, etc.  The respective obligations of Landlord and
Tenant shall not be affected or impaired by reason of (i) any damage to, or
destruction of, any Leased Property or any portion thereof, from whatever cause,
or any Condemnation of any Leased Property or any portion thereof (except as
otherwise expressly and specifically provided in Section15 or Section16), (ii) the interruption
or discontinuation of any service or utility servicing any Leased Property,
(iii) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use
of any Leased Property, or any portion thereof, due to the interference with
such use by any Person or eviction by paramount title, (iv) any claim that
Tenant has or might have against Landlord on account of any breach of warranty
or default by Landlord under this Lease or any other agreement by which Landlord
is bound, (v) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord, (iv) the
revocation, suspension or non-renewal of any license, permit, approval or other
Authorization, (vii) any withholding, non-payment, reduction or other adverse
change respecting any Facility Provider Agreement or other Third Party Payor
Program, (viii) any admissions hold under any Third Party Payor Program, or (ix)
for any other cause whether similar or dissimilar to any of the foregoing other
than a discharge of Tenant from any such obligations as a matter of
law.  Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(x) to modify, surrender or terminate this Lease or quit or surrender any Leased
Property or any portion thereof, or (y) that would entitle Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Tenant hereunder.  The obligations of Landlord and Tenant hereunder
shall be separate and independent




15


covenants
and agreements and the Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events unless and to the extent the obligations to
pay the same shall be terminated by termination of this Lease as to any Leased
Property other than by reason of an Event of Default.




6.  Premises;
Tenant’s Personal Property.




6.1  Ownership
of the Premises.  Tenant acknowledges that the Premises are the
property of Landlord and that Tenant has only the right to the possession and
use of the Premises upon and subject to the terms and conditions of this
Lease.  Notwithstanding anything to the contrary contained in this
Lease, in the case of any easement or other rights that are appurtenant to any
Leased Property, Tenant agrees that Landlord does not make any representation or
warranty relative to Landlord’s title thereto or whether such appurtenances are
encumbered, and Landlord shall not be obligated to discharge any liens or
encumbrances with respect to, or otherwise to defend, Landlord’s right, title
and interest, if any, in any such appurtenances.  Tenant agrees that
such appurtenances shall constitute Permitted Encumbrances, as to which Tenant
shall have the obligations set forth in Section8.2.6 and Section23.




6.2  Tenant’s
Personal Property.  Tenant shall provide and maintain during
the entire Term all such Tenant’s Personal Property and Landlord’s Personal
Property as shall be necessary to maintain the Authorizations in effect and to
operate each Facility in compliance with all licensure and certification
requirements, in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use of each Leased Property.  Except as
otherwise agreed in writing by Landlord in its sole discretion, upon the
expiration or earlier termination of this Lease as it applies to any Leased
Property, (i) Tenant’s Personal Property that is to be transferred to Landlord
pursuant to Section35 below shall include all
of the foregoing required Tenant’s Personal Property, and any other Tenant’s
Personal Property (excluding certain specific items of Tenant’s Personal
Property described in Section35 below), in high quality
condition and (ii) Landlord’s Personal Property shall be returned to Landlord,
and left at or in such Leased Property, in high quality condition.




6.3  Landlord’s
Personal Property.  Tenant may, from time to time, in Tenant’s
reasonable discretion, without notice to or approval of Landlord, sell or
dispose of any item of Landlord’s Personal Property; provided, however, that,
unless such item is functionally obsolete, Tenant shall promptly replace such
item with an item of similar quality, use and functionality, and any such
replacement item (other than items that, by the terms of Section35 below, are to be
retained by Tenant upon the expiration or termination of this Lease) shall, for
purposes of this Lease, continue to be treated as part of “Landlord’s Personal
Property.”  Tenant shall, promptly upon Landlord’s request from time
to time, provide such information as Landlord may reasonably request relative to
any sales, dispositions or replacements of Landlord’s Personal Property pursuant
to this Section6.3.




7.  Condition
and Use of Each Leased Property.




7.1  Condition
of Each Leased Property.  Tenant acknowledges receipt and
delivery of possession of each Leased Property.  Tenant is leasing
each Leased Property “AS
IS” “WHERE IS”
and Tenant waives any claim or action against Landlord in respect of the
condition of each Leased Property.  LANDLORD MAKES NO WARRANTY
OR




16


REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF ANY LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE
OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, OR
OTHERWISE, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
TENANT.  TENANT ACKNOWLEDGES THAT EACH LEASED PROPERTY HAS BEEN
INSPECTED BY TENANT AND THAT TENANT HAS FOUND EACH LEASED PROPERTY TO BE IN GOOD
ORDER AND REPAIR AND SATISFACTORY FOR ITS PURPOSES HEREUNDER.




7.2  Use of
Each Leased Property.




7.2.1  Primary
Intended Use.  During the entire Term, Tenant shall use each
Facility (including, without limitation, the Leased Improvements thereon) solely
for its Primary Intended Use (and shall not change, or consent to or acquiesce
in the change of, such Primary Intended Use) and shall operate each Facility in
a manner consistent with a high quality healthcare facility and, if any Third
Party Payor Programs apply to such Facility, sound reimbursement principles
under any such Third Party Payor Programs.  No use shall be made or
permitted to be made of any Leased Property, and no acts shall be done, that
would cause the cancellation of any insurance policy covering such Leased
Property or any part thereof, nor shall Tenant sell or otherwise provide to
occupants or patients therein, or permit to be kept, used or sold in or about
such Leased Property, any article that may be prohibited by any Legal
Requirements or by the standard form of fire insurance policies, or any other
insurance policies required to be carried hereunder, or fire underwriters’
regulations.




7.2.2  Authorizations
Appurtenant.  The Authorizations for any Facility shall, to the
maximum extent permitted by law, relate and apply exclusively to such Facility,
and Tenant acknowledges and agrees that, subject to all applicable Legal
Requirements, the Authorizations are appurtenant to the Facilities to which they
apply, both during and following the termination or expiration of the
Term.  In jurisdictions where any Authorization(s) is/are issued to a
Tenant or its subtenant, as the Facility operator, Tenant agrees that (i)
such  Authorizations shall nevertheless remain the property of
Landlord and be held by Tenant or such subtenant, in trust for the benefit of
Landlord pursuant to a revocable, temporary license that may be revoked by
Landlord at any time, and (ii) in connection with an Operational Transfer or as
otherwise required by Landlord, Tenant shall cooperate with Landlord, in
accordance with Section37.1hereof, to turn over all
of Tenant’s rights in connection with such Authorizations to Landlord or
Successor Operator, as applicable.  This Section7.2.2 shall survive the
expiration or earlier termination of this Lease.




7.3  Authorization
Collateral.  To the fullest extent permitted by applicable law,
Tenant hereby grants to Landlord a first priority security interest in, and lien
upon, all Authorizations issued to, leased or licensed to, or held by, Tenant,
including, but not limited to, Tenant’s interest in and rights under all
Facility Provider Agreements, with respect to the Facilities (collectively, the
“Authorization
Collateral”) to secure the performance of all of Tenant’s obligations
under this Lease, including, but not limited to, its obligation to engage in,
assist with and facilitate any Operational Transfer.  Tenant
represents and warrants to Landlord that attached hereto on Schedule7.3 is a detailed list and
description of all of the Authorization Collateral.  Notwithstanding
anything contained herein to the contrary, Tenant shall not (under any
circumstances) grant any lien upon, security interest in and to or otherwise
pledge,




17


encumber,
hypothecate, transfer or assign, in whole or in part, the Authorization
Collateral to any Person, irrespective of the priority of such security
interest, pledge or hypothecation.  The security interest and lien
granted by this Section7.3shall be in addition to
any lien of Landlord that may now or at any time hereafter be provided by
law.  The provisions of Section21.1.1.1 below shall be
applicable to the security interest and lien referenced in this Section7.3.




7.4  Granting
of Easements, etc.  Landlord may, from time to time, with
respect to any Leased Property: (i) grant easements, covenants and restrictions,
and other rights in the nature of easements, covenants and restrictions, (ii)
release existing easements, covenants and restrictions, or other rights in the
nature of easements, covenants or restrictions, that are for the benefit of such
Leased Property, (iii) dedicate or transfer unimproved portions of such Leased
Property for road, highway or other public purposes, (iv) execute petitions to
have such Leased Property annexed to any municipal corporation or utility
district, (v) execute amendments to any easements, covenants and restrictions
affecting such Leased Property and (vi) execute and deliver to any Person any
instrument appropriate to confirm or effect such grants, releases, dedications
and transfers (to the extent of its interests in such Leased Property) with
Tenant’s reasonable consent provided that it shall be unreasonable for Tenant to
withhold its consent if such easement or other instrument or action contemplated
by this Section7.4 does not unreasonably
interfere with the conduct of the business of Tenant on such Leased
Property.  If any easement or other instrument or action contemplated
by this Section7.4 unreasonably
interferes with the conduct of business by the applicable Tenant(s) at a Leased
Property, Landlord shall obtain Tenant’s prior written consent to such proposed
easement, instrument or action, which consent may be granted or withheld by
Tenant in its sole discretion (and which consent shall be deemed given if not
expressly denied by Tenant, in writing, within five (5) Business Days of
Tenant’s receipt of such request).




8.  Negative
and Affirmative Covenants of Tenant.




8.1  Negative
Covenants.Tenant covenants
and agrees with Landlord that:




8.1.1  Issuance
of Equity Interests.  Subject to the applicable provisions of
Section24 below, no Tenant shall
issue or allow to be created any stocks, shares, partnership or membership
interests or other ownership interests in any Tenant, other than the stocks,
shares, partnership or membership interests and other ownership interests that
are outstanding on the date hereof or any security or other instrument that is
outstanding on the date hereof and by its terms is convertible into or
exchangeable for stock, shares, partnership or membership interests or other
ownership interests in any Tenant.




8.1.2  Change in
Business or Organizational Status.  No Tenant shall make any
material change in the scope or nature of its business objectives or operations,
or undertake or participate in activities other than in continuance of its
present business.  No Tenant shall amend, modify or alter its Tenant
Org Docs in a manner that would make any material change in its purpose clause
or the scope or nature of its business operations or would violate Section45 below or allow itself
to be dissolved, voluntarily or involuntarily.




8.1.3  Affiliate
Transactions and Payments.  No Tenant shall enter into, or be a
party to, any transaction with an Affiliate of any Tenant or any of the
partners, members or shareholders of any Tenant except in the ordinary course of
business and on terms that are fully disclosed to Landlord in advance and are no
less favorable to any Tenant or such




18


Affiliate
than would be obtained in a comparable arm’s-length transaction with an
unrelated third party; provided, however, Tenant may enter into management
agreements with respect to each Facility with any Affiliate of any Tenant or any
Guarantor which provide for management fees of up to five percent (5%) of the
gross revenues of such Facility and provided further that any such Affiliate, as
manager, as well as any other property manager of a Facility, shall enter into a
subordination agreement relative thereto and in favor of Landlord on the terms
set forth in Exhibit F attached
hereto.  After the occurrence of an Event of Default and until such
Event of Default is cured, no Tenant shall make any payments or distributions
(including, without limitation, salaries, bonuses, fees, principal, interest,
dividends, liquidating distributions, management fees, cash flow distributions
or lease payments) to any Guarantor or any Affiliate of any Tenant or any
Guarantor, or any shareholder, member, partner or other equity interest holder
of any Tenant, any Guarantor or any Affiliate of any Tenant or any
Guarantor.




8.1.4  ERISA.  No
Tenant shall engage in any transaction that would cause any obligation, or
action taken or to be taken, hereunder (or the exercise by Landlord of any of
its rights under this Lease) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under
ERISA.  Each Tenant shall deliver to Landlord such certifications or
other evidence from time to time throughout the Term, as reasonably requested by
Landlord, that (i) such Tenant is not and does not maintain an “employee benefit
plan”, as defined in Section 3(3) of ERISA, that is subject to Title I of ERISA,
or a “governmental plan” within the meaning of Section 3(3) of ERISA; (ii) such
Tenant is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; and (iii) one or more of the
following circumstances is true:  (x) equity interests in such Tenant
are publicly offered securities, within the meaning of 29 C.F.R.
§2510.3-101(b)(2); (y) less than twenty-five percent (25%) of each outstanding
class of equity interests in such Tenant are held by “benefit plan investors”
within the meaning of 29 C.F.R. §2510.3-101(f)(2); or (z) such Tenant qualifies
as an “operating company” or a “real estate operating company” within the
meaning of 29 C.F.R. §2510.3-101(c) or (e).




8.1.5  Debt
Cancellation; Other Indebtedness; Guaranties.  No Tenant shall
cancel or otherwise forgive or release any claim or debt owed to any Tenant by
any Person, except for adequate consideration and in the ordinary course of such
Tenant’s business.  No Tenant shall create, incur, assume, or permit
to exist any indebtedness other than (i) trade debt incurred in the ordinary
course of Tenant’s business (which shall not include so-called “accounts
receivable” financing, which shall be governed by the terms of Section21.2); or (ii) any AR
Financing pursuant to Section21.2.  No Tenant
shall create, incur, assume, or permit to exist any guarantee of any loan or
other indebtedness except for the endorsement of negotiable instruments for
collection in the ordinary course of business.




8.1.6  Assets;
Investing.  No Tenant shall purchase or own any property other
than property necessary for, or incidental to, the operation of the applicable
Facility(ies) for its/their Primary Intended Use(s).  No Tenant shall
purchase or otherwise acquire, hold, or invest in securities (whether capital
stock or instruments evidencing indebtedness) of any Person.  No
Tenant shall make loans or advances to any Person, except for cash balances
temporarily invested in short-term or money market securities.




8.1.7  Liens;
Waste.  No Tenant shall create, incur, assume or suffer to
exist any lien, charge, encumbrance, easement or restriction on any portion of
any of the Leased Properties or the Lease Collateral other than (x) Permitted
Encumbrances (other than




19


Permitted
Encumbrances under clause (ii), (vii) or (viii) of the definition thereof that
arise on account of a breach of this Lease by Tenant) and (y) a lien upon the
Accounts Collateral in accordance with Section21.2 below.  No
Tenant shall commit or suffer to be committed any waste on any Leased Property,
nor shall any Tenant cause or permit any nuisance thereon. Tenant shall not take
or omit to take any action, the taking or omission of which may materially
impair the value or the usefulness of any Leased Property or any part thereof
for its Primary Intended Use.




8.1.8  Zoning.  No
Tenant shall initiate or consent to any zoning reclassification of any portion
of any of the Leased Properties or seek any variance under any existing zoning
ordinance or use (or permit the use of) any portion of any of the Leased
Properties in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation.




8.1.9  Contracts.  Except
as otherwise permitted in this Lease, no Tenant shall execute or modify any
material contracts or agreements with respect to any Facility except for
contracts and modifications approved by Landlord (which approval shall not be
unreasonably withheld).  Contracts made in the ordinary course of
business and that are in an amount less than $100,000.00 per Facility per annum
or are cancelable upon thirty (30) days written notice or less without penalty
shall not be considered “material” for purposes of this Section.




8.1.10  No Joint
Assessment.  No Tenant shall suffer, permit or initiate the
joint assessment of any Leased Property (i) with any other real property
constituting a tax lot separate from such Leased Property, or (ii) with any
portion of such Leased Property that may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes that may be
levied against any such personal property shall be assessed or levied or charged
to such Leased Property.




8.1.11  Use-Specific
Negative Covenants.  No Tenant shall:




8.1.11.1  Transfer
any Authorizations to any location other than the Facility operated by such
Tenant or as otherwise required by the terms of this Lease nor pledge any
Authorizations as collateral security for any loan or indebtedness except as
required by the terms of this Lease.




8.1.11.2  Rescind,
withdraw, revoke, amend, supplement, or otherwise alter the nature, tenor or
scope of (i) any Authorization for any Facility or (ii) any applicable Facility
Provider Agreement for any Facility.




8.1.11.3  Amend or
otherwise change, by consent, acquiescence or otherwise, any Facility’s (i)
licensed bed or unit capacity, and/or (ii) number or type of beds or units
(licensed, operational or otherwise), and/or (iii) licensing category or type,
and/or (iv) number of beds or units (licensed, operational or otherwise)
participating in governmental payment programs, in each case as the same exist
on the Commencement Date for each Facility, or apply for approval of any of the
foregoing amendments or changes, provided, however, that, notwithstanding the
foregoing, Tenant may, without the prior approval of Landlord, (x) remove from
service beds or units at a particular Facility so long as the number of beds or
units in service at such Facility is not less than (a) in the case of the
Facility known as




20


Summerville
at South Windsor, 85 beds, (b) in the case of the Facility known as Summerville
at Mentor, 89 beds, (c) in the case of the Facility known as Summerville at
Heritage Place, 146 beds, (d) in the case of the Original Farm Pond Property, 95
units in service for the provision of assisted living services and 119 units in
service for the provision of independent living services, and (e) in the case of
all other Facilities, a number equal to ninety five percent (95%) of the number
of licensed beds or units for such Facility set forth in Schedule17.1.13 attached hereto
and further so long as any such removal from service does not impair the
continued licensure of any such out-of-service beds or units and (y) make
amendments or changes of the nature referenced in this Section so long as Tenant
may, without the necessity of any governmental or other regulatory approval,
consent of application, revoke or otherwise unwind any such amendments or
changes and return to the pre-amendment and pre-change status quo.




8.1.11.4  Replace
or transfer all or any part of any Facility’s licensed beds or units to another
location or apply for approval of any such replacement or transfer.




8.1.11.5  Jeopardize
in any manner any Tenant’s participation in any material Third Party Payor
Program to which any Tenant is subject at any time during the Term or any
resident’s or patient’s entitlement to reimbursement from Medicaid for amounts
paid by such resident or patient to any Tenant, as applicable.




8.1.11.6  Enter
into any patient or resident care agreements with patients or residents or with
any other Persons that deviate in any material respect from the standard form
customarily used by any Tenant at the applicable Facility, provided, however,
that (i) Tenant may so materially deviate from its standard and customarily used
form of patient or resident care agreement for a particular Facility so long as
such deviation (a) does not cause such agreement not to satisfy the requirements
of any of clauses (i) through (v) in the definition of “Approved Residency
Agreement” and (b) if it was allowed and made in all of Tenant’s patient or
resident care agreements for such Facility, would not have a Material Adverse
Effect on such Facility, any Tenant or any Guarantor, and (ii) Tenant may so
materially deviate from its other standard and customarily used forms for a
particular Facility so long as such deviation, if it was allowed and made in all
of Tenant’s agreements for such Facility using such form, would not have a
Material Adverse Effect on such Facility, any Tenant or any
Guarantor.




8.1.11.7  Change
the terms of any Facility Provider Agreement, any Third Party Payor Program or
its normal billing, payment or reimbursement policies and procedures with
respect thereto (including, without limitation, the amount and timing of finance
charges, fees and write-offs); provided that a Tenant may enter into changes
that do not have a material adverse effect on (i) the business or financial
position or results of operations of such Tenant, (ii) the ability of such
Tenant to perform, or of Landlord to enforce, the terms of this Lease or (iii)
the value of the Leased Properties taken as a whole.




8.1.11.8  Assign or
transfer any of its interest in any Authorization or assign, pledge,
hypothecate, transfer or remove, or permit any other Person to assign, transfer,
pledge, hypothecate or remove, any records pertaining to any Facility,
including, without limitation, patient records and medical and clinical records,
except for (i) removal of such patient records as directed by the patients
owning such records, and (ii) transfers of the foregoing to an assignee of
Tenant’s rights under this Lease that is expressly permitted by




21


Section24.1.2 if all of the
requirements of Section24 have been complied with
or waived in writing by Landlord, or Landlord has otherwise consented in writing
to such transfer.




8.1.12  Indemnification
Claims.  Tenant shall not make any claim or claims under any
indemnity provision of that certain Operations Transfer Agreement, dated on or
about August 1, 2005, between certain of the Farm Pond Tenants and the prior
owners and operators of the respective Farm Pond Properties, that, in the
aggregate, exceed $2,825,000.00 without the prior written consent of Landlord,
not to be unreasonably withheld.




8.2  Affirmative
Covenants.  Until all of Tenant’s obligations hereunder have
been performed and discharged in full, Tenant covenants and agrees as
follows:




8.2.1  Perform
Obligations.  Tenant shall perform or cause to be performed, as
and when due, all of its obligations under this Lease, the Authorizations
(including, but not limited to, any Facility Provider Agreements), any Permitted
Encumbrances, any Insurance Requirements and any Legal Requirements. Prior to
the date hereof, Tenant has taken all necessary action to obtain all
Authorizations (including, but not limited to, the Facility Provider Agreements)
required for the operation of each of the Facilities for its Primary Intended
Use and shall take all necessary action to maintain such Authorizations
(including, but not limited to, the Facility Provider Agreements) during the
Term.




8.2.2  Proceedings
to Enjoin or Prevent Construction.  If any proceedings are
filed seeking to enjoin or otherwise prevent or declare invalid or unlawful
Tenant’s construction, occupancy, maintenance, or operation of any Facility or
any portion thereof for its Primary Intended Use, Tenant shall cause such
proceedings to be vigorously contested in good faith, and shall, without
limiting the generality of the foregoing, use all reasonable commercial efforts
to bring about a favorable and speedy disposition of all such proceedings and
any other proceedings.




8.2.3  Documents
and Information.




8.2.3.1  Furnish
Information.  Tenant shall (i) promptly supply Landlord with
such information concerning its financial condition, licensing, affairs and
property as Landlord may reasonably request from time to time hereafter and in
the format reasonably designated by Landlord and, without limitation of the
foregoing, promptly, and in any event within ten (10) days, after a request from
Landlord, Tenant shall provide to Landlord such additional information regarding
Tenant, Tenant’s financial condition or the Facilities as Landlord, or any
existing or proposed creditor of Landlord or Ventas, Inc. (including, without
limitation, any existing or proposed Facility Mortgagee), or any auditor or
underwriter of Landlord or Ventas, Inc., may require from time to time; and (ii)
promptly notify Landlord in writing of any condition or event that constitutes a
breach of any term, condition, warranty, representation, or provision of this
Lease or any other agreement between Landlord or its Affiliates and any Tenant,
any Guarantor or any of their Affiliates, and of any event or condition having a
Material Adverse Effect on any Facility, any Tenant, any Guarantor or any
Affiliate of any Tenant or any Guarantor and of any Event of
Default.  Tenant shall notify Landlord, in writing and within ten (10)
Business Days, if any Tenant is advised, in writing, formally or informally, by
its insurance carrier, reinsurance provider, accountants, actuary, any
Governmental Authority, or any Third Party Payor Program provider of any actual,
pending, threatened or contemplated increase in its reserves for expenses
relating to malpractice or




22


professional
liability claims or any material increase in the premium costs for malpractice
or professional liability insurance (as used in this sentence, an increase in
such premium costs of fifty percent (50%) or more over the previously applicable
premium costs shall be deemed “material”) (any of the foregoing, a “Reserve Event”).




8.2.3.2  Further
Assurances.  Tenant shall, upon request of Landlord from time
to time, execute, deliver, and furnish such documents as may be necessary or
appropriate to consummate fully the transactions contemplated under this
Lease.




8.2.3.3  Material
Communications.  Tenant shall transmit to Landlord, within five
(5) Business Days after receipt thereof, any Actuarial Correspondence or any
material communication affecting one or more Facilities, any Tenant, any
Guarantor, any Affiliate of any Tenant or any Guarantor, this Lease, the Legal
Requirements, the Insurance Requirements, the Facility Provider Agreements or
the Authorizations, and Tenant shall promptly respond to inquiries by Landlord
with respect to such information. Tenant shall notify Landlord in writing
promptly after any Tenant obtains knowledge of any potential, threatened or
existing litigation or proceeding against, or investigation of, any Tenant, any
Guarantor, any Affiliate of any Tenant or any Guarantor or any Facility that may
affect the right to operate one or more of the Facilities, any Facility Provider
Agreements, any of the Authorizations, the right to receive regular
reimbursement under any Third Party Payor Program, any resident’s or patient’s
entitlement to reimbursement from Medicaid for amounts paid by such resident or
patient to any Tenant, as applicable, or Landlord’s title to any Facility or any
Tenant’s interest therein.




8.2.3.4  Operator
Reports; Actuarial Reports.  Tenant shall provide Landlord with
accurate and complete copies of any and all of the census information concerning
the number of licensed beds or units, as applicable, occupied by bona fide
residents or patients, financial statements and other reports, materials and
information concerning any Tenant, the Facilities and each Tenant’s business
operations and compliance with material laws, ordinances, rules, regulations,
Authorizations and Facility Provider Agreements that are submitted by Tenant to
any Governmental Authorities or any provider pursuant to any Third Party Payor
Program (including any Health Department), for any of the Facilities (the “Operator Reports”) promptly,
and in any event, within five (5) Business Days, after the submission
thereof.  All Operator Reports shall be accurate in all material
respects as of the date of such Operator Reports.  Tenant shall
provide Landlord with any and all Actuarial Reports received by, or prepared by
or on behalf of, any Tenant within ten (10) Business Days after the receipt or
submission thereof by or to any Tenant.




8.2.4  Compliance
With Laws.  Tenant shall comply with all Insurance Requirements
and shall comply in all material respects with all Legal Requirements (and
Landlord shall have no responsibility for such compliance).  Tenant
shall keep all Authorizations and Facility Provider Agreements in full force and
effect.




8.2.5  Financial
Covenants.  The following financial covenants shall be met
throughout the Term of this Lease:




8.2.5.1  Portfolio
Coverage Ratio.  Tenant shall maintain, for each twelve (12)
month period ending at the end of a fiscal quarter of Tenant (each such 12 month
period ending as aforesaid, a “Test Period”), a Portfolio
Coverage Ratio of not less than:




23





0.90
      to 1.0
            -  For
      any Test Period ending on or prior to December 31,
    20081.05
      to 1.0
            -  For
      any Test Period ending during 20091.10
      to 1.0
            -  For
      any Test Period ending during 20101.15
      to 1.0
            -  For
      any Test Period ending during or after
2011


If Tenant
fails to maintain a Portfolio Coverage Ratio that satisfies the above-referenced
applicable requirement for a particular Test Period ending on or prior to the
expiration of the Initial Term as to any Leased Property, Tenant shall not be
considered in default of this Section8.2.5 provided and on the
condition that all of the following conditions and requirements are
met:


(i)  Tenant
has not failed to maintain a Portfolio Coverage Ratio that satisfies the
above-referenced applicable requirements with respect to four (4) other previous
Test Periods ending on or prior to the expiration of the Initial Term as to any
Leased Property.




(ii)  The
Portfolio Coverage Ratio has not, for more than two (2) consecutive Test
Periods, been more than 0.05 less than the required ratio (for example, if the
required ratio is 1.10 to 1.00, this requirement would be violated if, for
example, the Portfolio Coverage Ratio equaled less than 1.05 to 1.00 for three
(3) consecutive Test Periods).




(iii)  Within
ten (10) days after receipt of a written notice from Landlord specifying that
Tenant has failed to maintain a Portfolio Coverage Ratio that satisfies the
above-referenced applicable requirement, (a) Tenant deposits with Landlord an
additional Security Deposit (herein, a “Coverage Based Security
Deposit”), in cash or in the form of a Letter of Credit satisfying the
requirements of Section3.4 above, in the amount
by which the Cash Flow would have needed to be higher in order for the Portfolio
Coverage Ratio, for such Test Period, to have satisfied the above-referenced
applicable requirement (but, for purposes of calculating the amount of the
required Coverage Based Security Deposit under this Lease, with such Portfolio
Coverage Ratio to be calculated by reference only to the Facilities demised
under this Lease and the Cash Flow from, and Fixed Rent, and all other debt
service and lease payments, relating to, such Facilities) and (b) each of the
tenants under the Other Leases (other than the Brighton Lease, the Fairwood
Lease and the Whitehall Lease) deposits with its landlord a Coverage Based
Security Deposit in accordance with the provisions of Section 8.2.5 of its
Other Lease and in an amount calculated by reference only to the Facilities
demised under its Other Lease and the Cash Flow from, and Fixed Rent, and all
other debt service and lease payments relating to, such Facilities (subject to
increase as provided in subsection (v) below, the aggregate amount of the
additional security deposits pursuant to subsections (a) and (b) above is
referred to herein as the “Shortfall
Amount”).




(iv)  In the
event Landlord holds a Coverage Based Security Deposit pursuant to this Section8.2.5 and, for two (2)
consecutive subsequent Test Periods, the above-referenced applicable Portfolio
Coverage Ratio requirement(s) is (are) satisfied, Landlord shall, promptly after
receipt of reasonably satisfactory evidence of the foregoing and provided no
Event of Default exists and no event has occurred or condition has arisen that,
with notice or the passage of time or both, may become an Event of Default,
return to Tenant




24


the
Coverage Based Security Deposit portion of the Security Deposit, which return
shall not preclude Tenant from thereafter making a further Coverage Based
Security Deposit if the applicable Portfolio Coverage Ratio requirement
referenced above is not satisfied as to a subsequent Test Period.




(v)  In the
event Landlord holds a Coverage Based Security Deposit, then, as to each
subsequent Test Period until such deposit is returned to Tenant as provided in
subsection (iv) above, the Portfolio Coverage Ratio shall be calculated and, if
Tenant has failed to maintain a Portfolio Coverage Ratio that satisfies the
above-referenced applicable requirement, the amounts referenced in subsections
(iii)(a) and (b) above shall be calculated for such Test Period, and, if the
amount calculated for such Test Period pursuant to subsection (iii)(a) above
exceeds the amount of the Coverage Based Security Deposit then being held by
Landlord, within ten (10) days after receipt of a written demand from Landlord,
(a) Tenant shall deliver to and deposit with Landlord an additional Coverage
Based Security Deposit in the amount of such excess, (b) each of the tenants
under the Other Leases (other than the Brighton Lease, the Fairwood Lease and
the Whitehall Lease) shall deliver to and deposit with its landlord an
additional Coverage Based Security Deposit in the amount, if any, by which the
amount calculated for such Test Period pursuant to subsection (iii)(b)
above exceeds the amount of the Coverage Based Security Deposit then being held
by its landlord, and (c) after the additional deposits referenced in subsections
(a) and (b) of this subsection (v), the aggregate amount of the Coverage Based
Security Deposits then being held by Landlord under this Lease and the
respective landlords under the Other Leases (other than the Brighton Lease, the
Fairwood Lease and the Whitehall Lease) shall be the applicable Shortfall Amount
for such Test Period.




(vi)  Landlord
shall be entitled to treat any Coverage Based Security Deposit as part of the
Security Deposit and shall have the same rights and protections with respect
thereto (including, without limitation, rights to draw upon any Letter of Credit
deposited under this Section8.2.5) as it has with
respect to the portion of the Security Deposit that was deposited pursuant to
Section3.4.




8.2.6  Permitted
Encumbrances.  Tenant shall, at its own cost, fully observe,
perform and comply with all Permitted Encumbrances as the same apply to or bind
Landlord or the Premises.  No Tenant shall cause, or permit its
respective Tenant Parties to cause, whether by act or omission, any breach of,
default under or termination of any Permitted Encumbrance applicable to or
binding upon Landlord or the Premises.




8.3  Authorization
Non-Compliance.  In the event that Tenant shall receive a
complaint or notice from a private party to any Third Party Payor Program or
Governmental Authority alleging, asserting or suggesting that Tenant is not in
compliance with any Legal Requirement, any license, permit, approval or other
Authorization or any certification for reimbursement under any Facility Provider
Agreement or other Third Party Payor Program, Tenant shall, within five (5)
Business Days, send notice to Landlord, whereupon Tenant shall remedy any
condition causing such complaint, notice or non-compliance promptly, and in any
case within any cure period allowed therefor by the applicable agency or
authority, in the case of such non-compliance.




25


9.  Maintenance
of Facilities.




9.1  Maintenance
and Repair.




9.1.1  Facility
Repair.  Tenant, at its sole expense, shall keep each Leased
Property (and Tenant’s Personal Property) in good and safe order and repair,
except for ordinary wear and tear and damage by Casualty and Condemnation
(whether or not the need for such repairs occurs as a result of Tenant’s use,
any prior use, the elements or the age of such Leased Property, Tenant’s
Personal Property, or any portion thereof).  Without limitation of the
foregoing, Tenant shall promptly make all necessary and appropriate repairs and
replacements (capital and otherwise) to each Facility, 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
existing prior to the commencement of the Term (concealed or otherwise),
including, but not limited to, any roof repairs or replacements or parking lot
repairs or replacements, such that each Leased Property is maintained in a high
quality operating and structural condition for use for its Primary Intended
Use.  Tenant shall maintain, repair and replace each Facility such
that no deferred maintenance items exist at, in or on any Leased Property at any
time and all systems, components, and elements (structural and otherwise) have a
useful life determined in the exercise of Landlord’s reasonable judgment that
exceeds the then applicable Expiration Date by not less than three (3) years
(and not less than seven (7) years as to structural items).  Tenant
shall have in place service and maintenance contracts with duly licensed
contractors or repair services providing for regular maintenance and repair of
any and all major systems serving each Leased Property, including, but not
limited to, the HVAC systems, life safety systems, plumbing systems and elevator
and conveyor systems.  Landlord may from time to time as to any one or
more Leased Properties, and at Tenant’s sole expense (but no more than once
every three (3) years at Tenant’s expense), cause an engineer designated by
Landlord, in its sole discretion, to inspect one or more Leased Properties and
issue a report (a “Leased
Property Condition Report”) with respect to the condition of any such
Leased Properties.  Tenant shall, at its own expense, make any and all
repairs or replacements recommended by such Leased Property Condition
Report.  All repairs shall be made in a good and workmanlike manner
and in accordance with all Legal Requirements relating to such
work.  Landlord shall not under any circumstances be required to
repair, replace, 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 to make any expenditure
whatsoever with respect thereto, or to maintain any Leased Property in any
way.  Tenant hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law currently in
effect or hereafter enacted.




9.1.2  Notice of
Non-Responsibility.  Except as expressly set forth in this
Lease, nothing contained in this Lease and no action or inaction by Landlord
shall be construed as:  (i) constituting the consent or request of
Landlord, express or implied, to any contractor, subcontractor, laborer,
materialman or vendor 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) giving Tenant 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 Landlord in respect thereof or to make any agreement that
might




26


create,
or in any way be the basis for, any right, title, interest, lien, claim or other
encumbrance upon the estate of Landlord in any Leased Property, or any portion
thereof.  Landlord may post, at Tenant’s sole cost, such notices of
non-responsibility upon, or of record against, any Leased Property to prevent
the lien of any contractor, subcontractor, laborer, materialmen or vendor
providing work, services or supplies to Tenant from attaching against the
Premises.  Tenant agrees to promptly execute and record any such
notice of non-responsibility at Tenant’s sole cost.




9.1.3  Vacation
and Surrender.  Tenant shall, upon the expiration or sooner
termination of the Term as to any Leased Property, vacate and surrender the
applicable Leased Property to Landlord in a high quality, broom clean condition
consistent with the requirements of Section9.1.1, except as repaired,
rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for damage from Casualty or
Condemnation.  Each Leased Property so returned to Landlord shall
include any and all Alterations, which shall be and remain the property of
Landlord as part of such Leased Property (except for Alterations that Landlord
requests, in writing, that Tenant remove, which Alterations shall be promptly
and completely removed by Tenant).  Tenant shall repair, at Tenant’s
sole cost, any damage to a Leased Property resulting from Tenant’s vacation from
or surrender of such Leased Property and/or the removal of any Alterations
therefrom, whether effected by Tenant or Landlord.




9.2  Encroachments.  If
any of the Leased Improvements on any Leased Property shall, at any time,
encroach upon any property, street or right-of-way adjacent to such Leased
Property, then, promptly upon the request of Landlord, Tenant shall, at its
expense, subject to its right to contest the existence of any encroachment and,
in such case, in the event of any adverse final determination, either (i) obtain
valid waivers or settlements of all claims, liabilities and damages resulting
from each such encroachment, whether the same shall affect Landlord or Tenant,
or (ii) make such changes in the Leased Improvements, and take such other
actions, as Tenant, in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, 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 Improvements for the Primary Intended Use substantially in the manner and
to the extent the Leased Improvements were operated prior to the assertion of
such encroachment.  Any such alteration shall be made in conformity
with the applicable requirements of Section11.  Tenant’s
obligations under this Section9.2 shall be in addition
to and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance and Tenant shall not be entitled to a
credit for any sums recovered by Landlord under any such policy of title or
other insurance.




10.  Tenant’s
Representations and Warranties.  Tenant hereby makes the
following representations and warranties, as of the date hereof, to Landlord and
acknowledges that Landlord is granting the Lease in reliance upon such
representations and warranties. Tenant’s representations and warranties shall
survive the expiration or termination of this Lease and, except to the extent
otherwise specifically limited, shall continue in full force and effect, and
remain true and correct, until Tenant’s obligations hereunder have been
performed in full.




10.1  Organization
and Good Standing.  Each Tenant is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware.  Each Tenant is qualified to do business in and is
in good standing under the laws of




27


the State
in which the Facility operated by such Tenant is located.  Tenant has
delivered true and complete copies of the documents, certificates and agreements
pursuant to which each Tenant is organized to do business (the “Tenant Org
Docs”).




10.2  Power and
Authority.  Each Tenant has the power and authority to execute,
deliver and perform this Lease and to make itself jointly and severally liable
for the obligations of each other Tenant.  Each Tenant has taken all
requisite action necessary to authorize the execution, delivery and performance
of such Tenant’s obligations under this Lease.




10.3  Enforceability.  This
Lease constitutes a legal, valid, and binding obligation of each Tenant
enforceable in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditor’s rights generally, including, without limitation, fraudulent
transfer or conveyance laws.




10.4  Consents.  The
execution, delivery and performance of this Lease will not require any consent,
approval, authorization, order, or declaration of, or any filing or registration
with, any court, any Governmental Authority, or any other Person, except as set
forth on Schedule 10.4
attached hereto.




10.5  No
Violation.  The execution, delivery and performance of this
Lease (i) do not and will not conflict with, and do not and will not result in a
breach of, any Tenant Org Docs; and (ii) do not and will not violate in any
material respect any order, writ, injunction, decree, statute, rule or
regulation applicable to any Tenant or any of the Facilities.




10.6  Reports
and Statements.  All reports, statements (financial or
otherwise), certificates and other data furnished by or on behalf of Tenant or
any Guarantor to Landlord in connection with this Lease, and all representations
and warranties made herein or in any certificate or other instrument delivered
in connection herewith, are and will be, to the best of Tenant’s knowledge, true
and correct in all material respects as of the date of such report, statement,
certificate or other data.




10.7  No
Default.  As of the date hereof, (i) there is no existing Event
of Default under this Lease; and (ii) no event has occurred which, with the
giving of notice or the passage of time, or both, would constitute or result in
such an Event of Default.




10.8  Adverse
Matters.  To the best of Tenant’s knowledge and except as set
forth on Schedule 10.8 attached
hereto, no Tenant nor any of their respective officers, directors, members or
managing employees or other contractors, subcontractors, employees or agents has
engaged in any activities that are prohibited under criminal law, or are cause
for civil penalties or mandatory or permissive exclusion from any Third Party
Payor Program or any governmental health care program.  To the best of
Tenant’s knowledge, there is no, and there shall continue to be no, threatened,
existing or pending revocation, suspension, termination, probation, restriction,
limitation or non-renewal affecting any Tenant or any Facility with regard to
participation in any Third Party Payor Program or the applicable Authorizations
to which any Tenant or Facility presently or at any time hereafter is/are
subject or with regard to any resident’s or patient’s entitlement to
reimbursement from Medicaid for amounts paid by such resident or patient to any
Tenant, as applicable.




28


10.9  Certification.  Each
Tenant has obtained any and all Authorizations necessary or advisable to operate
its Facility(ies) for its Primary Intended Use and to be, and to continue to be,
validly licensed and certified to operate its applicable Facility in accordance
with all applicable governmental rules and regulations and the requirements of
all applicable Governmental Authorities.




10.10  No
Reimbursement Audits or Appeals.There are no
current, pending or outstanding reimbursement audits regarding any Third Party
Payor Program nor any appeals pending at any Facility.




10.11  No
Recoupments Efforts.There are no
current or pending recoupment efforts regarding any Third Party Payor Program at
(or with respect to) any Facility.  Tenant is not a participant in any
federal program whereby any Governmental Authority may have the right to recover
funds by reason of the advance of federal funds.




10.12  Professional
Liability Reserves.  For each Facility, the applicable Tenant
or Guarantor has accrued, and will periodically (on an annual basis and upon any
Reserve Event) accrue, reserves for expenses relating to malpractice and
professional liability claims that are adequate and complete in the exercise of
commercially reasonable judgment and normal commercial practice, which reserves
have been, and will be, approved by its independent auditors and its independent
actuary.




10.13  Primary
Intended Use.  Each Facility is being operated for its Primary
Intended Use and contains the number of licensed and operational beds or units
described on Schedule
10.13 attached hereto (and with regard to the Jensen Beach Land Parcel,
such parcel shall remain vacant land or, without limitation of Landlord’s
approval rights relative to Alterations, be used as a skilled nursing, assisted
living, independent living and/or Alzheimer’s care facility that is
complimentary to the Primary Intended Use of the Jensen Beach
Property).




10.14  Compliance
with Laws.  Each Tenant is in substantial compliance with all
applicable federal, state and local laws, regulations and guidelines (including,
without limitation, any government payment program requirements and disclosure
of ownership and related information requirements), quality and safety
standards, accepted professional standards and principles that apply to
professionals providing services to assisted or independent living facilities,
in each case, as applicable, accreditation standards, and requirements of
applicable Governmental Authorities, including, without limitation, those
requirements relating to the physical structure and environment of each Leased
Property, licensing, quality and adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies,
additions to facilities and services and fee splitting.  No Tenant has
committed any act which may give any Governmental Authority the right to cause
Tenant to lose any applicable Authorizations.




29


10.15  Ownership
of Authorizations.  The Authorizations:  (i) are not,
and have not been, transferred to any location other than the Facility to which
such Authorizations relate; (ii) are not, and have not been, pledged as
collateral security for any loan or indebtedness other than pursuant to the
terms of this Lease; (iii) are held free from restrictions or conflicts that
would materially impair the use or operation of each Facility for its Primary
Intended Use; and (iv) are not provisional, probationary or restricted in any
way.




10.16  Third
Party Payor Programs.  There is no threatened or pending
revocation, suspension, termination, probation, restriction, limitation, fine,
civil monetary penalty, recoupment or non-renewal affecting any Tenant or any
Leased Property in respect of any Third Party Payor Programs to which Tenant or
any Facility is subject.  All cost reports and financial reports, if
any, submitted by any Tenant pursuant to any Third Party Payor Program have been
and will continue to be materially accurate and complete and have not been and
will not be misleading in any material respects.




11.  Alterations.




11.1  Alterations.  Tenant
shall not (i) make any Capital Alterations on or to any Leased Property, (ii)
enlarge or reduce the size of any Facility and/or (iii) make any Capital
Alterations or other Alterations that would tie in or connect with any
improvements on property adjacent to the Land.  Tenant may, without
Landlord’s consent, make any alterations, additions, or improvements
(collectively, with the alterations described in items (i) – (iii) of the
preceding sentence, “Alterations”) to any Leased
Property if such Alterations are not of the type described in clause (i), (ii)
or (iii) above, so long as in each case:  (w) the same do not (A)
decrease the value of the Leased Property, (B) affect the exterior appearance of
the Leased Property, or (C) affect the structural components of the Leased
Property or the main electrical, mechanical, plumbing, elevator or ventilating
and air conditioning systems for any Facility, (x) the same are consistent in
terms of style, quality and workmanship to the original Leased Property and
Fixtures, (y) the same are constructed and performed in accordance with the
provisions of Section11.2 below and (z) the
cost thereof does not exceed, in the aggregate, $250,000.00 for any consecutive
twelve (12) month period with respect to any single Facility.  Except
for those limited Alterations that expressly do not require Landlord’s consent
pursuant to the preceding sentence, all Alterations shall be subject to
Landlord’s prior written consent, in Landlord’s reasonable
discretion.  To the extent Landlord’s prior written consent shall be
required in connection with any Alterations, Landlord may impose such conditions
thereon in connection with its reasonable approval thereof as Landlord deems
appropriate.  Notwithstanding the foregoing, Landlord agrees that
painting, landscaping, and replacement of floor, wall and window coverings shall
be deemed Alterations that do not require Landlord’s consent, regardless of the
cost thereof, so long as the same meet the requirements of clauses (x) and (y)
above, and the cost thereof shall not be counted towards the above-referenced
$250,000.00 threshold.




11.2  Construction
Requirements for all Alterations.  For all Alterations of any
Leased Property, the following shall apply and shall be in addition to and not
in lieu of any other requirements that Landlord may impose on Tenant in
connection with the making of any Alterations and, except as described in this
Section11.2, the following shall
apply whether or not Landlord’s consent to the subject Alteration is
required:




11.2.1  Plans and
Specifications.  Prior to commencing any Alterations, Tenant
shall have submitted to Landlord a written proposal describing in
reasonable




30


detail
such proposed Alteration and shall provide to Landlord for approval (or
information, in the case of Alterations that do not require Landlord’s consent)
such plans and specifications, permits, licenses, construction budgets and other
information (collectively, the “Plans and Specifications”) as
Landlord shall request, showing in reasonable detail the scope and nature of the
proposed Alteration.




11.2.2  Permits.  Such
construction shall not commence until Tenant shall have procured and paid for
all municipal and other governmental permits and authorizations required
therefor (as well as any permits or approvals required in connection with any
Permitted Encumbrance), and Landlord shall join in the application for such
permits or authorizations whenever such action is necessary; provided, however,
that (i) any such joinder shall be at no liability, cost or expense to Landlord;
and (ii) any Plans and Specifications required to be filed in connection with
any such application that require the approval of Landlord shall have been so
approved by Landlord.




11.2.3  No
Impairment.  Such construction shall not, and prior to
commencement of such construction Tenant’s licensed architect or engineer shall
certify to Landlord that such construction shall not, impair the structural
strength of any component of the applicable Facility or overburden or impair the
operating efficiency of the electrical, water, plumbing, HVAC or other building
systems of any such Facility.  The aforesaid certification shall not
be required in the case of Alterations that do not require Landlord’s
consent.




11.2.4  Compliance
Certification.  Prior to commencing any Alterations, Tenant’s
licensed architect or engineer shall certify to Landlord that the Plans
and Specifications conform to and comply with all Insurance Requirements
and all applicable building, subdivision and zoning codes, laws, ordinances,
regulations and other Legal Requirements.  The aforesaid certification
shall not be required in the case of Alterations that do not require Landlord’s
consent.




11.2.5  Parking.  During
and following completion of such construction, the parking that is located on
the Land adjoining the applicable Facility shall remain adequate for the
operation of such Facility for its Primary Intended Use and in no event shall
such parking be less than is required by any applicable Legal Requirements or
was located on the Land adjoining such Facility prior to such
construction.




11.2.6  Materials;
Quality.  All work done in connection with such construction
shall be done promptly and in a good and workmanlike manner using first-class
materials and in conformity with all Legal Requirements.




11.2.7  As-Builts.  Promptly
following the completion of the construction of any Alterations, Tenant shall
deliver to Landlord:  (i) “as built” drawings of any Capital
Alterations included therein, certified as accurate by the licensed architect or
engineer selected by Tenant to supervise such work; and (ii) a certificate from
Tenant’s licensed architect or engineer certifying to Landlord that such
Alterations have been completed in compliance with the Plans and Specifications
and all applicable Legal Requirements.  The certification referenced
in subsection (ii) above shall not be required in the case of Alterations that
do not require Landlord’s consent.




31


11.2.8  Certificate
of Occupancy.  If, by reason of the construction of any
Alteration, a new or revised certificate of occupancy for any component of the
applicable Facility is required, Tenant shall obtain such certificate in
compliance with all applicable Legal Requirements and furnish a copy of the same
to Landlord promptly upon receipt thereof.




11.2.9  Lien
Waivers.  Upon completion of any Alteration, Tenant shall
promptly deliver to Landlord final lien waivers from each and every general
contractor and subcontractor that provided goods or services in connection with
such Alteration indicating that such contractor or subcontractor has been paid
in full for such goods or services, together with such other evidence as
Landlord may reasonably require to satisfy Landlord that no liens have been
created in connection with such Alteration.  The deliveries referenced
in this Section11.2.9 shall not be
required in the case of Alterations that do not require Landlord’s consent,
unless and to the extent requested in writing by Landlord.




11.3  Capital
Expenditures Account.




11.3.1  Required
Capital Expenditures.




11.3.1.1  As used
in this Lease, (i) “Required
Leased Property Annual Capital Expenditures Amount” shall mean, as to
each Lease Year applicable to a particular Leased Property, an amount equal to
the product of (a) the Required Per Unit Annual Capital Expenditures Amount that
is applicable during such Lease Year (calculated as a weighted average in the
event of any change in such Required Per Unit Annual Capital Expenditures Amount
during such Lease Year) times (b) the aggregate number of Units at such Leased
Property during such Lease Year (calculated as a weighted average in the event
of any change in the number of such Units during such Lease Year), but, subject
to Section11.3.4, below, with such
amount to be prorated for any partial Lease Year, and (ii) “Capital Expenditures” shall
mean expenditures by Tenant on repairs, replacements and improvements to the
Premises (including any part of Landlord’s Personal Property or Tenant’s
Personal Property other than any part thereof that, by the terms of Section35 below, is to be
retained by Tenant upon the expiration or termination of this Lease and
excluding the Hurricane Renovations referenced in Section11.3.5 below) that (a) in
accordance with GAAP, constitute capital expenditures, (b) are contemplated by
the Annual Capital Expenditure Budget and (c) have been completed in a good,
workmanlike and lien free fashion and in compliance with all Legal Requirements
and with the terms of Sections11.1 and 11.2 applicable to any
Alterations.




11.3.1.2  Within
thirty (30) days following the end of each respective Lease Year (or of any
partial Lease Year resulting from the expiration or termination of this Lease)
(such Lease Year (or partial Lease Year, if applicable), the “Subject Lease Year”), Tenant
shall deliver to Landlord a report (a “Capital Expenditures Report”)
on each Leased Property as to which a Lease Year has so ended, certified as
true, correct and complete by Tenant pursuant to an Officer’s Certificate,
summarizing and describing in reasonable detail all of the Capital Expenditures
made by Tenant during such Subject Lease Year and the two (2) Lease Years
preceding it (such Subject Lease Year, together with the two (2) Lease Years
preceding it, the “Subject
Three Lease Years”), on both an aggregate basis as to all Leased
Properties as to which a Lease Year has so ended and broken down for each such
Leased Property, and such receipts and other information as Landlord may
reasonably request relative to the Capital Expenditures made by Tenant during
such Subject Three Lease Years relative to each such Leased
Property.  If, as to a particular Leased Property and a particular
Subject Lease Year,




32


the sum
of (i) the amount of the Capital Expenditures so made by Tenant at such Leased
Property during the applicable Subject Three Lease Years and so reported to
Landlord, plus (ii) the amount of any Capital Expenditures Deposits previously
made by Tenant with respect to such Leased Property and such Subject Three Lease
Years, and minus (iii) the amount of any payments made to Tenant from the
Capital Expenditures Account with respect to such Leased Property and such
Subject Three Lease Years (such sum, as  to a particular Leased
Property and a particular Subject Lease Year, the “Actual Leased Property Three Lease
Years Capital Expenditures Amount”) is less than the sum of the Required
Leased Property Annual Capital Expenditures Amounts with respect to such Leased
Property for the Lease Years included in such Subject Three Lease Years (such
sum, as to a particular Leased Property and a particular Subject Lease Year, the
“Required Leased Property Three
Lease Years Capital Expenditures Amount”), Tenant shall, on or prior to
the due date of the Capital Expenditures Report for such Subject Lease Year,
deposit (herein, a “Capital
Expenditures Deposit”) into an interest bearing account (the “Capital Expenditures Account”)
under the sole dominion and control of Landlord (or any Facility Mortgagee) an
amount equal to the amount by which such Required Leased Property Three Lease
Years Capital Expenditures Amount exceeds such Actual Leased Property Three
Lease Years Capital Expenditures Amount.  If, as to a particular
Leased Property and a particular Subject Lease Year, the applicable Actual
Leased Property Three Lease Years Capital Expenditures Amount exceeds the
applicable Required Leased Property Three Lease Years Capital Expenditures
Amount, then, provided no default or Event of Default by Tenant exists
hereunder, within five (5) Business Days after Tenant’s presentation of its
Capital Expenditures Report for such Subject Lease Year reflecting such greater
expenditure at such Leased Property (if Landlord is holding the Capital
Expenditures Account) or within five (5) Business Days after Landlord’s receipt
of the necessary funds from the Facility Mortgagee that is holding the Capital
Expenditures Account (if a Facility Mortgagee is holding the Capital
Expenditures Account), Landlord shall pay to Tenant the lesser of (a) the amount
by which the applicable Actual Leased Property Three Lease Years Capital
Expenditures Amount so made by Tenant at such Leased Property and so reported to
Landlord exceeds the applicable Required Three Lease Years Capital Expenditures
Amount or (b) the net amount of funds in the Capital Expenditures Account that
are attributable to Capital Expenditures Deposits previously made with respect
to such Leased Property.  Attached hereto as Schedule11.3.1 is an example of
the application of this Section11.3.1.




11.3.2  Capital
Expenditures Account.  The Capital Expenditures Account shall
be maintained with a Lending Institution reasonably satisfactory to Landlord or
with any Facility Mortgagee, and, for purposes of Section11.3.1.2(b) above and the other terms
of this Lease, Landlord shall, with respect to each Capital Expenditures
Deposit, keep records allocating such deposit to the appropriate Leased
Property(ies) hereunder.  Landlord shall not be liable to Tenant or
any other Person for any decline in the value of the funds held in the Capital
Expenditures Account.  Furthermore, neither Landlord nor any Facility
Mortgagee shall bear responsibility for the financial condition of, nor any act
or omission by, any Lending Institution at which the Capital Expenditures
Account is located.  The interest from deposits into the Capital
Expenditures Account shall be retained in the Capital Expenditures Account to be
applied in accordance with the terms of this Section11.3.  Tenant
hereby grants to Landlord a first priority security interest in the Capital
Expenditures Account pursuant to the Uniform Commercial Code (the “UCC”) of the State whose laws
govern the perfection of such security interest, and the provisions of Section21.1.1.1 below shall be
applicable to such security interest.  Upon the occurrence of any
Event of Default, Landlord or any Facility Mortgagee may apply any
funds




33


held in
the Capital Expenditures Account to cure such Event of Default or on account of
any damages suffered or incurred by Landlord in connection
therewith.  In connection with any assignment of Landlord’s interest
under this Lease, the assigning Landlord or any predecessor shall have the
right, and the obligation, to transfer all amounts in the Capital Expenditures
Account and still in its possession or control to such assignee and, upon such
transfer, the assigning Landlord or any such predecessor, as the case may be,
transferring any such amounts shall thereupon be completely released from all
liability with respect to such amounts so transferred, and Tenant shall look
solely to said assignee in reference thereto.




11.3.3  Disposition
of Capital Expenditures Account.  As described above, within
thirty (30) days following the expiration or termination of this Lease, Tenant
shall deliver to Landlord a Capital Expenditures Report with respect to the
Lease Year or partial Lease Year immediately preceding such expiration or
termination, and, if applicable, make a deposit into the Capital Expenditures
Account.  If, on the basis of such Capital Expenditures Report, Tenant
is entitled to a payment as described in Section11.3.1 above, then,
notwithstanding anything to the contrary contained in such Section11.3.1, such payment shall
be due and payable to Tenant only as and when the conditions of Section3.4.3 for the return of
the Security Deposit have been met.  Except as provided in the
preceding sentence, upon the expiration or termination of this Lease, all funds
in the Capital Expenditures Account (including, without limitation, any funds
that are required to be deposited therein by Tenant with respect to the Lease
Year or partial Lease Year immediately preceding such expiration or termination)
shall automatically and without further action of the parties become the
property of Landlord, without any obligation on Landlord’s part to credit Tenant
in any manner therefor.  The obligations of Landlord and Tenant under
this Section11.3 shall survive the
expiration or termination of this Lease.




11.3.4  Certain
Divisions and Calculations.  In the event that this Lease is
terminated as to one or more Leased Properties (but not all of the Premises) on
account of any event, circumstance or transaction to which Section17.9 or Section40 is applicable, then,
for purposes of dividing any amounts then held in the Escrow Account or the
Capital Expenditures Account between the amounts that will continue to be held
under this Lease and the amounts that will be transferred to corresponding
accounts under a New Lease entered into pursuant to Section40 hereof or for any other
purpose under this Lease, any such amounts so held in the Escrow Account or the
Capital Expenditures Account shall be allocated to and among each terminated,
and each non-terminated, Leased Property as determined by Landlord, in its sole
discretion if any such termination results from an Event of Default and
otherwise in its reasonable discretion.  In addition, in the event of
(i) any termination of this Lease as to one or more Leased Properties (but not
all of the Premises) on account of any New Lease under Section40 or (ii) any combination
of leases pursuant to Section39, calculations of the
applicable amounts of the Required Leased Property Annual Capital Expenditures
Amount, Actual Leased Property Three Lease Years Capital Expenditures Amount,
required Capital Expenditures Deposits and similar items shall be made with
respect to the Transferred Premises (in the case of Section40) or the combined
properties under the Section 39 Lease (in the case of Section39) the same as if all of
such Transferred Premises or combined properties, as applicable, had been under
the New Lease or Section 39 Lease relating thereto, as applicable, during any
partial Lease Year preceding the Property Transfer Date (in the case of Section40) or Section 39 Date (in
the case of Section39) applicable
thereto.




34


11.3.5  Hurricane
Renovations Escrow.  As of the Effective Date, Landlord
continues to hold the sum of One Million Six Hundred Fifty Eight Thousand One
Hundred Eighty Six and 13/100 Dollars ($1,658,186.13), plus interest on such
amount since December 31, 2007, representing the remaining amount, plus
interest thereon, credited to Landlord from the sellers of the Farm Pond
Properties located in Florida on account of certain hurricane repairs and
capital improvement items which have yet to be completed (collectively, the
“Hurricane Renovations”)
(such deposit is referred to herein as the “Hurricane Renovations Escrow
Deposit”), in an account (the “Hurricane Renovations Escrow
Account”) of Landlord or, in Landlord’s sole discretion, with any
Facility Mortgagee, which deposit may be commingled with other assets of
Landlord or such Facility Mortgagee.  Landlord shall not be liable to
Tenant or any other Person for any consequent loss of principal or interest on
funds held in the Hurricane Renovations Escrow Account.  Furthermore,
neither Landlord nor any Facility Mortgagee shall bear responsibility for the
financial condition of, nor any act or omission by, any Lending Institution at
which the Hurricane Renovations Escrow Account is located.  The
interest from deposits into the Hurricane Renovations Escrow Account shall be
retained in the Hurricane Renovations Escrow Account to be applied in accordance
with the terms of this Section11.3.5.  Provided
that no default or Event of Default by Tenant exists hereunder, and subject to
the terms and conditions of this Section11.3.5, the Hurricane
Renovations Escrow Deposit shall be used by Landlord to directly pay third
parties for any out-of-pocket costs incurred by Tenant for the Hurricane
Renovations (“Hurricane
Renovations Costs”), upon delivery by Tenant to Landlord of documentation
evidencing such Hurricane Renovations Costs, which payment shall be provided
within ten (10) Business Days after the presentation of such evidence (if
Landlord is holding the Hurricane Renovations Escrow Account) or within ten (10)
Business Days after Landlord’s receipt of the appropriate funds from the
Facility Mortgagee that is holding the Hurricane Renovations Escrow Account (if
a Facility Mortgagee is holding the Hurricane Renovations Escrow
Account).  Landlord shall have no obligation to make any payment for
any Hurricane Renovations Costs that are: (i) in the aggregate, in excess of the
Hurricane Renovations Escrow Deposit, (ii) for Hurricane Renovations made
without the prior written approval of Landlord (not to be unreasonably withheld
or delayed), or (iii) in the aggregate, for an amount less than $25,000 for any
single payment request by Tenant (however, such lesser amounts that satisfy the
other conditions of this Section11.3.5and are paid by Tenant
shall be reimbursed by Landlord in accordance with this Section11.3.5).  Promptly
following the Effective Date, and in any event on or prior to July 31,
2008, Tenant shall commence any remaining Hurricane Renovations (including,
without limitation, the replacement of windows at the Subject Farm Pond
Properties that are located in Florida (other than the Summerville at Lake Mary
Property, if such property is demised pursuant to this Lease)) and Tenant shall
thereafter proceed diligently and continuously to complete such Hurricane
Renovations and shall complete such Hurricane Renovations on or prior to
December 31, 2008.Upon completion of the
Hurricane Renovations and payment or reimbursement of the Hurricane Renovation
Costs, any amount remaining in the Hurricane Renovations Escrow Account shall be
deposited into the Capital Expenditures Account.  The obligations of
Landlord and Tenant under this Section11.3.5shall survive the
expiration or termination of this Lease.




11.4  Annual
Capital Expenditure Budget.  On or prior to January 31 of each
calendar year, Tenant shall deliver to Landlord, at Tenant’s expense, a budget
(the “Annual Capital
Expenditure Budget”) setting forth Tenant’s reasonable estimate of the
capital repairs, replacements and improvements to the Premises that Tenant
anticipates will be necessary in such




35


calendar
year to comply with the maintenance, repair and replacement obligations
contained in Section9 hereof and maintain the
Leased Properties in a high quality condition, and, on or prior to the December
15 preceding the commencement of such calendar year, Tenant shall deliver to
Landlord, at Tenant’s expense, a preliminary draft of the aforesaid Annual
Capital Expenditure Budget for such calendar year.  Tenant shall
perform any and all capital repairs, replacements or improvements contemplated
by the Annual Capital Expenditure Budget within twenty-four (24) months after
the commencement of the calendar year to which such Annual Capital Expenditure
Budget relates.  If Tenant has not completed such capital repairs,
replacements or improvements within such twenty-four (24) month period, Landlord
may, but shall not be obligated to, complete such capital repairs, replacements
or improvements, in which case Landlord may reimburse itself for the cost of any
such work by withdrawing funds from the Capital Expenditures Account sufficient
to pay for such capital repairs, replacements or improvements, and Tenant shall,
within ten (10) days following demand therefor by Landlord, (i) restore to the
Capital Expenditures Account any amount so withdrawn therefrom and paid to
Landlord and (ii) to the extent there were insufficient funds in the Capital
Expenditures Account fully to reimburse Landlord for the cost of such work, pay
to Landlord any remaining unreimbursed amount.  In the event of any
payment by Tenant pursuant to subsection (i) and/or (ii) above, Tenant shall be
entitled to include the amount thereof in its next Capital Expenditures
Report.




12.  Liens.  Subject
to the provisions of Section13below governing a
permitted contest by Tenant, Tenant 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) liens for those taxes of Landlord that Tenant is not
required to pay hereunder, (ii) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements, so long as (1) the same are not yet
payable or (2) such liens are in the process of being contested as permitted by
Section13, (iii) liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either disputed
in good faith or not yet due, provided that (1) such lien and such reserve or
other appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor and (2) any such liens are
in the process of being contested as permitted by Section13, and (iv) any liens
that are expressly the responsibility of Landlord
hereunder.  Notwithstanding the foregoing, Tenant shall bond over any
lien affecting the applicable Leased Property if Landlord shall request or if
any applicable Facility Mortgagee shall so require.




13.  Permitted
Contests.  Tenant, on its own or on Landlord’s behalf (or in
Landlord’s name), but at Tenant’s expense, may contest, by appropriate legal
proceedings, conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Imposition or any lien,
attachment, levy, encumbrance, charge or claim not otherwise permitted by Section12, provided that (i) in
the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge,
or claim, the commencement and continuation of such proceedings shall suspend
the collection thereof from Landlord and from the applicable Leased Property,
(ii) neither the applicable Leased Property nor any Rent therefrom nor any part
thereof or interest therein would be reasonably likely to be in danger of being
sold, forfeited, attached or lost, (iii) Tenant shall indemnify and hold
harmless Landlord and the Landlord Indemnified Parties from and against any
Losses incurred by Landlord or the Landlord Indemnified Parties in connection
with any such contest or as a result thereof, (iv) Tenant shall give such
security as may be demanded by Landlord to insure ultimate payment of, or
compliance with, the same and




36


to
prevent any sale or forfeiture of the affected Leased Property or the Rent by
reason of such non-payment or non-compliance; provided, however, the provisions
of this Section13 shall not be construed
to permit Tenant to contest the payment of Rent or any other sums payable by
Tenant to Landlord hereunder, (v) in the case of the contest of an Insurance
Requirement, the coverage required by Section14shall be maintained, and
(vi) if such contest is resolved against Landlord or Tenant, Tenant shall, as
Additional Rent due hereunder, pay to the appropriate payee the amount required
to be paid, together with all interest and penalties accrued thereon, within ten
(10) days after such determination (or within such shorter period as may be
required by the terms of such determination), and comply, within any cure period
allowed therefor by the applicable agency or authority (or if no such cure
period shall be allowed or specified by the applicable agency or authority,
promptly and diligently following the effective date of such determination);
provided, however, that this subsection (vi) is not intended, and shall not be
construed, to afford Tenant any cure or grace period beyond the effective date
of any final unappealable determination.  Landlord, at Tenant’s
expense, shall execute and deliver to Tenant such authorizations and other
documents as may reasonably be required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, shall join as a party
therein.  The terms of this Section13 shall survive the
expiration or sooner termination of this Lease.




14.  Insurance.




14.1  General
Insurance Requirements.  Tenant shall obtain and maintain, or
cause to be maintained, insurance for Tenant and the Leased Properties providing
insurance coverages of such types, against such risks, in such amounts, with
such deductibles and self-insurance retentions and with such endorsements as (i)
Landlord, in its sole discretion, from time to time deems (1) commercially
reasonable (in light of such factors, including, without limitation, the
availability and cost of particular types and amounts of coverages, as Landlord,
in its sole discretion, deems appropriate) and/or (2) consistent with the
insurance coverages that are maintained by owners of properties similar to the
Leased Properties or (ii) as may be required from time to time by any Facility
Mortgagee, but with such insurance coverages at all times to include (without
limitation of the preceding provisions for greater coverages) at least the
following minimum coverages:




14.1.1  Coverage
for loss or damage by fire, lightning, wind and such other perils as are
included in a standard “all risk” or “special causes of loss” endorsement and
against loss or damage by other risks and hazards covered by a standard property
insurance policy, including, without limitation, riot, civil commotion,
vandalism, malicious mischief, burglary and theft, relative to each Leased
Property, in each case (i) in an amount equal to one hundred percent (100%) of
the Full Replacement Cost of such Leased Property; (ii) containing an agreed
amount endorsement with respect to the Leased Improvements and Tenant’s Personal
Property at such Leased Property waiving all co-insurance provisions; (iii)
containing (a) an “Ordinance or Law Coverage” or “Enforcement” endorsement and
(b) “demolition” insurance and “increased cost of construction” insurance, if
any of the Leased Improvements at, or the use of, such Leased Property shall at
any time constitute legal non-conforming structures or uses; and (iv) having a
deductible not exceeding Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00).  In addition, each Tenant shall at a minimum obtain:
(y) flood hazard insurance, in the event that any portion of the Leased
Improvements at any Leased Property is currently or at any time in the future
located in a federally designated “special flood hazard area”, and (z)
earthquake insurance, in the event that any Leased Property is located in an
area with a high




37


degree of
seismic activity, provided that the insurance pursuant to clauses (y) and (z)
hereof shall be on terms consistent with the comprehensive all risk insurance
policy required under this Section14.1.1.




14.1.2  Commercial
general liability insurance against claims for personal injury, bodily injury,
death or damage to the Leased Properties occurring upon, in or about each Leased
Property, such insurance (i) to be for a combined limit, excluding umbrella
coverage, of not less than One Million and No/100 Dollars ($1,000,000.00) per
occurrence with not less than a Three Million and No/100 Dollars ($3,000,000.00)
general aggregate limit and with the applicable limits applying on a “per
location” basis; (ii) to cover at least the following: (1) premises and
operations; (2) products and completed operations on an “if any” basis; (3)
independent contractors; (4) blanket contractual liability for legal contracts;
(5) contractual liability covering indemnities, if any, given by Tenant
contained in the Facility Mortgage, if any, applicable to the Leased Property,
to the extent the same is available; (6) broad form property damage; (7)
personal injury (including death resulting therefrom); (8) healthcare
professional liability and (9) a liquor liability endorsement if alcoholic
beverages are sold at any Leased Property; and (iii) to have a per claim
deductible not exceeding Five Hundred Thousand and No/100 Dollars
($500,000.00).




14.1.3  Business
interruption insurance (i) with loss payable to Landlord; (ii) covering all
risks required to be covered by the insurance provided for in Section14.1.1above; (iii) in an
amount sufficient to avoid any co-insurance penalty and to provide proceeds that
will, in Landlord’s sole discretion, cover a period of not less than twelve (12)
months from the date of casualty or loss; and (iv) containing an extended period
of indemnity endorsement that provides that, after the physical loss to the
applicable Leased Property has been repaired, the continued loss of income will
be insured until such income returns to the same level it was prior to the loss
or the expiration of not less than twelve (12) months from the date of the loss,
whichever first occurs, and notwithstanding that the policy may expire prior to
the end of such period.




14.1.4  At all
times during which Alterations or structural construction or repairs are being
made with respect to any of the Leased Improvements, and only if the Leased
Properties’ coverage form does not otherwise apply, (i) owner’s contingent or
protective liability insurance covering claims not covered by or under the terms
or provisions of the above mentioned commercial general liability insurance
policy; and (ii) the insurance provided for in Section14.1.1 above written in a
so-called builder’s risk completed value form (1) on a non-reporting basis, (2)
against all risks insured against pursuant to Section14.1.1 above, (3)
including permission to occupy the Leased Properties, and (4) with an agreed
amount endorsement waiving co-insurance provisions.




14.1.5  Workers’
compensation insurance, subject to the statutory limits of the State in which
the applicable Leased Property is located, and employer’s liability insurance
with limits of at least One Hundred Thousand and No/100 Dollars ($100,000.00)
per accident and per disease, per employee, and at least Five Hundred Thousand
and No/100 Dollars ($500,000.00) aggregate in respect of any work or operations
on or about any Leased Property, or in connection with any Leased Property or
its operation (if applicable).




14.1.6  Broad
form boiler and machinery insurance (without exclusion for explosion) covering
all boilers or other pressure vessels, machinery, and equipment
located




38


in, on or
about any Leased Property (including “system breakdown coverage”) and insurance
against loss of occupancy or use arising from any breakdown of such
equipment.




14.1.7  Motor
vehicle liability coverage for all owned and non-owned vehicles, including,
without limitation, rented and leased vehicles, containing limits per
occurrence, including umbrella coverage, of not less than One Million and No/100
Dollars ($1,000,000.00).




14.1.8  If
alcoholic beverages are sold at any Leased Property, so-called “dramshop”
insurance or other liability insurance required in connection with the sale of
alcoholic beverages.




14.1.9  Insurance
against employee dishonesty.




14.2  Policies;
Certificates.  All insurance provided for in Section14.1aboveshall be obtained under
valid and enforceable policies (individually, a “Policy” and, collectively, the
“Policies”) and shall be
subject to the approval of Landlord, which approval shall not be unreasonably
withheld or delayed.  Not less than ten (10) days prior to the
expiration date of each Policy, a certificate of insurance evidencing the
renewal of such Policy, accompanied by evidence satisfactory to Landlord of
payment of the premiums then due thereunder (the “Insurance Premiums”), shall be
delivered by Tenant to Landlord.  Tenant shall deliver certified
copies of the Policies to Landlord prior to the date hereof and thereafter upon
request.  All Policies must have a term of not less than one (1)
year.




14.3  Blanket
and Loss Limit Policies.  Any blanket Policy shall specifically
allocate to each Leased Property the amount of coverage from time to time
required hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only such Leased Property in compliance with the
provisions of Section14.1.  Policies
under Sections14.1.1, 14.1.3 and 14.1.6 above shall be
permitted to be written on a loss limit basis, subject to the delivery to
Landlord of such information relating thereto as Landlord may from time to time
reasonably request and to Landlord’s approval of such loss limit and of the
terms thereof, which approval shall not be unreasonably withheld, delayed or
conditioned.




14.4  Additional
Insured; No Separate Insurance.  All Policies provided for or
contemplated by Section14.1 above, except for the
Policy referenced in Section14.1.5, shall name each
applicable Tenant as the insured and Landlord and any Facility Mortgagee(s) and
its/their successors and/or assigns as additional insureds, as its/their
interests may appear, and, in the case of property damage, loss of rent,
business interruption, terrorism, boiler and machinery, flood and earthquake
insurance, shall contain a so-called New York standard non-contributing
mortgagee clause in favor of Landlord or any Facility Mortgagee, as applicable,
providing that the loss thereunder shall be payable to Landlord or such Facility
Mortgagee, as applicable.  Tenant shall not, on Tenant’s own
initiative or pursuant to the request or requirement of any third party, (i)
take out separate insurance concurrent in form or contributing in the event of
loss with that required in this Section14 to be furnished by
Tenant or (ii) increase the amounts 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 Landlord
and all Facility Mortgagees, are included therein as additional insureds and the
loss is payable under such insurance in the same manner as losses are payable
under this Lease.  Tenant shall




39


immediately
notify Landlord of the taking out of any such separate insurance or of the
increasing of any of the amounts of the then existing insurance by securing an
additional policy or policies.




14.5  Policy
Requirements.  All Policies of insurance provided for in Section14.1shall contain clauses or
endorsements to the effect that:




(i)  no
failure by Tenant or any Tenant Party to comply with the provisions of any
Policy, that might otherwise result in a forfeiture or impairment of the
insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Landlord or any Facility Mortgagee is
concerned;




(ii)  the
Policy shall not be materially changed (other than to increase the coverage
provided thereby) or canceled without at least thirty (30) days’ written notice
to Landlord, any Facility Mortgagee and any other party named therein as an
additional insured or loss payee;




(iii)  neither
Landlord nor any Facility Mortgagee shall be liable for any Insurance Premiums
thereon or subject to any assessments thereunder; and




(iv)  a waiver
of subrogation rights as to Landlord and any Facility Mortgagee.




14.6  Evidence
of Compliance.  If at any time Landlord is not in receipt of
written evidence that all insurance required hereunder is in full force and
effect, Landlord shall have the right, without notice to Tenant, to take such
action as Landlord deems necessary to protect its interest in the Leased
Properties, including, without limitation, the obtaining of such insurance
coverages as Landlord in its sole discretion deems appropriate and all premiums
incurred by Landlord in connection with any such action or in obtaining any such
insurance and keeping it in effect shall be paid by Tenant to Landlord upon
demand and shall bear interest at the Overdue Rate until paid.




14.7  Foreclosure;
Transfer.  In the event of foreclosure of any Facility Mortgage
or other transfer of title to any Leased Property, all right, title and interest
of the applicable Tenant in and to the Policies then in force concerning the
Leased Properties and all proceeds payable thereunder shall thereupon vest in
the purchaser at such foreclosure or in Landlord, Facility Mortgagee or other
transferee in the event of such other transfer of title.




14.8  Insurance
Company.  The Policies shall be issued by one or more domestic
primary insurance companies, duly qualified in the jurisdictions where the
Leased Properties are located.  Each insurer under each Policy shall
have, as of each applicable Commencement Date and as of each renewal of such
Policy, a rating of A: VII or better by A.M. Best.  The insurer under
each Policy shall have, as of each applicable Commencement Date and as of each
renewal of such Policy, a claims-paying ability rating of at least “AA” or its
equivalent from each of the Rating Agencies, or, if a particular Policy is
issued by more than one insurer, then, at least seventy-five percent (75%) of
the coverage (if there are four (4) or fewer insurers under such Policy) or at
least sixty percent (60%) of the coverage (if there are five (5) or more
insurers under such Policy) must be with carriers having such claims-paying
ability ratings (provided that all of the insurers under such Policy must have
claims-paying ability ratings of not less than “A-” or the equivalent from each
of the Rating Agencies as of each applicable Commencement Date and as of each
renewal of such Policy).  At all times, each insurer
under




40


each
Policy must maintain a rating of B++: VII or better by A.M. Best.  In
the event that Tenant satisfies the above-referenced ratings tests as to a
particular Policy as of an applicable Commencement Date or as of a Policy
renewal date, as applicable, but thereafter an insurer under such Policy ceases
to satisfy the minimum A.M. Best ratings that must be met at all times, Tenant
shall not be in default under this Section14.8 so long as, within
thirty (30) days after such cessation arises, Tenant replaces the insurer(s)
that do not satisfy such minimum ratings requirements with insurer(s) that do
satisfy such minimum ratings requirements.




14.9  Terrorism.  Tenant’s
Policies as to a particular Leased Property(ies) shall not be required to omit
any exclusions from coverage for acts of terrorism, unless obtaining such
omission (i) shall not cause the premiums therefor to exceed commercially
reasonable rates and (ii) is then customarily required by commercial landlords
owning, or institutional lenders making mortgage loans secured by, properties
similar to such Leased Property(ies).




15.  Damage and
Destruction.




15.1  Notice of
Casualty.  If any Leased Property shall be destroyed, in whole
or in part, or damaged by Casualty, Tenant shall give prompt written notice
thereof to Landlord and any Facility Mortgagee, in no event more than five (5)
Business Days after the occurrence of a Casualty.  Within fifteen (15)
days after the occurrence of a Casualty, or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: (i) the date of the Casualty; (ii) the nature
of the Casualty; (iii) a description of the damage or destruction caused by the
Casualty, including, but not limited to, the type of Leased Property damaged,
the area of the Leased Improvements damaged and the general extent of such
damage; (iv) a preliminary estimate of the cost to repair, rebuild, restore or
replace the Leased Property; (v) a preliminary estimate of the schedule to
complete the repair, rebuilding, restoration or replacement of the Leased
Property; (vi) a description of the anticipated property insurance claim,
including, but not limited to, the name of the insurer, the insurance coverage
limits, the deductible amounts, the expected settlement amount and the expected
settlement date; and (vii) a description of the business interruption claim,
including, but not limited to, the name of the insurer, the insurance coverage
limits, the deductible amounts, the expected settlement amount and the expected
settlement date.  Tenant shall provide Landlord with copies of any and
all material correspondence to and from the insurance provider within five (5)
Business Days after Tenant’s receipt or submission thereof and provide any other
information reasonably requested by Landlord.




15.2  Substantial
Destruction.  Except as otherwise set forth herein, if a
Facility is substantially destroyed or rendered Unsuitable For Its Primary
Intended Use by a Casualty at any time during the Term, Landlord may elect to
terminate this Lease with respect to the Leased Property on which such Facility
is located by providing written notice to Tenant within ninety (90) days of the
date upon which Tenant notifies Landlord of the Casualty, which termination
shall be effective as of the date of Tenant’s receipt of such
notice.  If Landlord elects to terminate, then Landlord shall receive
any and all of the insurance proceeds payable by reason of the Casualty (the
“Casualty Insurance
Proceeds”) and Tenant shall immediately pay to Landlord an amount equal
to any uninsured deductible, and as of the date of such termination, the
applicable Leased Property shall be deleted from this Lease and the provisions
of Section17.9 governing a deletion
of a Leased Property after Casualty shall be applicable.  If Landlord
does not elect to terminate, then Tenant shall promptly rebuild and restore the
Leased Property in accordance with Section15.4 below and Landlord
shall make the Casualty Insurance




41


Proceeds
available to Tenant for such restoration only pursuant to, and in accordance
with, Section15.5below.  The
term “substantially destroyed” means any Casualty resulting in the loss of use
of fifty percent (50%) or more of the licensed beds or units at the Facility
located on the relevant Leased Property or that would require more than fifty
percent (50%) of the value of the Leased Improvements to restore.




15.3  Partial
Destruction.  If a Leased Property is damaged by a Casualty but
the Facility(ies) located on such Leased Property is not substantially destroyed
or rendered Unsuitable For Its Primary Intended Use, then, subject to the
requirements of any Facility Mortgage binding upon, or secured by, the Leased
Property, Tenant shall restore the Leased Property in accordance with the
requirements of Section15.4 below and Landlord
shall make the Casualty Insurance Proceeds available to Tenant for such
restoration pursuant to Section15.5below.  Notwithstanding
the foregoing, if such Casualty shall occur during the final two (2) Lease Years
of the Term, then Landlord shall have the right to terminate this Lease with
respect to such Leased Property and retain any Casualty Insurance Proceeds, by
delivering notice of such election to Tenant within ninety (90) days of its
receipt of notice from Tenant of such Casualty, which termination shall be
effective as of the date such notice of termination from Landlord is received by
Tenant, whereupon Tenant shall immediately pay to Landlord the amount of any
uninsured deductible and the applicable Leased Property shall be deleted
herefrom pursuant to Section17.9below governing the
deletion of a Leased Property in connection with a Casualty.




15.4  Restoration.




15.4.1  Commencement
of Restoration.  Within sixty (60) days after the earliest to
occur of (i) Tenant’s receipt of notice from Landlord directing Tenant to
restore a Leased Property damaged or destroyed by a Casualty, (ii) in the case
of a Casualty that results in Landlord having the option to terminate this Lease
as to the affected Leased Property pursuant to Section15.2 or Section15.3, the expiration of
the period in which Landlord may exercise such option to terminate if Landlord
fails to affirmatively elect to terminate this Lease with respect to such Leased
Property, or (iii) in the case of damage to a Leased Property by Casualty that
does not result in the substantial destruction or the rendering Unsuitable For
Its Primary Intended Use of the applicable Facility(ies), and that does not
occur during the final two Lease Years of the Term, the date of such Casualty,
Tenant shall furnish to Landlord complete plans and specifications (the “Restoration Plans and
Specifications”) describing the work Tenant intends to undertake to
restore the applicable Leased Property (the “Work”) for Landlord’s
approval, which approval shall not be unreasonably withheld.  The
Restoration Plans and Specifications shall be prepared in accordance with good
and customary construction and design practices and bear the signed approval
thereof by an architect licensed to do business in the State where the
applicable Leased Property is located and shall be accompanied by a written
estimate from the architect containing the projected cost of completing the
Work.  The Restoration Plans and Specifications shall contemplate Work
of such nature, quality and extent that, upon the completion thereof, the Leased
Property shall be at least equal in value and general utility to its value and
general utility prior to the Casualty and shall be adequate to operate the
applicable Facility(ies) for its Primary Intended Use.  Tenant shall
satisfy all of the terms and conditions set forth in Sections11.2.1 through11.2.4 hereof relative to
Alterations as to the Work and the Restoration Plans and
Specifications.




15.4.2  Permits.  Prior
to the commencement of the Work, Tenant shall furnish to Landlord certified or
photostatic copies of all permits and contracts required by




42


any and
all applicable Legal Requirements or Insurance Requirements in connection with
the commencement and conduct of the Work.




15.4.3  Conduct
of Work.  Upon satisfaction of the requirements set forth in
Section15.4.1 and Section15.4.2 above, Tenant shall
perform the Work diligently and in a good, workmanlike and lien-free fashion, in
accordance with (i) the Restoration Plans and Specifications; (ii) the permits
and contracts referred to in Section15.4.2 above; and (iii)
all applicable Legal Requirements and other requirements of this
Lease.




15.5  Disbursement
of Insurance Proceeds.  Tenant shall use commercially
reasonable efforts to complete the Work on or prior to the estimated completion
date provided by its architect. If Landlord is required or elects to apply any
Casualty Insurance Proceeds toward repair or restoration of the applicable
Facility, provided Tenant is diligently performing the Work in accordance with
this Lease, Landlord shall disburse such Casualty Insurance Proceeds as and when
required by Tenant in accordance with normal and customary practice for the
payment of a general contractor in connection with construction projects similar
in scope and nature to the Work, including, at Landlord’s option, the
withholding of 10% of each disbursement of such Casualty Insurance Proceeds
until the Work is completed as evidenced by a certificate of occupancy or
similar evidence issued upon an inspection by the applicable Governmental
Authority and proof has been furnished to Landlord that no lien or liability has
attached or will attach to the applicable Leased Property or to Landlord in
connection with the Work.  Upon the completion of the Work and the
furnishing of such proof, the balance of the Casualty Insurance Proceeds payable
to Tenant on account of the Work shall be paid to Tenant as and when the terms
of Sections15.4.1through 15.4.3have been complied
with.  Prior to any final disbursement of Casualty Insurance Proceeds,
Tenant shall satisfy all of the conditions set forth in Sections11.2.1 through 11.2.9 relative to
Alterations as to the Work, as well as provide evidence reasonably satisfactory
to Landlord that any amounts required to be paid by Tenant in connection with
such Work pursuant to Section15.6 below have been paid
in full.  Notwithstanding anything contained herein to the contrary,
any Facility Mortgagee may retain and disburse the Casualty Insurance Proceeds
and Tenant shall comply with the requests and requirements of such Facility
Mortgagee in connection with the Work and the disbursement of Casualty Insurance
Proceeds.




15.6  Insufficient
Proceeds/Risk of Loss.  If the Casualty Insurance Proceeds are
not sufficient to pay the costs of the Work in full, Tenant shall nevertheless
remain responsible, at its sole cost and expense, to complete the
Work.  Tenant expressly assumes all risk of loss, including, without
limitation, a decrease in the use, enjoyment or value of the Leased Property
from any Casualty whatsoever, whether or not insurable or insured
against.  Tenant shall pay any insurance deductible and any other
uninsured Losses.




15.7  Excess
Proceeds.  Provided no Event of Default exists and this Lease
is not terminated pursuant to Section15 with respect to the
Leased Property on which the applicable Facility is located, any amount by which
the Casualty Insurance Proceeds exceed the amount necessary to complete the Work
shall be promptly paid by Landlord to Tenant, provided, however, that any such
excess Casualty Insurance Proceeds shall be paid by Landlord to Tenant only
following the disbursement of Casualty Insurance Proceeds necessary to complete
the Work in accordance with Section15.5.




43


15.8  Landlord’s
Inspection.  During the progress of the Work, Landlord and
Landlord’s Representatives may, from time to time, inspect the Work and the
Leased Property.  If, during such inspection or otherwise, Landlord
and Landlord’s Representatives determine that the Work is not being done in
accordance with the Restoration Plans and Specifications, this Lease or any
Legal Requirements, upon receipt by Tenant from Landlord of a written notice
setting forth in reasonable specificity and detail any defect in the Work,
Tenant will cause corrections to be made to any such defect.




15.9  Not Trust
Funds.  Notwithstanding anything herein or at law or in equity
to the contrary, none of the Casualty Insurance Proceeds, or Award on account of
any Condemnation, that may be paid to Landlord as herein provided shall be
deemed trust funds, and Landlord shall be entitled to dispose of such Casualty
Insurance Proceeds or Award as provided in this Section15 or in Section16 or Section17.6 below, as
applicable.




15.10  Waiver.  Tenant
waives any statutory rights of termination that may arise by reason of any
Casualty or Condemnation.




15.11  Facility
Mortgagee.  Notwithstanding anything contained herein to the
contrary, in the event that any Facility Mortgagee elects to require that any
Casualty Insurance Proceeds in connection with any Casualty, or the Award in
connection with any Condemnation, be applied by Landlord to reduce the
outstanding principal balance of any loan secured by any Leased Property,
Landlord may elect, in its sole discretion and by written notice to Tenant,
delivered promptly after the receipt by Landlord of written notice of such
election from Facility Mortgagee, to terminate this Lease as to the Leased
Property affected by such Casualty or Condemnation, in which event the
provisions of Section17.9governing a deletion of
one or more Leased Properties from this Lease after a Casualty or Condemnation
shall apply.  Notwithstanding anything contained in Section15 or Section16 hereof, Tenant shall
remain liable for any uninsured portion of any Casualty or the cost of any
restoration not covered by an Award in the event this Lease is terminated as to
the applicable Leased Property pursuant to Section15 or Section16 hereof.  In
the event a Facility Mortgagee so elects to apply any Casualty Insurance
Proceeds or Award in reduction of a loan secured by a particular Leased Property
and Landlord elects not to exercise its above-described termination right as to
such Leased Property, Landlord shall be obligated to disburse its own funds in
replacement for any Casualty Insurance Proceeds or Award so applied by the
Facility Mortgagee, and, in such event, Landlord’s own funds shall be disbursed
to Tenant from time to time as, when and subject to the satisfaction of the same
terms, conditions and requirements as would have governed the disbursement of
the Casualty Insurance Proceeds or Award that Landlord’s funds replace (e.g. the
requirements of Section15.5 shall continue to be
required to be satisfied as a pre-condition to any disbursement of Landlord’s
funds).




16.  Condemnation.




16.1  Parties’
Rights and Obligations.  If during the Term there is any
Condemnation of all or any part of any Leased Property, the rights and
obligations of the parties shall be determined by this Section16.




16.2  Total
Taking.  If any Leased Property is totally taken by
Condemnation, this Lease shall terminate as to such Leased Property on the Date
of Taking, in which event the provisions of Section17.9governing the deletion
of one or more Leased Properties from this




44


Lease
upon a Condemnation shall apply.  In the event of a total taking by
Condemnation of any Leased Property, the Award shall be solely the property of
Landlord, whether such damages shall be awarded as compensation for diminution
in value of the leasehold or the fee estate of the Premises, provided, however, Tenant shall
be entitled to any damages specifically attributable to reasonable removal and
relocation costs included in the Award.




16.3  Partial
Taking.  If any portion of any Leased Property is taken by
Condemnation, this Lease shall remain in effect as to such Leased Property if
the Facility(ies) located thereon is not thereby rendered Unsuitable For Its
Primary Intended Use as reasonably determined by Landlord, but if the
Facility(ies) is/are thereby rendered Unsuitable For Its Primary Intended Use,
this Lease shall terminate as to such Leased Property on the Date of Taking, in
which event the provisions of Section17.9 governing the
deletion of one or more Leased Properties from this Lease upon a Condemnation
shall apply.  If, as a result of any such partial taking by
Condemnation, this Lease is not terminated as provided above, Tenant’s
obligation to make payments of Rent and to pay all other charges required under
this Lease shall remain unabated during the Term notwithstanding such
Condemnation, unless the taking includes a material part of the Facility on any
Leased Property, in which event, from and after such taking, Rent hereunder
shall be equitably abated, as determined by Landlord, in its reasonable
discretion.  In the event of any partial taking by Condemnation of any
Leased Property, the entire Award shall belong to and be paid to Landlord,
except that, subject to the rights of any Facility Mortgagees, Tenant shall be
entitled to receive from the Award, if and to the extent such Award specifically
includes such item, the following: (i) a sum specifically attributable to
Tenant’s Personal Property and any reasonable removal and relocation costs
included in the Award; and (ii) a sum specifically attributable to the cost of
restoring the Leased Property in accordance with Section16.4 hereof; and (iii) a
sum specifically attributable to the interruption of business operations, which
sum, if and to the extent received by Landlord, shall be credited against
payments of Rent and other charges due from Tenant to Landlord under this
Lease.




16.4  Restoration.  If
there is a partial taking by Condemnation of any Leased Property and this Lease
remains in full force and effect pursuant to Section16.3, Tenant at its cost
shall accomplish all necessary restoration, which restoration activities shall
be performed in accordance with the terms and conditions applicable to Work
under Section15.




16.5  Temporary
Taking.  The taking of any 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 four (4) months.  During any such four (4) month period,
all the provisions of this Lease shall remain in full force and effect and Rent
shall continue without abatement or reduction.




17.  Default.




17.1  Events of
Default.  The occurrence of any one or more of the following
events shall constitute an “Event of Default” under this
Lease:




17.1.1  Payment
Default.  Tenant fails to make payment of the Rent or any other
sum payable under or pursuant to the terms of this Lease when the same becomes
due and payable and (i) if the Premises do not include any Leased Property(ies)
located in California, such failure is not cured within three (3) days after
such due and payable date (in the




45


case of
any failure to pay Fixed Rent) or within ten (10) Business Days after such due
and payable date (in the case of any failure to pay any Rent, other than Fixed
Rent) or (ii) if the Premises include any Leased Property located in California,
such failure is not cured within three (3) days after written notice thereof
from Landlord to Tenant (in the case of any failure to pay Fixed Rent) or within
ten (10) Business Days after written notice thereof from Landlord to Tenant (in
the case of any failure to pay any Rent, other than Fixed Rent).




17.1.2  Certain
Covenant Defaults.  Tenant fails to observe or perform any
term, covenant or agreement on its part to be performed or observed pursuant to
Section8.1.11or item (vi) of Section13, and such failure is
not cured within a period of fifteen (15) Business Days after receipt of notice
thereof from Landlord or Tenant fails to provide in a timely manner any notice
required under Section8.3 or to observe or
perform any term, covenant or agreement on its part to be performed or observed
pursuant to Section8.2.5(but without limitation
of the cure provisions of Section8.2.5 relative to Coverage
Based Security Deposits),Section14.1, Section14.2, Section14.5 or Section24.




17.1.3  Reporting
Obligations.  Any Tenant fails to observe or perform any term,
covenant or other obligation of Tenant set forth in Section25 hereof and such failure
is not cured within a period of fifteen (15) Business Days after receipt of
notice thereof from Landlord.




17.1.4  General
Covenant Defaults.  Tenant fails to observe or perform in all
material respects any term, covenant or condition of this Lease not specifically
provided for in this Section17.1 and such failure is
not cured within a period of thirty (30) days after receipt of notice from
Landlord, unless such failure cannot with due diligence be cured within a period
of thirty (30) days, in which case such period of time shall be extended to such
period of time as may be necessary to cure such default provided that (i) Tenant
commences such cure during the aforesaid 30 day period and (ii) Tenant
thereafter and continuously exercises due diligence to complete such
cure.




17.1.5  Representations
and Warranties.  Any representation or warranty made by or on
behalf of Tenant under or in connection with this Lease or any document,
financial statement, certificate or agreement delivered by or on behalf of
Tenant in connection with this Lease (including, but not limited to, any
Officer’s Certificate or Estoppel Certificate) proves to have been untrue in any
material respect on the day when made or deemed made.




17.1.6  Lease
Guaranty Defaults.  Any Guarantor shall fail to observe or
perform any term, covenant or condition of any Lease Guaranty and such failure
is not cured within any applicable cure period provided for in such Lease
Guaranty.




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




46


17.1.8  Bankruptcy
Petition.  Any petition is filed by or against any Tenant or
any Guarantor under federal bankruptcy laws, or any other proceeding is
instituted by or against any Tenant or any Guarantor seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for any Tenant or any Guarantor, or for any
substantial part of the property of any Tenant or any Guarantor, and such
proceeding is not dismissed within sixty (60) days after institution thereof, or
any Tenant or any Guarantor shall take any action to authorize or effect any of
the actions set forth above in this Section17.1.8.




17.1.9  Liquidation.  Any
Tenant or any Guarantor is liquidated or dissolved, or shall begin proceedings
toward such liquidation or dissolution.




17.1.10  Levy.  The
estate or interest of any Tenant in any Leased Property or any part thereof is
levied upon or attached in any proceeding and the same shall not be vacated or
discharged within the later of ninety (90) days after commencement thereof or
sixty (60) days after receipt by such Tenant of notice thereof from Landlord or
any other Person (unless such Tenant shall be contesting such lien or attachment
in good faith in accordance with Section13hereof).




17.1.11  Receiver.  Any
receiver, trustee, custodian or other similar official is appointed for any
Tenant, any Guarantor or any of the Facilities and any such appointment is not
dismissed within ninety (90) days after the date of such appointment and prior
to the entry of a final, unappealable order approving such
appointment.




17.1.12  Licensure,
Authorization or Facility Provider Agreement Defaults.  The
receipt by Tenant of written notice of any pending, threatened or contemplated,
or the occurrence of any, (i) determination by applicable Governmental
Authorities of Tenant’s material non-compliance with Legal Requirements
applicable to any Leased Property, or (ii) revocation of any material license,
permit, approval or other Authorization required for the lawful operation of a
Leased Property in accordance with its Primary Intended Use, or (iii) other
circumstances under which (a) a Tenant is, or may be, required by a
determination of any Governmental Authority to cease operation of all or any
material part of a Facility in accordance with its Primary Intended Use or (b)
any material Facility Provider Agreement, or any reimbursement agreement under
any other material Third Party Payor Program, is, or may be, terminated, in
whole or in part, prior to the expiration of the term thereof or, without the
prior written consent of Landlord in each instance (which consent may be
withheld in Landlord’s sole and absolute discretion), is not (or may not be)
renewed or extended, in whole or in part, upon the expiration of the stated term
thereof, and, in the case of any such written notice so received by Tenant or
any of the foregoing occurrences, the failure of Tenant (x) within ten (10) days
after written notice from Landlord, to commence to cure the underlying
circumstances that resulted in Tenant’s receipt of such written notice or such
occurrence, (y) thereafter continuously to exercise due diligence to complete
such cure, and (z) to complete such cure on or prior to (1) in the case of
clause (iii)(b) above, thirty (30) days after the aforesaid written notice from
Landlord or (2) in the case of the other clauses of this Section17.1.12, the taking of any
enforcement or other action by a Governmental Authority with respect to, or on
account of, any of the foregoing occurrences that has a Material Adverse Effect
on any Facility, any Tenant or any Guarantor.




47


17.1.13  Reduction
in Number of Licensed Beds or Units.  There is (i) as to any
Farm Pond Property, a reduction in the number of licensed units at any Facility
to an amount equal to less than ninety-eight percent (98%) of the number of
licensed units set forth on Schedule17.1.13 attached hereto in
violation of the requirements of this Lease or (ii) as to any Mentor Property, a
reduction in the number of licensed beds at any Facility to an amount equal to
less than ninety-eight percent (98%) of the number of licensed bedsset forth on Schedule17.1.13 attached hereto in
violation of the requirements of this Lease or (iii) a change in the type of
licensed or operational beds or units for any Facility in violation of the
requirements of this Lease, and such condition in clause (i) or clause (ii)
continues for ten (10) days after written notice thereof from Landlord to
Tenant.




17.1.14  Adverse
Regulatory Actions.  With respect to any Facility, any
Governmental Authority (i) makes a substandard quality of care determination
regarding such Facility and the underlying conditions that resulted in such
determination are not corrected within ninety (90) days; (ii) makes a
determination that such Facility is not in substantial compliance with any
applicable regulatory requirements and the underlying conditions that resulted
in such determination are not corrected within ninety (90) days; (iii)
designates any portion of such Facility or the entirety of such Facility as part
of a “poor performing chain” and the underlying conditions that resulted in such
designation are not corrected within ninety (90) days; (iv) takes adverse
regulatory action with respect to such Facility, including, without limitation,
the imposing of civil money penalties, with such adverse regulatory action
continuing unremedied for a period of sixty (60) days following the commencement
of such adverse regulatory action; (v) commences procedures to impose a ban on
new admissions generally or on the admission of patients otherwise qualifying
for reimbursement under any applicable governmental reimbursement program and
the underlying conditions that resulted in the commencement of such procedures
are not corrected on or prior to the earlier of ninety (90) days or the
imposition of such a ban; or (vi) imposes a ban of the nature described in
clause (v) above.




17.1.15  Cessation
of Services.  Except in connection with restoration of any
Casualty or Condemnation or on account of any Alteration permitted by the terms
of this Lease, any cessation of operations at all or any material part of any
Facility.




17.1.16  Default
Under Other Leases or Guaranties.  Any default by
any tenant or guarantor that continues beyond any applicable grace or cure
period shall occur under the terms of (i) any of the Other Leases or (ii) any
guaranty(ies) of any of the leases referenced in subsection (i) above by any
Guarantor, any of its Affiliates, or any of their respective successors and
assigns.




17.1.17  Default
Under Purchase Agreements.  An Event of Default occurs as
provided in Section17.10.




17.1.18  Default
Under Three Year Loan.  An Event of Default occurs as provided
in Section17.11.




17.2  Remedy
Election.  Upon the occurrence of any Event of Default,
Landlord may, at its option and by written notice to Tenant, terminate this
Lease (i) as to the Premises and/or (ii) if such Event of Default is a Facility
Default, as to any one or more of the Leased Property(ies) (selected in
Landlord’s sole discretion and by written notice to Tenant) to which such
Facility Default relates (a termination of this Lease as to less than all of the
Premises




48


as
provided in this subsection (ii) is herein referred to as a “Limited Termination Election”)
(the Leased Property(ies) as to which Landlord elects to terminate this Lease as
provided in subsection (i) or subsection (ii) above are herein referred to as
“Terminated Lease
Properties”).  Upon receipt of a termination notice as provided
in this Section17.2,Tenant shall have no right
to cure the Event of Default in question, all rights of Tenant under this Lease
shall cease as to the Leased Property(ies) so specified, and, if the Leased
Property(ies) so specified is/are less than all of the Premises, the provisions
of Section17.9shall
apply.  Without limitation of the foregoing, if Landlord makes a
Limited Termination Election, the deletion of the applicable Terminated Lease
Properties from this Lease shall be absolutely without limitation of each
Tenant’s continuing obligation (on a joint and several basis) for the damages
and other amounts owing on account of the Event of Default giving rise to the
deletion herefrom of such Terminated Lease Properties and/or the termination of
this Lease as to such Terminated Lease Properties.  Notwithstanding
any Limited Termination Election, Tenant shall pay, as Additional Rent, all
Litigation Costs as a result of any Event of Default hereunder.




17.3  Certain
Remedies.  If an Event of Default shall have occurred, Tenant
shall, if and to the extent required by Landlord so to do, immediately surrender
to Landlord the Leased Property(ies) specified by Landlord and as to which the
Lease has been or may be terminated pursuant to Section17.2or otherwise, and
Landlord may enter upon and repossess such Leased Property(ies) by reasonable
force, summary proceedings, ejectment or otherwise, and may remove Tenant and
all other Persons and all personal property from such Leased Property(ies)
subject to the rights of any occupants or patients and to any requirement of
law.  The provisions of this Section are subject to the terms of Section48.2below, if
applicable.




17.4  Damages.  To
the extent permitted by law, neither (i) the termination of this Lease pursuant
to Section17.2, (ii) the
repossession of any or all of the Leased Properties or any portion thereof,
(iii) the failure of Landlord to relet any or all of the Leased Properties or
any portion thereof, (iv) the reletting of any or all of the Leased Properties
or any portion thereof, (v) the failure of Landlord to collect or receive any
rentals due upon any such reletting, nor (vi) the election by Landlord not to
terminate the Lease but rather to seek all damages provided at law or in equity,
shall relieve Tenant of any of its liabilities or obligations hereunder, all of
which shall survive any such termination, repossession or
reletting.  In the event of any such termination of this Lease (or any
termination of this Lease as to less than all of the Leased Properties in the
event of a Limited Termination Election or the election by Landlord not to
terminate this Lease as to such Leased Properties, but rather to pursue its
damages at law or in equity), without limitation of Section17.5 and Section19 below, Tenant shall
forthwith pay to Landlord, at Landlord’s option, as liquidated damages with
respect to Rent for the Premises (or the Terminated Lease Properties in the
event of any Limited Termination Election), either:




(A)           the
sum of:  (1) the unpaid Rent that had been earned at the time of
termination (or the unpaid Rent as to the Terminated Lease Properties in the
event of a Limited Termination Election), which Rent shall bear interest at the
Overdue Rate from the date of such termination until paid; and (2) the then net
present value (computed using a discount rate equal to the Prime Rate) of the
amount of unpaid Rent (or the unpaid Rent as to the Terminated Lease Properties
in the event of a Limited Termination Election) for the balance of the Term not
previously collected pursuant to clause (B) below following the date of
termination (excluding, however, any period following termination on account of
which Landlord previously collected




49


Rent
pursuant to clause (B) below) without, subject to Section17.5 below, any obligation
or deemed obligation on the part of Landlord to mitigate damages,
or




(B)           each
installment of Rent hereof and other sums payable hereunder (or such Rent and
other sums as to the Terminated Lease Properties in the event of a Limited
Termination Election) as the same become due and payable, to the extent that
such Rent and other sums exceed the rent and other sums actually collected by
Landlord for the corresponding period pursuant to any reletting (without subject
to Section17.5 below, any obligation
or deemed obligation on the part of Landlord to mitigate damages) of the
Premises (or the Terminated Lease Properties in the event of a Limited
Termination Election).




Notwithstanding
anything contained herein to the contrary, in the event that Landlord elects to
collect damages pursuant to clause (A) or clause (B) above, Landlord may
subsequently elect to collect damages pursuant to the other of clause (A) and
clause (B) above, in each case so long as Landlord does not collect, and
provided that Landlord may not collect, any damages pursuant to clause (A) or
clause (B) above, as applicable, with respect to any period as to which Landlord
has theretofore actually collected damages from Tenant pursuant to the other of
clause (A) and clause (B) above, as applicable.  In case of any Event
of Default, Landlord may, with or without terminating this Lease, (x) relet any
or all of the Premises or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms that may, at Landlord’s option, be
equal to, less than or exceed the period that would otherwise have constituted
the balance of the Term and may grant concessions or free rent to the extent
that Landlord considers advisable or necessary to relet the same, and (y) make
such reasonable alterations, repairs and decorations in the applicable Leased
Property(ies) or any portion thereof as Landlord, in its sole judgment,
considers advisable or necessary for the purpose of reletting the applicable
Leased Property(ies); and such reletting and the making of such alterations,
repairs and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid.  Landlord shall in no event be
liable in any way whatsoever for failure to relet any Leased Property, or, in
the event that any Leased Property is relet, for failure to collect the rent
under such reletting.  To the fullest extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant’s being evicted or dispossessed,
or in the event of Landlord’s obtaining possession of any Leased Property, by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease or any other Event of Default.  The provisions of this
Section are subject to the terms ofSection48.2below, if
applicable.




17.5  Waiver;
Mitigation.  If this Lease is terminated pursuant to this Section17, whether in whole or,
in the case of any Limited Termination Election, in part, Tenant waives, to the
maximum extent permitted by applicable law, (i) any right of redemption,
re-entry or repossession, (ii) any right to a trial by jury in the event of
proceedings to enforce the remedies set forth in this Section17, and (iii) the benefit
of any moratorium laws or any laws now or hereafter in force exempting property
from liability for rent or for debt.  In addition, Tenant waives, to
the maximum extent permitted by applicable law, any duty on the part of Landlord
to mitigate the damages recoverable from Tenant on account of any breach or
Event of Default by Tenant, except that, notwithstanding the foregoing or
anything to the contrary contained in this Lease, Landlord agrees to comply with
any non-waivable duty to mitigate the aforesaid damages that may be imposed by
applicable law.




17.6  Application
of Funds.  Notwithstanding anything to the contrary contained
in this Lease, any payments, Security Deposit or other deposits (including, in
the case




50


of any
such deposit that is held in the form of a letter of credit, any funds resulting
from any draw upon any such letter of credit), escrows, Casualty Insurance
Proceeds or Awards received or held by Landlord under any of the provisions of
this Lease may, during the existence of any Event of Default and at Landlord’s
option, in its sole discretion, be applied to any Tenant’s obligations under
this Lease and/or, in the case of the Security Deposit (including, in the case
of all or any part thereof that is held by Landlord in the form of a letter of
credit, any funds resulting from any draw upon such letter of credit), any
Tenant’s or any Guarantor’s obligations under any of the Purchase Agreements or
any of the Three Year Loan Documents, in the order that Landlord in its sole
discretion may determine.




17.7  Nature of
Remedies.  Landlord shall have all rights at law and in equity
available to Landlord as a result of an Event of Default or Tenant’s breach of
this Lease, including, without limitation, to the extent permitted by law (but
subject, in the case of any Leased Property(ies) located in California, to any
provisions of California law providing that this Lease will be deemed terminated
as to any Leased Property(ies) as to which Tenant’s right to possession is
terminated by Landlord due to an Event of Default), the right to dispossess
Tenant from a Leased Property(ies) without terminating this Lease as it applies
to such Leased Property(ies) and thereafter, unless and until Landlord
terminates this Lease as it applies to such Leased Property(ies), collect Rent
and other sums payable hereunder as to such Leased Property(ies) as the same
become due and payable, to the extent such Rent and other sums exceed the rent
and other sums actually collected by Landlord for the corresponding period
pursuant to any reletting (without, subject to Section17.5above, any obligation or
deemed obligation on the part of Landlord to mitigate damages) of such Leased
Property(ies).  To the extent permitted by law, the rights and
remedies of Landlord under this Lease, at law and in equity shall be cumulative
and may be exercised concurrently or successively, on one or more occasions, as
Landlord deems appropriate in its sole discretion, as often as occasion therefor
arises.  To the extent permitted by law, each such right and remedy
shall be in addition to all other such rights and remedies, and the exercise by
Landlord of any one or more of such rights and remedies shall not preclude the
simultaneous or subsequent exercise of any or all other such rights and
remedies.  Without limiting the generality of the foregoing, the
liquidated damages in respect of Rent provided for in clauses (A) and (B) of
Section17.4hereof, and in Section19hereof, shall be payable
by Tenant in addition to, and not in lieu of, any other damages suffered by
Landlord in connection with any default or Event of Default by Tenant
(including, without limitation, Litigation Costs and costs of
reletting).




17.8  No
Mediation or Arbitration.  Upon any Event of Default by Tenant,
Landlord shall be entitled to proceed immediately to enforce its rights and
remedies pursuant to this Section17 and the other terms of
this Lease, and neither any Event of Default, nor the rights and obligations of
Tenant and Landlord under this Lease, shall be subject to mediation or
arbitration of any kind.




17.9  Deletion
of Properties.  In the event that this Lease is terminated as
to one or more Deleted Properties (but not all of the Premises) pursuant to
Section17.2or as to one or more
Leased Properties (but not all of the Premises) in connection with a Casualty or
Condemnation, the provisions of this Section17.9 shall be
applicable.  Without necessity of any further action of the parties,
this Lease shall terminate as to the Deleted Property(ies), and the Deleted
Property(ies) shall be separated and removed herefrom, at such time (such date,
the “Property Removal
Date”) as Landlord delivers written notice to Tenant exercising
its




51


termination
rights pursuant to Section15, Section16 or Section17.2 (any of the
foregoing, a “Deletion
Notice”).  In addition, without further action of the parties,
(x) upon the consummation of the Option Closing pursuant to Section44.1 hereof, the Subject
Mentor Properties shall be considered Deleted Properties, and shall be separated
and removed from this Lease as provided in this Section17.9, with the applicable
Property Removal Date to be the day preceding such Option Closing (if the net
closing proceeds are received by Landlord on or prior to 2:00 p.m. Chicago time
on the day of closing) and otherwise to be the day of such Option Closing, and
(y) upon the consummation of the sale of any Subject Farm Pond Property(ies) to
Tenant as provided in Section44.3, such Farm Pond
Property(ies) shall be considered Deleted Properties, and shall be separated and
removed from this Lease as provided in this Section17.9, with the applicable
Property Removal Date to be the day preceding the consummation of such sale (if
the net closing proceeds are received by Landlord on or prior to 2:00 p.m.
Chicago time on the day of closing) and otherwise to be the day of such
consummation.  As of the applicable Property Removal Date, this Lease
shall be automatically and ipso facto amended to:




(i)  delete
and eliminate the applicable Deleted Property(ies) herefrom;




(ii)  exclude
the applicable Deleted Property(ies) from the definition of
Premises;




(iii)  reduce
the Fixed Rent payable hereunder by an amount equal to the Fixed Rent applicable
to the applicable Deleted Property(ies); and




(iv)  amend and
reduce, respectively, Exhibit C attached hereto
and the Base Year Patient Revenues to delete and eliminate the applicable
Deleted Property(ies) therefrom and reduce the Base Year Patient Revenues
applicable to the remaining Leased Property(ies) by the amount of the Allocated
Base Year Patient Revenues applicable to the applicable Deleted Property(ies)
for the purposes of determining whether the Rent Escalation Condition has been
satisfied and otherwise.




With
respect to any Terminated Lease Property(ies), the terms of items (i) through
(iv) above shall be without limitation upon the liability of Tenant (joint and
several) for the rental amounts allocated to the Terminated Lease Property(ies),
and (a) in case of any termination of this Lease as a result of any Event of
Default, for any damages resulting from the Event of Default that resulted in
the deletion of such Terminated Lease Property(ies) herefrom and (b) in case of
any termination of this Lease pursuant to Section15 or Section16 hereof, for any
obligations owed by Tenant to Landlord on account of such termination under
Section15 or Section16
hereof.  Promptly (and in any event within ten (10) days) after
receipt of Landlord’s request therefor, Tenant shall execute and deliver to
Landlord such instrument(s) as Landlord may from time to time request reflecting
the elimination of any Deleted Property(ies) herefrom on the terms described
above.




17.10  Purchase
Agreements.  Landlord and Tenant acknowledge and agree that (i)
contemporaneously with the Effective Date, VR Landlord is entering into five (5)
separate Agreement for Sale of Real Estate instruments (such instruments, as
amended from time to time, are herein referred to as the “Purchase Agreements”) each
dated as of the Effective Date and with Emeritus Corporation, a Washington
corporation, as purchaser, and relating, respectively, to the properties
commonly known as Summerville at Mentor, Summerville at Lake Mary, Golden Pond
Assisted Living, Atherton Court Alzheimer’s Residence and Summerville at
Brighton, (ii)




52


Tenant
agrees to cause the obligations of the purchasers under the Purchase Agreements
to be performed in a timely manner and without default and acknowledges and
agrees that VR Landlord, as seller, would not have entered into the Purchase
Agreements if this Section17.10, and the rights and
remedies provided to Landlord in this Section17.10, had not been
included in this Lease, and (iii) the occurrence of any default by a purchaser
under any of the Purchase Agreements which would permit VR Landlord to terminate
any such Purchase Agreement shall, immediately and without notice or opportunity
to cure, constitute an Event of Default under this Lease, on account of which
Landlord shall have the right to exercise any and all rights and remedies that
may be available to it under this Lease, including, without limitation, the
rights to dispossess Tenant from any or all of the Premises and/or terminate
this Lease as it applies to any or all of the Premises, and further the right to
apply and retain Four Million Three Hundred Thousand Dollars ($4,300,000.00) of
the Security Deposit as liquidated damages for breach of one or more of the
Purchase Agreements (AND
LANDLORD
AND TENANT AGREE THAT THE ACTUAL DAMAGES OF VR LANDLORD, AS SELLER, IN THE EVENT
OF A PURCHASER DEFAULT UNDER ANY OF THE PURCHASE AGREEMENTS WHICH WOULD PERMIT
VR LANDLORD TO TERMINATE ANY SUCH PURCHASE AGREEMENT ARE UNCERTAIN AND DIFFICULT
TO ASCERTAIN, AND THAT APPLICATION AND RETENTION OF SUCH $4,300,000.00 FROM THE
SECURITY DEPOSIT IS A REASONABLE ESTIMATE OF SUCH DAMAGES) (and Tenant
agrees that, upon any such application and retention of the Security Deposit,
Tenant shall be obligated to restore the Security Deposit to its required amount
as set forth in Section3.4.3 hereof, and such
liquidated damages shall not limit or impair Landlord’s rights to collect
additional damages under this Lease and/or exercise any and all other rights and
remedies as aforesaid on account of such Event of Default under this
Lease).




17.11  Three
Year Loan.  Landlord and Tenant acknowledge and agree that (i)
contemporaneously with the last closing under the Purchase Agreements, a loan in
the amount of Ten Million Dollars ($10,000,000.00) is to be made by VR Landlord
or one of its Affiliates pursuant to the terms of a certain Binding Term Sheet
dated as of the Effective Date executed by VR Landlord, as such Binding Term
Sheet may be amended after the Effective Date and prior to the closing of such
loan (such loan is herein referred to as the “Three Year Loan”, the
documents evidencing and securing such Three Year Loan are herein referred to as
the “Three Year Loan
Documents”, the makers of the promissory note evidencing the Three Year
Loan are referred to herein, individually and collectively, as the “Three Year Loan Makers” and
the guarantor of the Three Year Loan is referred to herein as the “Three Year Loan Guarantor”),
(ii) Tenant agrees to cause the obligations of the Three Year Loan Makers and
the Three Year Loan Guarantor under the Three Year Loan Documents to be
performed in a timely manner and without default and acknowledges and agrees
that VR Landlord would not have entered into the aforesaid Binding Term Sheet,
the lender under the Three Year Loan Documents would not have made the Three
Year Loan, and VR Landlord, as seller, would not have entered into the Purchase
Agreements if this Section17.11, and the rights and
remedies provided to Landlord in this Section17.11, had not been
included in this Lease, and (iii) the occurrence of any default by any Three
Year Loan Maker or Three Year Loan Guarantor under any of the Three Year Loan
Documents shall, if not cured within any applicable notice and cure period,
immediately and without notice or opportunity to cure, constitute an Event of
Default under this Lease, on account of which Landlord shall have the right to
exercise any and all rights and remedies that may be available to it under this
Lease, including, without limitation, the rights to dispossess Tenant from any
or all of the Premises and/or terminate this Lease as it applies to any or all
of the




53


Premises,
and further the right to apply the Security Deposit to any amounts owing under
any of the Three Year Loan Documents (and Tenant agrees that, upon any such
application, Tenant shall be obligated to restore the Security Deposit to its
required amount as set forth in Section3.4.3 hereof, and any such
application shall not limit or impair Landlord’s rights to exercise any and all
other rights and remedies as aforesaid on account of such Event of Default under
this Lease).




18.  Landlord’s
Right to Cure Tenant’s Default.  If an Event of Default shall
have occurred and be continuing, Landlord, without waiving or releasing any
obligation of Tenant or the Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payments or perform such acts
for the account and at the expense of Tenant, and may, to the extent permitted
by law, enter upon any or each Leased Property or any portion thereof for the
purpose of curing such Event of Default and take all such action thereon as, in
Landlord’s opinion, may be necessary or appropriate in connection with curing
such Event of Default.  No such entry shall be deemed an eviction of
Tenant.  All sums so paid or advanced by Landlord and all costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, together with interest thereon (to the maximum extent
permitted by law) as Additional Rent hereunder at the Overdue Rate from the date
on which such sums or expenses are paid or incurred by Landlord, shall be paid
by Tenant to Landlord on demand.  The obligations of Tenant and rights
of Landlord contained in this Section18 and in Section17 above shall survive the
expiration or earlier termination of this Lease.




19.  Holding
Over.  If Tenant shall, for any reason other than if required
by this Lease or by Landlord, remain in possession of any Leased Property after
the expiration or earlier termination of the Term as to such Leased Property,
such possession shall, at the option of Landlord, in its sole discretion as to
each such Leased Property, be as a month-to-month tenant during which time
Tenant shall pay as rental for such Leased Property each month (which rental
constitutes liquidated damages with respect to Fixed Rent for such Leased
Property, and not a penalty, for the period to which it relates), one and
one-half (11⁄2) times the aggregate of the Fixed Rent payable by Tenant pursuant
to the provisions of this Lease, in each case, with respect or attributable to
the Leased Property(ies) in question.  During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease with respect to the Leased
Property(ies) in question (including, but not limited to, its obligation to pay
Additional Rent), but shall have no rights hereunder other than the right, to
the extent given by law to month-to-month tenancies, to continue its occupancy
and use of the applicable Leased Property(ies).  Landlord shall have
the right to terminate Tenant’s month-to-month tenancy as to any such Leased
Property(ies) at any time after giving Tenant ten (10) days’ prior written
notice, and at any time thereafter, Landlord may re-enter and take possession of
the Leased Property(ies) in question as to which such a termination notice has
been given.  Nothing contained herein shall constitute the consent,
express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of this Lease as it applies to any or all of
the Leased Properties.  The terms of this Section19 shall be without
limitation upon any other right Landlord may have hereunder, at law or in
equity, on account of any holdover with respect to the applicable Leased
Property(ies).  The obligations of Tenant and the rights of Landlord
contained in this Section19 shall survive the
expiration or earlier termination of this Lease.




54


20.  Subordination.




20.1  Subordination.  This
Lease and all rights of Tenant hereunder are subject and subordinate to all
Facility Mortgages that may now or hereafter affect Landlord’s interest in any
Leased Property, and to all renewals, modifications, consolidations,
replacements and extensions of all Facility Mortgages, provided, however, that,
in the case of any Facility Mortgage that is not in existence as of the
Effective Date, Tenant’s aforesaid subordination shall be conditioned on
Tenant’s receipt of a so-called “non-disturbance” agreement in favor of Tenant
from the Facility Mortgagee under any such Facility Mortgage on such Facility
Mortgagee’s commercially reasonable standard form.  This Section shall
be self-operative and no further instrument of subordination shall be
required.  In confirmation of such subordination, Tenant also agrees
to execute and deliver promptly (and in any event within ten (10) Business Days)
any commercially reasonable and customary agreement (in recordable form, if
requested) that Landlord or any Facility Mortgagee may request to evidence such
subordination.




20.2  Attornment.  If
the interests of Landlord under this Lease are transferred by reason of, or
assigned in lieu of, foreclosure or other proceedings for enforcement of a
Facility Mortgage, then Tenant shall, at the option of such purchaser or
assignee, as the case may be, (i) attorn to such party and perform for its
benefit all the terms, covenants and conditions of this Lease on Tenant’s part
to be performed with the same force and effect as if such party were the
landlord originally named in this Lease, or (ii) enter into a New Lease with
such party, as landlord, pursuant to Section40 hereof for the
remaining Term and otherwise on the same terms and conditions as this Lease,
except that such successor landlord shall not be (w) liable for any previous
act, omission, breach, default or negligence of Landlord under this Lease; (x)
subject to any counterclaim, defense or offset that theretofore shall have
accrued to Tenant against Landlord; (y) bound by any previous modification or
amendment of this Lease or by any previous prepayment of more than one month’s
rent, unless such modification, amendment or prepayment shall have been approved
in writing by the Facility Mortgagee through or by reason of which such
successor landlord shall have succeeded to the rights of Landlord under this
Lease or, in case of any such prepayment, such prepayment of rent has actually
been delivered to such successor landlord; or (z) liable for any security
deposited pursuant to this Lease unless such security has actually been
delivered to such successor landlord.  Nothing contained in this Section20.2 shall be construed to
impair any right otherwise exercisable by any such owner, holder or
lessee.




20.3  Mortgagee
Cure Rights.  If any act or omission by Landlord would give
Tenant the right, immediately or after lapse of time, to cancel or terminate
this Lease or to claim a partial or total eviction, or an abatement of Rent,
setoff or counterclaim not otherwise expressly permitted by the terms of this
Lease, or to declare a default hereunder, Tenant will not exercise any such
right until (i) it has given written notice of such act or omission to each
Facility Mortgagee whose name and address shall have previously been furnished
to Tenant, (ii) Landlord shall have failed to cure the same after the delivery
of such notice as may be herein required and within the time limits set forth in
this Lease, and (iii) following the giving of such notice to each Facility
Mortgagee, no Facility Mortgagee shall have remedied such act or omission (x) in
the case of an act or omission that is capable of being remedied without
possession of the applicable Leased Property, within the cure period available
to Landlord under this Lease plus thirty (30) days; and (y) in the case of
any act or omission that is incapable of being remedied without possession of
the applicable Leased Property, within thirty (30) days




55


following
the date on which possession is obtained (either by such Facility Mortgagee or
by a receiver in an action commenced by such Facility Mortgagee).




20.4  Modifications.  Tenant
shall execute any modification of this Lease reasonably requested by any
Facility Mortgagee or prospective Facility Mortgagee to cause the terms of this
Lease to conform with customary and reasonable mortgage financing requirements,
provided that such modifications (i) do not materially adversely increase the
obligations of Tenant hereunder or materially diminish Tenant’s rights under
this Lease, (ii) do not increase Rent payable hereunder, and (iii) are requested
by any such Facility Mortgagee or prospective Facility Mortgagee only at the
time of its initial loan advance or any subsequent extension of the maturity
date of its loan or material modification of the terms of its
loan.  Tenant will not unreasonably withhold, delay or condition its
consent to such modification, provided subsections (i), (ii) and (iii) above are
complied with.




21.  Property and Accounts
Collateral.




21.1  Landlord’s
Security Interest.  The parties intend that, if an Event of
Default occurs under this Lease, Landlord will control Tenant’s Personal
Property so that Landlord or its designee or nominee can operate, sell or re-let
each Facility for its Primary Intended Use.  Accordingly, to implement
such intention, and for the purpose of securing the payment and performance
obligations of Tenant hereunder, Landlord and Tenant agree as
follows:




21.1.1  Property
Collateral; Accounts Collateral.  Tenant, as debtor, hereby
grants to Landlord, as secured party, a security interest in, and lien upon, (i)
all of Tenant’s right, title and interest in and to Tenant’s Personal Property
(exclusive of Tenant’s computer hardware, proprietary software, names and
tradenames) and any and all products, rents, proceeds and profits thereof in
which Tenant now owns or hereafter acquires an interest or right (collectively,
the “Property
Collateral”) and (ii) all accounts receivable with respect to each
Facility that Tenant now owns or in which Tenant hereafter acquires an interest
or right (collectively, the “Accounts
Collateral”).  The security interests and liens granted to
Landlord in this Section21.1 with respect to the
Accounts Collateral may be subordinated to any first priority security interest
granted in connection with any permitted AR Financing (as defined in Section21.2 below); provided, however, that, in
connection with such AR Financing, Landlord shall furnish Tenant’s financiers,
and Tenant’s financiers shall execute and return to Landlord, an intercreditor
agreement in form and substance reasonably acceptable to Landlord.




21.1.1.1  Security
Agreement.  This Lease constitutes a security agreement
pursuant to and in accordance with the UCC covering all Property Collateral and
Accounts Collateral, as well as the Authorization Collateral and any other
property in or against which Landlord is granted a security interest or lien by
the terms of this Lease (collectively, the “Lease Collateral”), and such
security agreement, and the security interests and liens created in this Lease,
shall survive the expiration or earlier termination of this
Lease.  Tenant hereby authorizes Landlord to file such financing
statements, continuation statements and other documents as may be necessary or
desirable to perfect or continue the perfection of Landlord’s security interests
and liens in the Lease Collateral pursuant to the UCC.  In addition,
if required by Landlord at any time during the Term, Tenant shall execute and
deliver to Landlord, in form reasonably satisfactory to Landlord, additional
security agreements, financing statements, fixture filings and such other
documents as Landlord may reasonably require to




56


perfect
or continue the perfection of Landlord’s security interests and liens in the
Lease Collateral.  Upon the occurrence of an Event of Default or in
connection with an Operational Transfer, Landlord shall be entitled to exercise
any and all rights and remedies available to a secured party under the UCC, or
available to a landlord under the laws of the State(s) where the applicable
Leased Property(ies) is (are) located, with respect to the Lease Collateral,
including the right to sell the same at public or private sale, and, in
connection with any such sale, Tenant agrees that the giving of ten (10) days’
notice by Landlord, designating the time and place of any public sale of any
Lease Collateral, or the time after which any private sale or other intended
disposition of any Lease Collateral is to be made, shall be deemed to be
reasonable notice thereof, and Tenant waives any other notice with respect
thereto.




21.1.2  Certain
Changes.  Tenant shall give Landlord at least thirty (30) days’
prior written notice of any change in any Tenant’s principal place of business,
name, identity, jurisdiction of organization or corporate structure, and any
such change shall, without limitation of Section24 hereof, be subject to
Landlord’s prior written approval, which approval shall not be unreasonably
withheld.  With respect to any such change, Tenant will promptly
execute and deliver such instruments, documents and notices and take such
actions, as Landlord deems necessary or desirable to create, perfect and protect
the security interests and liens of Landlord in the Lease
Collateral.




21.2  Accounts
Receivable Financing.  Tenant shall not obtain so-called
“Accounts Receivable” financing with respect to any Facility (or its operations
therein) or otherwise pledge any receivables as collateral (“AR Financing”) unless (i) the
terms and conditions of this Section21 have been satisfied;
(ii) Tenant obtains Landlord’s consent to the terms thereof; and (iii) no Event
of Default exists hereunder.  Landlord shall not unreasonably withhold
or delay its consent to any AR Financing secured by a first lien upon Tenant’s
Accounts Collateral and as to which Landlord has received an intercreditor
agreement as required pursuant to Section21.1.1, and, as to any
other AR Financing, Landlord may withhold its consent in its sole
discretion.




22.  Risk of
Loss.  During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of each Leased Property in consequence of the
damage or destruction thereof by fire, the elements, acts of terrorism,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
attachments, levies or executions is assumed by Tenant, and Landlord shall in no
event be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Tenant to any abatement of Rent.




23.  Indemnification.  Notwithstanding
the existence of any insurance provided for herein, and without regard to the
policy limits of any such insurance, Tenant shall protect, indemnify, save
harmless and defend Landlord and the Landlord Indemnified Parties from and
against all Losses (including, without limitation, Litigation Costs), to the
maximum extent permitted by law (and to the extent not the result of Landlord’s
gross negligence or willful misconduct), imposed upon or incurred by, or
asserted or alleged against, Landlord or any Landlord Indemnified Parties by
reason of:  (i) any accident, injury to, or death of, persons or loss
of, or damage to, property occurring on or about any Leased Property; (ii) any
use, misuse, non-use, condition, maintenance or repair of any Leased Property by
Tenant, any Tenant Parties or anyone claiming under Tenant or any Tenant
Parties; (iii) any Impositions; (iv) any failure on the part of Tenant, any
Tenant Parties or anyone claiming under Tenant or any Tenant Parties to perform
or comply with any of the terms of this Lease; (v) any claims for work or
labor




57


performed
or materials supplied to Tenant or any Tenant Parties; (vi) any breach by Tenant
of any of its representations and warranties hereunder; (vii) any breach or
default under any Authorization by any Tenant (or any Facility) or any
revocation of any Authorizations (including, but not limited to, any Facility
Provider Agreement); (viii) any negligence or misconduct on the part of Tenant
or any Tenant Parties; (ix) the non-performance of any of the terms and
provisions of any and all existing and future subleases of any Leased Property
to be performed by the subtenant thereunder; and/or (x) the claims of any broker
or finder made in connection with this Lease except to the extent claiming under
the written agreements of Landlord.  Any amounts that become payable
by Tenant under this Section23 shall be paid within
ten (10) days after demand by Landlord, and if not timely paid, shall bear
interest at the Overdue Rate from the date of such demand until
paid.  Tenant, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Landlord or any
Landlord Indemnified Parties with counsel acceptable to Landlord in its sole
discretion and shall not, under any circumstances, compromise or otherwise
dispose of any suit, action or proceeding without obtaining Landlord’s written
consent.  Tenant shall have the right to control the defense or
settlement of any claim provided that (A) Tenant shall first confirm in writing
to Landlord that such claim is within the scope of this indemnity and that
Tenant shall pay any and all amounts required to be paid in respect of such
claim; and (B) any compromise or settlement shall require the prior written
approval of Landlord, which approval shall not be unreasonably withheld provided
Landlord (or the applicable Landlord Indemnified Parties) are irrevocably
released from all liabilities in connection with such claim as part of such
settlement or compromise.  Landlord, at its election and sole cost and
expense, shall have the right, but not the obligation, to participate in the
defense of any claim.  If Tenant does not act promptly and completely
to satisfy its indemnification obligations hereunder, Landlord may resist and
defend any such claims or causes of action against Landlord or any Landlord
Indemnified Party at Tenant’s sole cost.  The terms of this Section23 shall survive the
expiration or sooner termination of this Lease.




24.  Assignment;
Sublease.




24.1  Assignment;
Sublease.




24.1.1  Notwithstanding
anything to the contrary contained in this Lease, Tenant shall have no right,
directly or indirectly, or through one or more step transactions or tiered
transactions, voluntarily or by operation of law, to assign, convey, sell or
otherwise transfer this Lease in part under any
circumstances.  Subject to the foregoing, except as expressly provided
in Section24.1.2 hereof or elsewhere
herein, without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, delayed or conditioned so long as no Event of Default
has occurred and is continuing hereunder, Tenant shall not, either directly or
indirectly, or through one or more step transactions or tiered transactions,
voluntarily or by operation of law, (i) assign, convey, sell, pledge,
mortgage, hypothecate or otherwise encumber, transfer or dispose of all or any
part of this Lease or any Tenant’s leasehold estate hereunder;
(ii) sublease all or any part of any Leased Property; (iii) engage the
services of any Person for the management or operation of all or any part of any
Leased Property; (iv) convey, sell, assign, transfer, pledge, hypothecate,
encumber or otherwise dispose of any stock, partnership, membership or other
interests (whether equity or otherwise) in any Tenant or any Person(s)
controlling any Tenant, if such conveyance, sale, assignment, transfer, pledge,
hypothecation, encumbrance or disposition results, directly or indirectly, in a
change in control of such Tenant




58


(or of
such controlling Person(s)); (v) dissolve, merge or consolidate any Tenant
or any Persons controlling any Tenant with any other Person, if such
dissolution, merger or consolidation, directly or indirectly, results in a
change in control of such Tenant (or in such  controlling Person(s));
(vi) sell, convey, assign, or otherwise transfer all or substantially all of the
assets of any Tenant or any Person(s) controlling any Tenant; (vii) sell,
convey, assign, or otherwise transfer any of the assets of any Tenant or any
Person(s) controlling any Tenant, if the consolidated net worth of such Tenant
(or such controlling Person(s), as the case may be) immediately following such
transaction is not at least equal to the consolidated net worth of such Tenant
(or such controlling Person(s), as the case may be) immediately prior to such
transaction or if the applicable Guarantor Financial Tests are not satisfied
immediately following such transaction; or (viii) enter into or permit to be
entered into any agreement or arrangement to do any of the foregoing or to grant
any option or other right to any Person to do any of the
foregoing.  For purposes of this Section24.1, a change in control
of any Tenant or any controlling Person, as applicable, shall include, without
limitation, (a) the sale or other disposition of (x) all or any part of its
interest in any Guarantor or (y) all or substantially all of the assets of any
Guarantor or any Tenant, and (b) a merger or consolidation involving any
Guarantor or any Tenant, which results in the equity interest owners of any
Guarantor, or of any Tenant, immediately prior to such event owning less than
fifty percent (50%) of the capital stock, partnership interests, limited
liability company membership interests and/or other equity interests, as
applicable, of the surviving entity or any parent of the surviving
entity.  For purposes of this Section24, a sublease of all or
any part of any Leased Property shall be deemed to include any concessionaire
agreement, license agreement or other agreement involving use or possession of
all or any part of any Leased Property.




24.1.2  Subject
to the provisions of Section24.3 below and any other
express conditions or limitations set forth herein, so long as no Event of
Default has occurred and is continuing hereunder, Tenant may, without the
consent of Landlord, (i) assign this Lease in its entirety or sublet all or any
part of any Leased Property to any Affiliate of any Tenant, provided that, in
the case of both this clause (i) and clause (ii) below, the assignee or
subtenant in question is duly licensed and possessed of all Authorizations
necessary for the conduct of its activities and the operation of such Leased
Property or portion thereof in accordance with all applicable laws and shall
comply with the provisions of clauses (a), (b), (c) and (d) below (except that,
in the case of an assignment or sublet to an Affiliate pursuant to clause (i)
above, the assignee or subtenant shall not be required to comply with clauses
(b)(1), (b)(2) and (b)(3)), or (ii) sublet a minor portion of a particular
Facility to a Person providing services that are ancillary to Tenant’s Primary
Intended Use at such Facility (e.g., a sublease to a beauty salon operator), or
(iii) enter into Approved Residency Agreements with residents of a Facility,
provided that all of the requirements for constituting an Approved Residency
Agreement are complied with at the time of entry into such agreement and at all
times thereafter, or (iv) make a collateral assignment of any rights or
obligations hereunder to any Lending Institution in order to secure indebtedness
owed by any Tenant or any Guarantor to such Financial Institution, provided that
the prohibitions on partial assignment of this Lease and the other provisions of
this Section24 shall be applicable in
connection with any foreclosure (or assignment in lieu of foreclosure) or other
enforcement action relating to such collateral assignment, or (v) make or allow
any transfer or issuance of capital stock in Emeritus, or any change in control
of Emeritus or any Person(s) controlling Emeritus,




59


so long
as immediately following any such transfer or issuance or change in control, as
applicable:




(x) if
Emeritus remains in existence, (A) Emeritus remains the sole owner of all
capital stock, partnership interests, limited liability company membership
interests and/or other equity interests, as applicable, in Summerville, and
Summerville remains the sole owner of all capital stock, partnership interests,
limited liability company membership interests and/or other equity interests, as
applicable, in each Tenant, (B) Emeritus remains a Guarantor of this Lease
pursuant to the Emeritus Guaranty and satisfies the Guarantor Financial Tests as
they apply to Emeritus, (C) the Seniormost Parent Entity, if any, that controls
Emeritus shall become a Guarantor by executing and delivering to Landlord a new
Lease Guaranty in the form of the Emeritus Guaranty, (D) such Seniormost Parent
Entity, if any, satisfies the Guarantor Financial Tests as they apply to it, and
(E) the senior management of Emeritus is comprised of persons having a favorable
business, regulatory compliance and operational reputation and character;
and




(y) if
Emeritus ceases to exist, (A) such cessation of existence shall be due to a
merger or consolidation transaction as a result of which Emeritus is merged into
another entity (a “Successor
Entity”), (B) such Successor Entity shall be the sole owner of all
capital stock, partnership interests, limited liability company membership
interests and/or other equity interests, as applicable, in Summerville, and
Summerville shall remain the sole owner of all capital stock, partnership
interests, limited liability company membership interests and/or other equity
interests, as applicable, in each Tenant, (C) each of such Successor Entity and
the Seniormost Parent Entity, if any, that controls such Successor Entity shall
become a Guarantor by executing and delivering to Landlord a new Lease Guaranty
in the form of the Emeritus Guaranty, (D) each of such Successor Entity and such
Seniormost Parent Entity, if any, satisfies the Guarantor Financial Tests as
they apply to it, and (E) the senior management of such Successor Entity shall
be comprised of persons having a favorable business, regulatory compliance and
operational reputation and character.




So long
as no Event of Default has occurred and is continuing hereunder, Landlord shall
not unreasonably withhold, delay or condition its consent to any other
subletting of the Leased Properties in whole or in part or assignment of this
Lease in its entirety, provided that (a) in the case of a subletting, (1) the
subtenant shall comply with the provisions of Section24.2, and (2) if the
subtenant is an Affiliate of any Tenant or any Guarantor, the subtenant shall
execute and deliver to Landlord a guaranty of Tenant’s obligations under the
Lease substantially in the form of the Lease Guaranty attached hereto and made a
part hereof as Exhibit K, (b) the
assignee or subtenant (1) shall be a creditworthy entity with sufficient
financial resources and stability to satisfy its obligations under the Lease,
(2) shall have not less than five (5) years experience in operating health care
facilities for the purpose of the applicable Facility’s Primary Intended Use,
(3) has a favorable business, regulatory compliance and operational reputation
and character, (4) has all licenses, permits, approvals and other Authorizations
required to operate the Leased




60


Property(ies)
in question for the Primary Intended Use (or any other use permitted under the
terms of this Lease), and (5) in the case of an assignment, shall assume in
writing and agree to keep and perform all of the terms of this Lease on the part
of Tenant to be kept and performed and shall be, and become, jointly and
severally liable with Tenant for the performance thereof, (c) an original
counterpart of each such sublease and assignment and assumption, duly executed
by Tenant and such subtenant or assignee, as the case may be, in the form and
substance reasonably satisfactory to Landlord, shall be delivered promptly to
Landlord, and (d) in case of either an assignment or subletting, Tenant shall
remain primarily liable, as principal rather than as surety, for the prompt
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant
hereunder.  Landlord’s obligation to consent to a subletting or
assignment is subject to any reasonable approval rights of any Facility
Mortgagee.




24.1.2.1  In the
case of (i) any transaction described in Section24.1.1(i) through (viii) hereof that is
consented to by Landlord in accordance with Section24.1.1 hereof and that
results in any change in control of Tenant, Emeritus or Summerville or any
Person(s) controlling Tenant, Emeritus or Summerville or any change in control
of Emeritus or any Person(s) controlling Emeritus that is permitted in
accordance with subsection (v) of Section24.1.2 hereof or (ii) any
other transaction (other than a change in control) that is permitted in
accordance with subsection (v)(y) of Section24.1.2 hereof, Tenant
shall pay to Landlord a fee in the amount of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) and shall reimburse Landlord for all legal fees and
expenses incurred by Landlord in connection with Landlord’s review of the
transaction(s) resulting in such change of control or other transaction (other
than a change of control) and preparation and negotiation of any new
guaranty(ies) or other documents executed or to be executed by Landlord, Tenant
or any Guarantor in connection with such transaction(s).  Failure to
pay the aforesaid fee, or to make any such reimbursement, within fifteen (15)
days after Landlord’s demand therefor (accompanied by reasonable supporting
documentation in the case of any such reimbursement) shall constitute an
immediate Event of Default under this Lease.




24.1.3  If this
Lease is assigned or if any Leased Property or any part thereof is sublet (or
occupied by any entity other than Tenant and its employees), Landlord, after an
Event of Default occurs and so long as it is continuing, may collect the rents
from such assignee, subtenant or occupant, as the case may be, and apply the net
amount collected to the Rent herein reserved, but no such collection shall be
deemed a waiver of the provisions set forth in Section24.1, the acceptance by
Landlord of such assignee, subtenant or occupant, as the case may be, as a
tenant or a release of Tenant from the future performance of its covenants,
agreements or obligations contained in this Lease.




24.1.4  Subject
to Section24.4 below, no subletting
or assignment shall in any way impair the continuing primary liability of Tenant
hereunder, or the continuing liability of any Guarantor under its Lease
Guaranty, and no consent to any subletting or assignment in any particular
instance shall be deemed a waiver of the prohibitions and limitations set forth
in this Section24.1.  No
assignment, subletting or occupancy shall affect the Primary Intended
Use.




24.1.5  If Tenant
shall desire to assign this Lease or sublet all (but not a portion) of any
Leased Property (other than an assignment or sublease as to which Landlord’s
consent is not required as provided in Sections24.1.2(i), (ii), (iii)and (iv)above), it shall
first




61


submit in
writing to Landlord a notice indicating (i) the name of the proposed assignee or
subtenant, (ii) the material terms of the proposed assignment or sublease, (iii)
the nature and character of the business which the proposed assignee or
subtenant will conduct at the applicable Leased Property, (iv) reasonable
financial data concerning the proposed assignee or subtenant, and (v) the
effective date of the proposed assignment or the commencement date and
expiration date of the proposed sublease.  Tenant shall additionally
submit to Landlord any other information concerning the proposed assignment or
sublease that Landlord may reasonably request from time to time and, prior to
the effective date of any assignment permitted hereunder or the commencement
date of any sublease permitted hereunder, Tenant shall deliver to Landlord
evidence reasonably satisfactory to Landlord that the assignee or subtenant has
all licenses, permits, approvals and other Authorizations necessary to operate
each Leased Property for the Primary Intended Use (or any other use permitted
under the terms of this Lease).  In addition, if Tenant shall desire
to engage in any transfer, issuance or change in control transaction of the
nature described in Section24.1.2(v) above or any other
transaction on account of which a fee will be owing to Landlord as provided in
Section24.1.2.1 hereof
(collectively, a "Section
24.1.2(v) or 24.1.2.1 Transaction"), Tenant shall first submit in writing
to Landlord (x) information concerning the parties involved in, and the material
terms of, such Section 24.1.2(v) or
24.1.2.1 Transaction and (y) such other
information concerning such Section 24.1.2(v) or 24.1.2.1 Transaction as Landlord may
reasonably request from time to time, provided, however, that (a) subject to
subsection (b) below, Tenant shall not be obligated to submit the information
referenced in subsections (x) and (y) above to Landlord until a commercially
reasonable time in advance of the consummation of such Section 24.1.2(v) or 24.1.2.1 Transaction (as further described
in subsection (b) below) if Tenant is prohibited by law, or is prohibited by a
confidentiality agreement (which confidentiality agreement, notwithstanding
Tenant's reasonable efforts to revise the same to permit disclosure to Landlord,
does not permit disclosure to Landlord even if Landlord agrees to be bound by a
standard confidentiality agreement with Tenant), from disclosing such
information to Landlord sooner and (b) Tenant shall in any event be obligated to
submit to Landlord the information referenced in subsections (x) and (y) above
within a commercially reasonable time in advance of consummating such
Section 24.1.2(v) or 24.1.2.1 Transaction, so that Landlord may,
in advance of such consummation, (1) complete its review and study of such
information and the Section 24.1.2(v) or 24.1.2.1 Transaction to which it relates
and (2) make its determination whether its consent to such transaction is
required and, if so, whether to grant such consent.  Landlord agrees
to keep all information regarding third parties submitted to it by or on behalf
of Tenant in connection with a Section 24.1.2(v) or 24.1.2.1 Transaction strictly confidential,
except for disclosures (a) to employees, officers, shareholders, directors,
partners and managers of Landlord and Landlord's representatives, investors,
lenders, counsel, consultants and agents, provided that Landlord instructs such
persons to keep the information strictly confidential, (b) of information that
is otherwise available to the general public or was known to Landlord prior to
its receipt as aforesaid in connection with a Section 24.1.2(v) or 24.1.2.1 Transaction, (c) of information
which Landlord received from an independent third party and not at the direction
of Tenant, or (d) as may be required by law or by any Disclosure Law (as defined
in Section47.2 hereof) or in
connection with any legal proceeding concerning the Premises, such
Section 24.1.2(v) or 24.1.2.1 Transaction or this
Lease.




24.1.6  Any
assignment and/or sublease must provide that (i) it shall be subject and
subordinate to all of the terms and conditions of this Lease, (ii) the use of
the applicable Leased Property shall be restricted to the applicable Primary
Intended Use and shall




62


not
conflict with any Legal Requirement, Insurance Requirement or any other
provision of this Lease, (iii) no sublessee or assignee shall be permitted to
sublet further all or any part of the applicable Leased Property or assign this
Lease or its sublease except as expressly provided in this Lease and (iv) in the
event of cancellation or termination of this Lease for any reason whatsoever or
of the surrender of this Lease, whether voluntary, involuntary or by operation
of law, prior to the expiration date of such sublease, including extensions and
renewals granted thereunder, at Landlord’s option, the subtenant shall make full
and complete attornment to Landlord for the balance of the term of the sublease,
which attornment shall be evidenced by an agreement in form and substance
reasonably satisfactory to Landlord and which the subtenant shall execute and
deliver within five (5) days after request by Landlord, and the subtenant shall
waive the provisions of any law now or hereafter in effect that may give the
subtenant any right of election to terminate the sublease or to surrender
possession in the event any proceeding is brought by Landlord to terminate this
Lease.




24.1.7  Any
assignment of this Lease or sublease of the applicable Leased Property in
contravention of the express terms of this Section24 shall be voidable at
Landlord’s option and the acceptance of Rent by Landlord from any such
unauthorized assignee or subtenant shall not constitute a recognition or
acceptance of the tenancy of such unauthorized assignee or
subtenant.




24.1.8  Upon the
full execution and delivery of this Lease, the Emeritus Guaranty by the Emeritus
Guarantor, and any other documents or deposits to be made on the Effective Date
as required herein and upon Tenant’s payment to Landlord of a fee in the amount
of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the “Restructuring Fee”), and
reimbursement to Landlord of the legal fees and expenses incurred by Landlord in
connection with Landlord’s review of the Acquisition, the preparation and
negotiation of this Lease, the Emeritus Guaranty and the other documents
executed or to be executed as of the Effective Date or otherwise in connection
with the aforesaid documents (the “Reimbursement Amount”), as
full compensation for, among other things, Landlord’s time and expense incurred
as a result of its review of the Acquisition and the preparation and negotiation
of this Lease, Landlord shall be deemed to have waived the Forbearance Events
and consented to the Acquisition, for all purposes hereunder and under the
Mentor Master Lease and Farm Pond Master Lease.  Failure to pay the
Restructuring Fee and the Reimbursement Amount on or prior to the Effective Date
shall constitute an immediate Event of Default under this Lease.




24.2  Attornment.  Tenant
shall insert in each sublease permitted under Section24.1 provisions to the
effect that (i) such sublease is subject and subordinate to all of the terms and
provisions of this Lease and to the rights of Landlord hereunder, (ii) in the
event this Lease shall terminate before the expiration of such sublease, the
subtenant thereunder will, at Landlord’s option, attorn to Landlord and waive
any right the subtenant may have to terminate the sublease or to surrender
possession thereunder, as a result of the termination of this Lease, and (iii)
in the event the subtenant receives a written notice from Landlord or Landlord’s
assignees, if any, stating that an Event of Default has occurred, the subtenant
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 subtenant by Landlord or
Landlord’s assignees, if any, as the case may be, shall be credited against the
amounts owing by Tenant under this Lease.




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24.3  Sublease
Limitation.  Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not sublet any Leased Property on any basis such
that the rental to be paid by the subtenant thereunder would be based, in whole
or in part, on either (i) the income or profits derived by the business
activities of the subtenant, or (ii) any other formula such that any portion of
the sublease rental, if received by Landlord, 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.




24.4  Release.  Neither
Tenant nor any Guarantor shall be released from their respective duties and
obligations under, respectively, this Lease or any Lease Guaranty on account of
any assignment or sublease, provided, however, that Landlord agrees that, if (i)
Tenant requests Landlord’s consent to a complete assignment of this Lease, (ii)
Tenant specifies in its request that Tenant desires to have itself and each
Guarantor released from the aforesaid duties and obligations arising from and
after the date of such assignment, and (iii) Tenant agrees and specifies in its
request that, in considering whether to consent to such proposed assignment,
Landlord may, notwithstanding anything to the contrary contained in this Lease,
grant or withhold its consent in its sole and unfettered discretion, then, if
Landlord thereafter grants its consent to such assignment, such Tenant and such
Guarantor(s) shall be released from their aforesaid duties and obligations
arising from and after the date of such assignment.




25.  Financial
Statements and Reporting.




25.1  Maintenance
of Books and Records.  Tenant shall keep and maintain, or cause
to be kept and maintained, proper and accurate books and records in accordance
with GAAP, and a standard modern system of accounting, in all material respects
reflecting the financial affairs of each Tenant and the results from operations
of each Facility.  Landlord shall have the right, from time to time
during normal business hours after five (5) Business Days prior oral or written
notice to the applicable Tenant, itself or through any of Landlord’s
Representatives, to examine such books and records at the office of such Tenant
or other Person maintaining such books and records and to make such copies or
extracts thereof as Landlord or Landlord’s Representatives shall
request.




25.2  Annual
Financial Information.  As soon as available, and in any event
within one hundred eighty (180) days after the close of each Fiscal Year, Tenant
shall deliver to Landlord, presented on a consolidated and consolidating, but
not on a property-by-property, basis, financial statements prepared for such
Fiscal Year with respect to Tenant, including a balance sheet and operating
statement as of the end of such Fiscal Year and further including related
statements of income and members’, partners’ or owners’ capital for such Fiscal
Year, audited by a “Big Four” accounting firm or a nationally recognized,
independent certified public accounting firm reasonably satisfactory to
Landlord, whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP, applied on a consistent basis, and
shall not be qualified as to the scope of the audit or as to the status of any
Tenant as a going concern.  Together with Tenant’s annual financial
statements, Tenant shall deliver to Landlord:  (i) a statement of cash
flows for each Leased Property; and (ii) such other information as Landlord
shall reasonably request and that is prepared by any Tenant or any Guarantor in
the ordinary course of its business.  Relative to the annual financial
statements described above, Landlord agrees that, so long as the Emeritus
Guarantor remains a Guarantor of Tenant’s obligations under the Lease pursuant
to the Emeritus Guaranty, in lieu of the above referenced audited financial
statements of Tenant, Tenant shall deliver audited financial statements of
the




64


Emeritus
Guarantor, rather than Tenant, satisfying the above referenced requirements and
unaudited financial statements of Tenant satisfying the above referenced
requirements.




25.3  Quarterly
Financial Information.  As soon as available, and in any event
within forty-five (45) days after the end of each fiscal quarter, Tenant shall
deliver to Landlord, presented on a consolidated and consolidating as well as a
property-by-property basis, quarterly and year-to-date unaudited financial
statements prepared for such fiscal quarter with respect to Tenant, including a
balance sheet and operating statement as of the end of such fiscal quarter and
further including related statements of income, members’, partners’ or owners’
capital and cash flows for such fiscal quarter and for the portion of the Fiscal
Year ending with such fiscal quarter.  Each such quarterly statement
shall show the separate operations of each Leased Property, including, without
limitation, (i) a breakdown of Patient Revenues and other revenues itemized by
payor type and a reasonably detailed breakdown of operating expenses and (ii)
patient census information by payor type (collectively, “Census
Information”).  Each such quarterly report shall be accompanied
by the following:  (x) a statement in reasonable detail showing the
calculation of Net Operating Income for each Facility for the trailing four
fiscal quarters, in each case, ending at the end of the fiscal quarter as to
which such statement is being delivered; (y) a then current occupancy report for
each Facility; and (z) such other information as Landlord shall reasonably
request and that is prepared by any Tenant or any Guarantor in the ordinary
course of its business.




25.4  Certifications
of Compliance.  Simultaneously with the delivery of the annual
and quarterly financial statements contemplated by Sections25.2 and 25.3, Tenant shall deliver
to Landlord an Officer’s Certificate in the form of Exhibit D attached hereto and
dated as of the date of such delivery.




25.5  Annual
Budgets.  Tenant has previously delivered to Landlord the
Annual Budget for each Leased Property for the Fiscal Year ending December 31,
2007.  Not more than thirty (30) days following the commencement of
each subsequent Fiscal Year during the Term, Tenant shall deliver to Landlord an
Annual Budget presented on a consolidated and consolidating as well as a
property-by-property basis for such Fiscal Year and, promptly after preparation
thereof, any subsequent revisions to such Annual Budget.  On or prior
to fifteen (15) days prior to the commencement of each such subsequent Fiscal
Year, Tenant shall deliver to Landlord a preliminary draft of the aforesaid
Annual Budget for such Fiscal Year.




25.6  Monthly
Financial Information.  As soon as available, and in any event
within thirty (30) days after the end of each calendar month, Tenant shall
deliver to Landlord, presented on a consolidated and consolidating as well as a
property-by-property basis, monthly and year-to-date unaudited financial
statements prepared for the applicable month with respect to Tenant, including a
balance sheet and operating statement as of the end of such month and further
including related statements of income, members’, partners’ or owners’ capital
and cash flows for such month and for the portion of the Fiscal Year ending with
such month, which statements shall be accompanied by (i) an Officer’s
Certificate certifying that the same are true and correct and were prepared in
accordance with GAAP, applied on a consistent basis, subject to changes
resulting from audit and normal year-end audit adjustments, and (ii) an
Officer’s Certificate certifying as to any material variances from the approved
Annual Budget on a line-item basis.  Each monthly report shall show
the separate operations of each Leased Property, including, without limitation,
the monthly cash flow and Census Information for such Leased
Property.  Each such monthly report shall be accompanied by the
following:  (1) a statement




65


setting
forth in reasonable detail the calculation of Net Operating Income for each
Facility for the trailing twelve (12) months, in each case, ending at the end of
the calendar month as to which such statement is being delivered; (2) a then
current occupancy report for each Facility; (3) a report describing in
reasonable detail the occurrence during such month of any event that is
reasonably likely to result in a material adverse effect on the ability of
Tenant to perform any material provision of this Lease, or the value, use or
enjoyment of any of the Leased Properties or the operation thereof; (4) a
monthly summary of accounts receivable with respect to each Facility and all of
the Facilities in form acceptable to Landlord; and (5) such other information as
Landlord shall reasonably request and that is prepared by any Tenant or any
Guarantor in the ordinary course of its business.




25.7  Authorizations.  As
soon as available, and in any event within ninety (90) days after the end of
each calendar year, Tenant shall deliver to Landlord as to each Facility a
report describing in reasonable detail the status of such Facility’s compliance
with all Authorizations for such Facility.  In addition, not later
than thirty (30) days after the commencement of each Fiscal Year during the
Term, Tenant shall deliver to Landlord copies of any and all Authorizations
(together with any renewals or extensions thereof) certified by Tenant as
accurate and complete in an Officer’s Certificate.




25.8  Actuarial
Reports.  Promptly (and in any event no later than ten (10)
days) after Tenant’s receipt thereof, Tenant shall deliver to Landlord a
complete copy of any Actuarial Report(s) received by Tenant.




25.9  Notices/Inspection
Reports from Governmental Authorities.  As soon as available,
and in any event within ten (10) days of Tenant’s receipt, Tenant shall deliver
to Landlord (i) any and all notices (regardless of form) from any Governmental
Authority (1) that any Authorization for any Facility or the certification of
any Facility for reimbursement under any applicable governmental reimbursement
program is the subject of any enforcement action, revocation or suspension or is
subject to assessment for civil monetary penalties or is the subject of any
overpayment claim or recoupment claim or (2) that action is pending or being
considered to revoke or suspend any Authorization or to institute enforcement
actions of any kind and (ii) any and all inspection reports (regardless of form)
from any Governmental Authority relating to any of the Leased
Properties.




25.10  Financial
Statements of Guarantor.  Tenant shall cause each Guarantor to
deliver to Landlord on a timely basis the annual financial statements, and
Officer’s Certificates, that are required by the terms of each Lease
Guaranty.




25.11  Estoppel
Certificates.  Together with every Officer’s Certificate
required to be provided hereunder, or otherwise upon request by Landlord in
connection with a proposed sale or refinancing of any Leased Property(ies) by
Landlord or otherwise (and, in the case of any such request, in any case within
five (5) Business Days), Tenant shall deliver an “Estoppel Certificate” in form
and substance satisfactory to Landlord and certifying as to the matters
described in Exhibit E
attached thereto.  Each such Estoppel Certificate shall be certified
to Landlord and Landlord’s designees and may be relied upon by Landlord and its
designees.  Any Estoppel Certificate shall, at Landlord’s request, be
delivered together with complete and accurate copies (originals of which shall
be made available for inspection upon request by Landlord) of all licenses,
permits and other Authorizations necessary to operate the Facilities in
accordance with all applicable laws.




66


25.12  Supplemental
Information.  Tenant shall deliver to Landlord such supplements
to the foregoing documents, and such other information and reports (including,
without limitation, non-financial information), as Landlord or any Facility
Mortgagee may reasonably request from time to time, provided such supplements,
and such information and reports, are consistent with the types of supplements,
reports and information generally utilized by institutions within the healthcare
or financing industry.




25.13  Quarterly
Meetings; Facility Level Meetings and Reviews.  On a quarterly
basis, Tenant shall permit, and upon request by Landlord, shall make appropriate
arrangements for, Landlord and/or Landlord’s Representatives to discuss the
affairs, operations, finances and accounts of each Tenant, each Guarantor and
their respective Affiliates with, and be advised as to the same by, senior
officers of each Tenant (and such of each Tenant’s independent accountants and
other financial advisors as would be relevant to the topic(s) of the particular
meeting), all as Landlord may deem appropriate for the purpose of verifying any
report(s) delivered by Tenant to Landlord under this Lease or for otherwise
ascertaining compliance with this Lease by Tenant or the business, operational
or financial condition of each Tenant, each Guarantor and/or their respective
Affiliates and/or any of the Facilities.  Without limitation of the
foregoing, from time to time promptly following receipt of written notice from
Landlord to Tenant (and in any event within ten (10) Business Days of such
receipt), Tenant shall permit, and shall make appropriate arrangements for,
Landlord and/or Landlord’s Representatives to discuss the business, operational
and financial condition of specific Facility(ies) designated by Landlord with,
and be advised as to the same by, appropriate personnel of Tenant and its
Affiliates having operational and accounting responsibilities for the
Facility(ies) so specified by Landlord and to review, and make abstracts from
and copies of, the books, accounts and records of Tenant and its Affiliates
relative to any such Facility(ies).  Unless otherwise agreed in
writing by Landlord and Tenant, all of the discussions, reviews, abstracting and
copying referenced in this Section25.13 shall occur during
normal business hours.




25.14  Format.  Notwithstanding
anything contained herein to the contrary, Tenant shall deliver to Landlord the
financial information, statements, reports, operating budgets and other
financial data contemplated by Section25in hard copy and
electronic form and in a format acceptable to Landlord in the exercise of its
reasonable discretion.




26.  Landlord’s
Right to Inspect.  Tenant shall permit Landlord, Landlord’s
Representatives, any then current or prospective Facility Mortgagee or other
lender to Landlord, any then current or prospective investment banker, mortgage
broker or other professional engaged by Landlord, any prospective purchaser of
any Leased Property or any investor in Landlord or any Affiliate of Landlord
and/or any prospective lessee, and its and their respective authorized
representatives, to enter upon and conduct a physical inspection of any Leased
Property during normal business hours and, except in an emergency, upon not less
than five (5) Business Days’ prior written notice, subject to any security,
health, safety or confidentiality requirements of any Governmental Authority
relating to the Premises, or imposed by law or applicable regulations or any
insurance requirement, and provided that no such entry or inspection shall
materially interfere with Tenant’s business operations within the affected
Leased Property(ies).  Nothing contained in this Section26shall limit or impair
Landlord’s right to immediately enter upon and inspect the Premises, or any of
Landlord’s other rights or remedies, upon the occurrence of any Event of Default
by Tenant.




67


27.  No
Waiver.  No failure by Landlord or Tenant 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.  To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.




28.  Single
Lease.  Tenant hereby acknowledges that the agreement between
Landlord and Tenant to treat this Lease as single lease in all respects was and
is of primary importance to Landlord, and Landlord would not have entered into
this Lease without there being such an agreement and such treatment of this
Lease.  All rights and obligations under this Lease relating to the
Premises shall apply to each Leased Property and any default under this Lease
pertaining to a single Leased Property or to the Premises or any portion thereof
shall be an Event of Default pertaining to the Premises and each Leased
Property.  Without limiting the generality of the foregoing, the
parties hereto acknowledge that, notwithstanding any references herein to any
individual Leased Property and notwithstanding the possibility that certain
individual Leased Properties may be deleted herefrom pursuant to the express
provisions of this Lease under certain limited circumstances, the parties hereto
expressly intend and agree that this Lease is not divisible and shall be treated
as a single lease for all purposes whatsoever (including, without limitation, in
the context of Tenant’s attempted rejection, assumption and/or assignment of
this Lease in any bankruptcy or other insolvency proceeding affecting any
Tenant, in which case the parties hereto intend for such rejection to terminate
this Lease with respect to the entire Premises or such assumption to apply with
respect to the entire Premises, i.e., all but not less than all of the Leased
Properties).  Nothing contained in this Section28, Schedule 3.1.2, or elsewhere
in this Lease, and no allocation, attribution or application of Fixed Rent to
particular Leased Properties as described in Schedule 3.1.2 or
elsewhere in this Lease, shall be deemed to change the joint and several nature
of each Tenant’s obligation to pay all Rent owing hereunder as provided in Section1.3 above.  This
Lease does not constitute, and may not be enforced (except at Landlord’s sole
discretion in connection with a Limited Termination Election) or treated as, a
separate lease for any individual Leased Property.  Notwithstanding
the foregoing, the right of possession and leasehold right granted to each
Tenant hereunder is limited as provided in Section1.3 above.




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




30.  No Merger
of Title.There shall be no
merger of this Lease or of the leasehold estate created hereby by reason of the
fact that the same Person may acquire, own or hold, directly or indirectly, (i)
this Lease or the leasehold estate created hereby or any interest in this Lease
or such leasehold estate and (ii) the fee estate in any Leased
Property.




31.  Conveyance
by Landlord.  Landlord may, without the consent or approval of
Tenant, sell, transfer, assign, pledge, encumber, hypothecate, convey or
otherwise dispose of all or any portion of the Premises.  If Landlord
or any successor owner of any Leased Property shall sell, transfer, assign,
convey or otherwise dispose of any Leased Property in accordance with the terms
hereof other than as security for a debt, and the purchaser, grantee, assignee
or transferee




68


of the
Leased Property(ies) shall expressly assume all obligations of Landlord
hereunder with respect to the Premises, including, without limitation, the
Option with respect to any Subject Mentor Properties (if the same has not
theretofore lapsed or expired), arising or accruing from and after the date of
such sale, conveyance, transfer, assignment or other disposition, Landlord or
such successor owner, as the case may be, shall, if it is no longer the landlord
under this Lease with respect to any Leased Property, thereupon be released from
all future liabilities and obligations of Landlord under this Lease with respect
to the Premises arising or accruing from and after the date of such sale,
conveyance, transfer, assignment or other disposition as to such Leased
Property(ies) and all such future liabilities and obligations with respect to
the Premises, including, without limitation, the Option with respect to any
Subject Mentor Properties (if the same has not theretofore lapsed or expired),
shall thereupon be binding upon such purchaser, grantee, assignee or
transferee.  Any such sale, transfer, assignment, conveyance or other
disposition (other than as security for a debt) of less than all of the Premises
shall not prevent Landlord from electing to require a New Lease(s) as to one or
more of the Leased Properties pursuant to the provisions of Section40 hereof.




32.  Quiet
Enjoyment.  So long as Tenant shall pay all Rent as the same
becomes due and shall fully comply with all of the terms of this Lease and fully
perform its obligations hereunder, Tenant shall peaceably and quietly enjoy each
Leased Property for the Term hereof, free of any claim, interruption or other
action by Landlord or anyone claiming through Landlord, but subject to all
Permitted Encumbrances.  No failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to abate, reduce or make a
deduction from or offset against the Rent or any other sum payable under this
Lease, or to fail to perform any other obligation of Tenant
hereunder.  Notwithstanding the foregoing, Tenant shall have all
rights and remedies available at law or in equity, except as otherwise provided
herein, by separate and independent action, to pursue any claim or claims it may
have against Landlord as a result of any breach by Landlord of the covenant of
quiet enjoyment contained in this Section32.




33.  Notices.  All
notices, demands, requests, consents, approvals and other communications
hereunder shall be in writing and delivered (i) by mail (registered or certified
mail, return receipt requested), in which case such notice shall be deemed
received three (3) Business Days after its deposit, (ii) by confirmed facsimile,
in which case such notice shall be deemed received the next Business Day, or
(iii) by reputable nationally recognized overnight courier service, in which
case such notice shall be deemed received the next Business Day, addressed to
the respective parties, as follows:




(a)
            if
      to any Tenant:




c/o
Emeritus Corporation


3131
Elliott Avenue, #500


Seattle,
Washington  98121


Attention:  Eric
Mendelsohn


Facsimile:  (206)
357-7388





69


with a
copy to:




Pircher,
Nichols & Meeks


900 North
Michigan Avenue, Suite 1050


Chicago,
Illinois  60611


Attention:  Real
Estate Notices (JDL/MJK)


Facsimile:  (312)
915-3348





(b)
            if
      to Landlord:





c/o
Ventas, Inc.


10350
Ormsby Park Place, Suite 300


Louisville,
Kentucky  40223


Attention:  General
Counsel


Telephone:  (502)
357-9000


Facsimile:  (502)
357-9001





with a
copy to:





c/o
Ventas, Inc.


10350
Ormsby Park Place, Suite 300


Louisville,
Kentucky  40223


Attention:  Lease
Administrator


Telephone:  (502)
357-9000


Facsimile:  (502)
357-9001





with a
copy to:





Barack
Ferrazzano Kirschbaum & Nagelberg LLP


200 West
Madison Street, Suite 3900


Chicago,
Illinois 60606


Attention:  Douglas
W. Anderson, Esq.


Facsimile:  (312)
984-3150





or to
such other address as either party may hereunder designate in
writing.





34.  General
REIT Provisions.  Tenant understands that, in order for
Landlord’s Affiliate, Ventas, Inc., to qualify as a REIT, certain requirements
(the “REIT
Requirements”) must be satisfied, including, without limitation, the
provisions of Section 856 of the Code.  Accordingly, Tenant agrees,
and agrees to cause its Affiliates, permitted subtenants, if any, and any other
parties subject to its control by ownership or contract, to reasonably cooperate
with Landlord to ensure that the REIT Requirements are satisfied, including, but
not limited to, providing Landlord or Ventas, Inc. with information about the
ownership of Tenant and its Affiliates.  Tenant agrees, and agrees to
cause its Affiliates, upon request by Landlord or Ventas, Inc., to take all
action reasonably necessary to ensure compliance with the REIT
Requirements.




35.  Transfer
of Tenant’s Personal Property.  Upon the expiration or earlier
termination of this Lease with respect to a Leased Property (unless such
termination is the result




70


of
Tenant’s purchase of such Leased Property), all Tenant’s Personal Property
relating to such Leased Property (excluding the specific items of Tenant’s
Personal Property described below, which property may be retained and removed by
Tenant) shall become the property of Landlord, free of any lien, claim or
encumbrance, and Tenant shall, at its expense, take any actions reasonably
necessary to discharge any applicable lien, claim or encumbrance (and, relative
to any such Tenant’s Personal Property that is leased by Tenant, Tenant agrees,
at its expense, immediately to acquire title thereto, in order to be able to
convey title thereto to Landlord as provided in this Section35).  Landlord
acknowledges and agrees that Tenant’s automobiles, vans, computer hardware,
proprietary software, names, trademarks and accounts receivable that are
included in the Tenant’s Personal Property are not to be transferred to Landlord
pursuant to this Section35 (subject, in the case
of Tenant’s names, to the provisions of Section37.4 below and subject
further to Section21 as to such Tenant’s
Personal Property (exclusive of Tenant’s computer hardware, proprietary
software, names and tradenames)).  Tenant shall execute and deliver
such assignments, conveyance documents, bills of sale and other instruments as
Landlord shall reasonably require to evidence the conveyances and transfers
referenced in this Section35 and otherwise
reasonably assist Landlord with such conveyances and transfers.




36.  Compliance
With Environmental Laws.




36.1  Hazardous
Substances.  Tenant shall not place or hold any Hazardous
Substances under, on or at any of the Leased Properties, except as is necessary
or reasonable in the ordinary course of its business. If Tenant’s business
requires the use of any Hazardous Substances, other than such cleaning materials
as are typically found in healthcare facilities, Tenant shall notify Landlord in
writing and shall comply with hazard communication and notification requirements
of the Occupational Safety and Health Act and any other Environmental Laws with
respect to such Hazardous Substances.  Tenant shall comply with all
Environmental Laws in connection with its use, operation and management of the
Leased Properties.  Tenant shall not cause or allow any asbestos to be
incorporated into any Leased Improvements or Alterations that it makes or causes
to be made on or to any of the Leased Improvements.  Tenant shall not
use any of the Leased Properties as a treatment, storage, or disposal (whether
permanent or temporary) facility for Hazardous Substances as defined under
RCRA.  If Tenant, in the ordinary course of its business, generates
Hazardous Substances, then Tenant shall comply with all Environmental Laws
relating to the appropriate use, storage, transportation and disposal of
Hazardous Substances.  Tenant further agrees that it shall properly,
and in compliance with all Environmental Laws, dispose of all “infectious waste”
such as, without limitation, laboratory waste, pathological waste, blood
specimens or products, resident or patient waste, including, without limitation,
bandages and disposable gowns, sharp waste and any material generated by the
production or testing of biological agents.  All of the terms,
covenants, warranties and indemnifications contained in this Section36 shall survive the
expiration or sooner termination of this Lease.




36.2  Remediation;
Notification.  If Tenant becomes aware of a material violation
of any Environmental Laws relating to any Hazardous Substance or otherwise in,
on, under or about any Leased Property or any adjacent property thereto, or if
Tenant, Landlord or a Leased Property becomes subject to any order of any
federal, state or local agency to repair, close, detoxify, decontaminate or
otherwise remediate such Leased Property, Tenant shall promptly notify Landlord
of such event and, at its sole cost and expense, cure such violation or effect
such repair, closure, detoxification, decontamination or other remediation,
which activities




71


shall in
all events be performed in accordance with all applicable Environmental Laws and
shall be subject to Landlord’s written approval as to their scope, process,
content and standard for completion prior to their commencement, such approval
not to be unreasonably withheld.  If Tenant fails to implement and
diligently pursue any such cure, repair, closure, detoxification,
decontamination or other remediation as required under this Section36.2, Landlord shall have
the right, but not the obligation, to carry out such action and to recover from
Tenant all of Landlord’s costs and expenses incurred in connection
therewith.  Each of Landlord and Tenant shall promptly notify the
other upon becoming aware (or being notified) of (i) any claims, suits,
proceedings, investigations or demands, or any enforcement, cleanup or other
regulatory or judicial action, threatened, made, or initiated against or
involving it and relating to any of the Leased Properties pursuant to any
Environmental Laws, including, without limitation, those relating to the
presence, treatment, storage, handling, disposal, generation, spill, release or
discharge of any Hazardous Substances on, at, in, under or about the Leased
Properties or the migration thereof from or to any other property; and (ii) the
imposition of any lien arising under Environmental Laws on any of the Leased
Properties.




36.3  Indemnity.  Tenant
shall indemnify, defend, protect, save, hold Landlord and all of the Landlord
Indemnified Parties harmless from and against any and all Losses (including, but
not limited to, losses of use or economic benefit or diminution in value)
suffered or incurred by Landlord or any Landlord Indemnified Parties in
connection with, arising out of, resulting from or incident to:  (i)
the production, use, generation, storage, treatment, transporting, disposal,
discharge, release or other handling or disposition of any Hazardous Substances
from, in, on or about any of the Leased Properties, whenever caused, arising or
occurring, except to the extent caused by Landlord or any of the Landlord
Indemnified Parties from and after the date Landlord acquired fee simple title
to such Leased Property; (ii) the presence of any Hazardous Substances in, on,
under or about any Leased Properties before the applicable Commencement Date or
during the applicable Term; (iii) the violation of any Environmental Laws with
respect to any Leased Property during the applicable Term or prior to the
applicable Commencement Date; and (iv) any breach by Tenant or any Tenant
Parties of this Section36.




36.4  Environmental
Inspection.  Landlord shall have the right, upon not less than
five (5) days’ written notice to Tenant, except in the case of an emergency, in
which event no notice shall be required, to conduct an inspection of any Leased
Property to determine the existence or presence of Hazardous Substances at, in,
on, under or about any Leased Property in violation of any Environmental Laws or
the existence at any Leased Property of any violation of any Environmental
Laws.  Landlord shall have the right to enter and inspect any Leased
Property and to conduct any testing, sampling and analyses reasonably necessary
and shall further have the right to inspect materials brought into any Leased
Property.  Landlord may, in its discretion, retain such experts to
conduct the inspections, or perform the tests, referred to herein, and to
prepare a written report in connection therewith.  Landlord shall have
the right to inspect the Leased Properties with regard to the management and
disposal of Hazardous Substances at all reasonable times during the
Term.  All reasonable costs and expenses incurred by Landlord under
this Section36.4 shall be paid by
Tenant as Consent Expenses.




36.5  Removal.  Upon
the earlier of the expiration or earlier termination of this Lease as to one or
more Leased Properties, Tenant shall forthwith remove all Hazardous Substances
from any portion of the Leased Properties as to which such expiration or
termination relates, to the extent such Hazardous Substances are present due to
the acts or omissions of




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Tenant or
any Tenant Parties, which removal shall be performed in accordance with any
Environmental Laws and to Landlord’s satisfaction.




37.  Operational
Transfer.




37.1  Exercise;
Transfer of Authorizations.




37.1.1  Exercise.  Upon
(i) the expiration of this Lease as to any Leased Property in accordance with
its terms as of the Expiration Date applicable to such Leased Property, (ii) the
occurrence of an Early Termination Event as to any Leased Property (including
any Deleted Property) or (iii) the earlier dispossession of Tenant from any
Leased Property, Landlord shall have the unequivocal, unilateral right to
require an Operational Transfer with respect to such Leased Property (any Leased
Property with respect to which Landlord elects to require an Operational
Transfer, a “Transition
Property”) by delivery of written notice to Tenant specifying such
election (a “Transition
Notice”).  Landlord may exercise (in its sole discretion) its
right to require an Operational Transfer, with respect to any Leased Property
with respect to which this Lease will terminate by its terms as of the
Expiration Date applicable to such Leased Property, by delivering a Transition
Notice on or prior to ten (10) days prior to such Expiration Date.  In
the event of an Early Termination Event as to any Leased Property or
dispossession of Tenant with respect to any Leased Property, Landlord may
exercise (in its sole discretion) its right to require an Operational Transfer
with respect to such Leased Property at any time by delivering a Transition
Notice to Tenant.




37.1.2  Transfer
of Authorizations.  If Landlord exercises its right to require
an Operational Transfer with respect to a particular Leased Property(ies),
Tenant shall take any and all necessary actions; file such applications,
petitions, and transfer notices; make such assignments, conveyances and
transfers of permits, licenses, approvals and Facility Provider Agreements
issued to Tenant to and for the benefit of Landlord and/or any Landlord’s
designee (any such designee, a “Successor Operator”); and
cause such permits, licenses, approvals and Facility Provider Agreements to be
issued to and for the benefit of Landlord and/or any Successor Operator, in any
and all such cases as are necessary, desirable, or advisable, such that the
day-to-day operations of the Transition Property(ies) for the Primary Intended
Use(s) of the Facility(ies) located on such Transition Property(ies) are
transferred and transitioned, practically and legally, to Landlord and/or any
Successor Operator simultaneously with the termination or earlier expiration of
this Lease as to the Transition Property(ies) without interruption of the
business activities therein, regulatory or otherwise (such transfer of
operations, an “Operational
Transfer”).  Without limitation of the foregoing or any other
rights of Landlord or any Successor Operator as set forth in this Section37, as part of any
Operational Transfer, Tenant shall, to the extent permitted by applicable law,
(i) sell, transfer, convey and assign to Landlord and/or any Successor Operator,
as applicable, those of the Authorizations that Landlord elects to assume and
accept (or cause Successor Operator to assume and accept) (the “Assigned Authorizations”) or
allow Landlord or any Successor Operator to continue to rely upon any
Authorizations (including, but not limited to, any Facility Provider
Agreements); (ii) use its unconditional, best efforts to enable Landlord and/or
Successor Operator to apply for and obtain any and all licenses, operating
permits, Provider Agreements, provider status, certificates of need,
certificates of exemption, approvals, waivers, variances and other governmental,
quasi-governmental and private authorizations necessary or advisable for the
continuous operation of the Facility(ies) located on each Transition Property
for its/their Primary Intended Use(s) (collectively, “Transfer Authorizations”);
(iii) assign to Landlord or any Successor Operator,




73


as
applicable, such assignable patient, vendor, service provider and other
contracts relating to the Facility(ies) located on each Transition Property as
Landlord or any Successor Operator may request (the “Assigned Contracts”); (iv) if
requested by Landlord, enter into an operations transfer agreement with Landlord
or Successor Operator, as applicable, that is reasonably acceptable to Landlord;
(v) not unreasonably withhold, condition or delay its consent to entering into
any interim sublease or management agreements as may be necessary to effectuate
an early transfer of the operations of the Facility(ies) located on each
Transition Property for its/their Primary Intended Use(s) prior to the time that
Landlord or Successor Operator, as applicable, holds all Authorizations from all
applicable Governmental Authorities necessary to so operate such Facility(ies);
and (vi) indemnify, defend, protect and hold harmless Landlord and any Successor
Operator from and against any loss, damage, cost or expense incurred by Landlord
or Successor Operator in connection with the correction of any and all
deficiencies of a physical nature identified by any Governmental Authority in
the course of any Operational Transfer.  The costs and expenses
incident to any Operational Transfer, including, but not limited to, any costs
incident to assigning the Assigned Authorizations, obtaining Transfer
Authorizations and assigning the Assigned Contracts, shall be paid entirely by
Tenant as Consent Expenses.  It is the express intention of the
parties that, at the expiration or earlier termination of the Term as to each
Transition Property, and upon any dispossession of Tenant in connection with any
Event of Default as to any Facility(ies) located on a Transition Property, any
and all Authorizations needed to operate each Transition Property as to which
the Term is expired or terminated, or as to which Tenant has been dispossessed,
for its/their Primary Intended Use(s) shall, to the maximum extent permitted by
applicable law, and if Landlord so elects, remain with such Facility(ies) and
shall be transferred into the name of Landlord and/or Successor Operator, as
applicable, regardless of whether any such Authorization is in the name of
Tenant at any time during the Term.




37.2  Reasonable
Assistance.  In anticipation of the expiration of this Lease as
to any Leased Property, or upon any Early Termination Event as to any Leased
Property, or the earlier dispossession of Tenant with respect to any Leased
Property, Tenant shall cooperate with Landlord in all respects to facilitate and
effectuate an Operational Transfer if Landlord elects to require an Operational
Transfer.  Such cooperation shall include, without limitation: (i)
furnishing to Landlord or any prospective Successor Operator complete and
accurate books, records, files, documents and information in Tenant’s
possession, custody or control necessary or reasonably requested by Landlord or
Successor Operator in connection with any Operational Transfer, the assessment
and/or assumption of the operations of any Transition Property(ies) and/or the
completion and processing of any applications for the assignment of the Assigned
Authorizations or the Assigned Contracts or obtaining Transfer Authorizations;
and (ii) facilitating the evaluation and employment by Landlord or any
prospective Successor Operator of such employees of Tenant or its Affiliates (or
any third party employment agency with whom Tenant or its Affiliates has an
agreement pursuant to which such agency employs such parties) as Landlord or
Successor Operator may elect to evaluate or employ, including, without
limitation, to the extent permitted by law, affording Landlord or Successor
Operator, as applicable, access to all relevant personnel files, records,
documents and information in Tenant’s or its Affiliates’ possession, custody or
control.




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37.3  Facility
Termination; Limited Term Contraction Right; Limited Extended Operation by
Tenant.




37.3.1  Facility
Termination.  Notwithstanding anything to the contrary
contained in this Lease, Tenant shall not, prior to the tenth (10th) day
preceding the Expiration Date applicable to each Leased Property, commence to
wind up and terminate the operations of the Facility(ies) operated thereon (a
“Facility
Termination”).  In no event, and under no circumstances, shall
any Tenant relocate the patients or occupants of any Facility to any other
healthcare facility without obtaining Landlord’s prior written consent (which
consent may be withheld in Landlord’s sole discretion); provided, however, that,
if Landlord has not delivered a Transition Notice to Tenant prior to the tenth
(10th) day
preceding the Expiration Date applicable under this Lease to a particular Leased
Property, then Tenant may commence the Facility Termination (including the
relocation of patients) as to the Facility(ies) located on such Leased Property
and, upon the expiration of this Lease as to such Leased Property and
Facility(ies), Tenant shall vacate such Leased Property and surrender possession
thereof to Landlord in accordance with all of the applicable requirements of
this Lease.  If, prior to the tenth (10th) day
preceding the Expiration Date applicable under this Lease to a particular Leased
Property, Landlord elects to require an Operational Transfer by delivering a
Transition Notice to Tenant, Tenant shall not commence or otherwise engage in a
Facility Termination with respect to the Facility(ies) located on such Leased
Property.  In the event of an Early Termination Event or early
dispossession of Tenant with respect to any Leased Property, Tenant shall in no
event commence a Facility Termination in connection with the applicable Leased
Property unless and until Landlord affirmatively elects, in writing and in its
sole discretion, not to deliver a Transition Notice with respect to such Leased
Property.




37.3.2  Limited
Term Contraction Right.  Landlord shall have the right, as to
each Leased Property, to elect to contract the Term, and accelerate the
applicable Expiration Date, of this Lease as it applies to such Leased
Property.  To exercise such election and right as to a particular
Leased Property, Landlord shall give a written notice (a “Contraction Notice”) to Tenant
specifying the revised, earlier Expiration Date that will, for all purposes of
this Lease, thereafter be applicable to such Leased Property, which revised,
earlier Expiration Date so specified by Landlord shall be (i) not more than one
hundred twenty (120) days prior to the Expiration Date that was applicable to
such Leased Property immediately prior to Landlord’s Contraction Notice with
respect thereto, (ii) no sooner than sixty (60) days after the date of
Landlord’s aforesaid Contraction Notice, and (iii) binding upon Landlord and
Tenant upon Landlord’s issuance of such Contraction Notice.  Landlord
may issue one, but not more than one, Contraction Notice as to each Leased
Property.




37.3.3  Limited
Extended Operation by Tenant.  In the event Landlord delivers a
Transition Notice as to a particular Transition Property, Tenant shall
thereafter operate the Facility(ies) located on such Transition Property in
accordance with all of the requirements of this Lease until the earliest to
occur of (i) the date (on or after the expiration of this Lease as to such
Transition Property and Facility(ies)) on which Landlord or Successor Operator,
as applicable, will assume the operation of such Facility(ies), as specified in
a written notice from Landlord to Tenant given not less than fifteen (15) days
prior to the date of such assumption; (ii) the date that is one hundred twenty
(120) days after the Expiration Date applicable to such Transition Property and
Facility(ies) (except that in connection with any Early Termination Event or any
early dispossession of Tenant with respect to any Leased Property,




75


such one
hundred twenty (120) day period shall not commence until Landlord delivers a
Transition Notice as to the applicable Leased Property); and (iii) the date (on
or after the Expiration Date applicable to any Transition Property and
Facility(ies)) that is ninety (90) days after Tenant receives written notice
from Landlord that, notwithstanding the foregoing, Tenant may commence the
Facility Termination, on which earliest date, Tenant shall vacate the Leased
Property in question and surrender possession thereof to Landlord in accordance
with all of the applicable requirements of this Lease.  In the event
Landlord sends Tenant a TransitionNotice with respect to a
Leased Property as to which this Lease has terminated as of the Expiration Date
applicable to such Leased Property (e.g., not in the case of an Early
Termination Event or early dispossession of Tenant), and, as a result thereof,
Tenant operates a Facility(ies) beyond the aforesaid Expiration Date applicable
to such Leased Property, then, from and after the expiration of this Lease as to
such Leased Property and until the earliest to occur of the dates described in
clauses (i), (ii) and (iii) above relative to such Leased Property (the “Reimbursement Period”), (x)
Landlord shall provide Tenant with an operating budget, (y) Landlord shall
include in the aforesaid operating budget, and Tenant shall continue to pay
during the Reimbursement Period, all Rent that would have been owing under this
Lease as to such Leased Property if this Lease had not expired as to such Leased
Property, and (z) Landlord shall reimburse Tenant for any operating deficits
with respect to such Leased Property that Tenant may be required to fund
out-of-pocket on account of operating losses and expenses of such Leased
Property incurred by Tenant by reason of, or arising out of compliance with,
such budget with respect to the Reimbursement Period applicable to such Leased
Property.  Any such reimbursement shall be due from Landlord to Tenant
within thirty (30) days after written request by Tenant, provided that Tenant
shall furnish such documentation of any operating deficits, losses and expenses
as Landlord may reasonably request.  The terms of this Section37 shall survive the
expiration or sooner termination of this Lease.




37.4  Use of
Tenant’s Names.  Without limitation of the other provisions of
this Section37 and notwithstanding
anything to the contrary contained in this Lease, Tenant agrees to allow
Landlord or any Successor Operator, at its option and at no cost to Landlord or
any such Successor Operator, to continue to use, in its signage, marketing and
advertising materials, operations and otherwise, any or all name(s) (including,
without limitation, tradenames) associated with the operation of a particular
Leased Property and related Facility(ies) as a going concern (e.g. Summerville
at South Windsor) for up to one hundred twenty (120) days following (i) the
expiration or termination of this Lease as it applies to such Leased Property
and Facility(ies) and (ii) the vacation from, and surrender of, such Leased
Property and Facility(ies) by Tenant in accordance with this Section37 and the other requirements
of this Lease.  At the end of such one hundred twenty day (120)
period, or upon sooner written notice from Landlord to Tenant, Tenant shall,
promptly and at its expense, remove its aforesaid name(s) from all signs and
other Leased Improvements at such Leased Property and Facility(ies) and repair
any damage to such signs or other Leased Improvements caused by such
removal.  Landlord acknowledges and agrees that Tenant, not Landlord,
owns the aforesaid names and that neither Landlord nor any Successor Operator
may use the same except as described in this Section37.4 or as otherwise
agreed in writing by Tenant.




38.  Non-Recourse.  Each
Tenant specifically agrees to look solely to each Landlord’s and any successor
owner’s interest in the applicable Leased Property owned by such Landlord and
leased to such Tenant, as set forth in Schedule 1, for recovery of
any judgment from Landlord, it being specifically agreed that neither Landlord,
any such successor owner, nor any




76


officer,
director, employee, lender, agent or Affiliate of Landlord or any such successor
owner shall ever be personally liable for any such judgment or for the payment
of any monetary obligation to Tenant.  Tenant shall have no recourse
against any other property or assets of Landlord or any successor owner, or
against any property or assets of any officer, director, employee, lender, agent
or Affiliate of Landlord or any successor owner.  Furthermore, in no
event shall Landlord (original or successor) ever be liable to Tenant for any
special, indirect or consequential damages suffered by Tenant from whatever
cause.  Notwithstanding anything to the contrary herein, nothing in
this Section 38 shall
limit any Guarantor’s obligations under its Lease Guaranty.




39.  Combination
of Leases.If Landlord is the
landlord under both this Lease and any Other Lease, Landlord shall have the
right, at any time during the Term, by written notice to Tenant, to require that
this Lease and such Other Lease (the “Combination Lease”) be
combined into a single lease and to require Tenant to execute an amendment to
this Lease whereby (i) if this Lease is the Section 39 Lease, the Leased
Properties covered by the Combination Lease (“Additional Properties”) are
added as Leased Properties under this Lease and otherwise merged into this Lease
or (ii) if the Combination Lease is the Section 39 Lease, the Leased Properties
covered by this Lease are added as Leased Properties under the Combination Lease
and otherwise merged into the Combination Lease, in each case subject to the
following terms and conditions:




39.1  Section
39 Lease.  References in this Lease to the “Section 39 Lease” shall mean
and refer to whichever of this Lease or the Combination Lease is chosen by
Landlord to be the Section 39 Lease.




39.2  Additional
Properties.  If this Lease is the Section 39 Lease, effective
as of the date specified in Section39.4below (the “Section 39 Date”), this Lease
shall be deemed to be amended as follows:




39.2.1  The
Additional Properties shall be included as Leased Properties under this Lease
and the appropriate schedules and exhibits to this Lease shall be amended to add
the addresses and legal descriptions of such Additional Properties and such
other pertinent information with respect to such Additional Properties (e.g. the
respective amounts of Fixed Rent that are allocable, and the respective
Commencement Dates, Expiration Dates, Rent Escalation Dates and Minimum Rent
Escalation Amounts that are applicable, to such Additional Properties) as is
provided therein.




39.2.2  Fixed
Rent under this Lease shall be the combination of the respective amounts of the
Fixed Rent under this Lease and the Combination Lease.




39.2.3  Any
rental escalations that are to be made with respect to the Leased Properties
under this Lease shall also be made with respect to the Additional Properties as
if such Additional Properties had been Leased Properties under this Lease since
the beginning of the Term.




39.2.4  The
Security Deposit under this Lease shall increase to equal the required amount as
determined pursuant to the terms of this Lease, following such combination and
the addition of the Additional Properties and the Fixed Rent relating thereto,
and shall thereafter be adjusted pursuant to the terms hereof.




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39.2.5  Tenant
under this Lease shall be responsible for the payment, performance and
satisfaction of all duties, obligations and liabilities arising under the
Combination Lease, insofar as they relate to the Additional Properties, that
were not paid, performed and satisfied in full prior to the Section 39 Date,
and, without limitation of the foregoing, (i) any Event of Default that had
occurred, arisen or accrued under the Combination Lease prior to the Section 39
Date shall be, and shall be deemed to be, an Event of Default under this Lease,
as to which the rights and remedies and other provisions of this Lease shall be
applicable, (ii) any breach or default that had occurred, arisen or accrued
under the Combination Lease prior to the Section 39 Date but had not yet become
an Event of Default under the Combination Lease as of the Section 39 Date shall
be, and be deemed to be, a breach or default under this Lease, as to which the
cure periods, rights and remedies and other provisions of this Lease shall be
applicable, and (iii) with respect to any breach or default described in
subsection (ii) above, although the cure periods, rights and remedies and other
provisions of this Lease shall be applicable, the portion of any cure period
under the Combination Lease that had elapsed as of the Section 39 Date shall be
counted in determining whether and when the applicable cure period under this
Lease has expired.




39.2.6  The
Additional Properties shall otherwise be incorporated into this Lease as Leased
Properties included under this Lease the same as if this Lease, from the
inception of the Lease, had included such Leased Properties as Leased Properties
hereunder on the rent, lease terms and other economic terms described in the
Combination Lease (and, in such regard, any provisions of the Combination Lease
that apply particularly, or in a particular manner, to any or all of the
Additional Properties shall continue to apply thereto under this Lease (e.g. if
an Additional Property is located in a particular jurisdiction and, under Section48 of the Combination
Lease, particular provisions apply thereto on account thereof, such provisions
shall continue to apply to such Additional Property under this Lease, as the
Section 39 Lease)).




39.2.7  Exhibit C attached hereto and
the Base Year Patient Revenues shall thereafter be amended and increased,
respectively, to include the Additional Properties and increase the Base Year
Patient Revenues by the amount of the Allocated Base Year Patient Revenues
applicable to the Additional Properties.




39.2.8  In the
case of the Brighton Lease and the Whitehall Lease, if either or both of such
leases is combined with this Lease and this Lease is the Section 39 Lease,
the Leased Property under the Brighton Lease and/or the Whitehall Lease shall,
if it is so combined with this Lease, be considered a “Farm Pond Property” for
all purposes hereunder, including, without limitation, the applicability of
Section44.3
hereunder.  In the case of the Fairwood Lease, if any such lease is
combined with this Lease and this Lease is the Section 39 Lease, the Leased
Property under the Fairwood Lease shall, if it is so combined with this Lease,
be considered a “Mentor Property” for all purposes hereunder, including, without
limitation, the applicability of Section44.1
hereunder.  In addition, notwithstanding anything to the contrary
contained in Section39.2.6or Section39.3 hereof, if the
Brighton Lease, the Whitehall Lease and/or the Fairwood Lease is combined with
this Lease and this Lease is the Section39 Lease, (i) the
portfolio coverage ratio and security deposit provisions of this Lease, rather
than the coverage ratio, portfolio coverage ratio and security deposit
provisions of the Brighton Lease, the Whitehall Lease and/or the Fairwood Lease
(as applicable), shall apply (e.g. if the Fairwood Lease is combined with this
Lease and this Lease is the Section 39 Lease, (a) the definition of
“Portfolio Coverage Ratio” in Exhibit B hereof shall be
revised in connection with such




78


combination
so that the reference to the Facility under the Fairwood Lease is removed from
each of the parenthetical clauses of such definition that currently reference
the Fairwood Lease (i.e. after such combination, each such parenthetical clause
would read “(other than the Facilities under the Brighton Lease and the
Whitehall Lease)”), (b) the definitions of Coverage Ratio and Portfolio Coverage
Ratio in Exhibit B
to the Fairwood Lease shall be inapplicable, (c) the provisions of Sections8.2.5.1 and 8.2.5.2 of this Lease
relative, in general terms, to maintenance of certain portfolio coverage ratios,
and relative to “Test Periods” and “Coverage Based Security Deposits”, shall
apply, and (d) the provisions of Section3.4.3 hereof relative, in
general terms and without limitation of Section3.4.4 hereof or the
provisions of this Lease relative to Coverage Based Security Deposits, to
maintenance of a Security Deposit equal to a Required Number of Months of annual
Fixed Rent (i.e. four (4) months per Exhibit B hereof), and
adjustment of the Security Deposit whenever Fixed Rent changes, shall apply, in
lieu of the provisions of Section3.4.3 of the Fairwood
Lease requiring, in general terms, maintenance of a Security Deposit equal to
two (2) months’ annual Fixed Rent and adjustment of the Security Deposit every
five (5) Lease Years), and (ii) without limitation of subsection (i) above, in
the event of material or non-material differences between the form of the
Brighton Lease, the Whitehall Lease and/or the Fairwood Lease (as applicable)
and the form of this Lease, as the Section 39 Lease, the form of this Lease
shall govern (for example, (a) in Section1.3 of the Fairwood Lease,
no reference is made to the joint and several liability of Landlord and, in
Section1.3 of this Lease,
provisions regarding the joint and several liability of Landlord are included,
(b) in Section8.1.11.5 of the Fairwood
Lease, no reference is made to not jeopardizing any resident’s or patient’s
entitlement to certain reimbursements from Medicaid and, in Section8.1.11.5 of this Lease,
provisions regarding such topic are included, and (c) in Section44.1 and Exhibit H of the Fairwood
Lease, reference is made to an Option during Lease Years 7 through 12 and an
Option Exercise Notice no earlier than six (6) months prior to the commencement
of Lease Year 7 and not later than six (6) months prior the expiration of Lease
Year 12 and an Option Closing date that is the later of the first (1st) day of
Lease Year 7 or six (6) months after Option exercise, and, in Section44.1 and Exhibit H of this Lease,
actual dates are substituted for the aforesaid provisions based upon Lease
Years; in such examples above, following the combination of the Fairwood Lease
into this Lease, Section1.3 of this Lease would
continue to include the aforesaid joint and several liability provisions, Section8.1.11.5 of this Lease
would continue to include the aforesaid provisions regarding Medicaid
reimbursements and the actual dates set forth in Section44.1 and Exhibit H of this Lease
would continue to be the applicable dates).




39.3  Combination
Lease.  If this Lease is not the Section 39 Lease, effective as
of the Section 39 Date, this Lease shall be amended as necessary (i) to
incorporate into the Combination Lease as Leased Properties thereunder the
Leased Properties covered by this Lease the same as if the Leased Properties
covered by this Lease had, from the inception of this Lease, been included in
the Combination Lease as Leased Properties thereunder on the rent, lease terms
and other economic terms described in this Lease and (ii) otherwise to comply
with the requirements of Section 39 of the Combination
Lease, as the Section 39 Lease thereunder.  Tenant acknowledges and
agrees that, without limitation of Section39.2.5 above, the
amendment referenced in this Section39.3 shall not result in
Tenant being released from any duties, liabilities or obligations that had
accrued under this Lease through the Section 39 Date.




39.4  Section
39 Date.  In the case of any combination of leases pursuant to
this Section39, such combination shall
be effective on the date that is the earlier of (i) the date the




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required
amendments to the Lease and the Combination Lease are fully executed and
delivered by the parties thereto and (ii) the date specified in the written
notice from Landlord to Tenant requiring a combination of this Lease and the
Combination Lease as described above, which date shall be no sooner than ten
(10) days, nor later than sixty (60) days, after the date such notice is
issued.




39.5  Additional
Actions.  Landlord and each Tenant shall take such actions and
execute and deliver such documents, including, without limitation, required
amendments to this Lease and the Combination Lease, as are reasonably necessary
and appropriate to effectuate fully the provisions and intent of this Section39and, in the event any
ambiguity, or actual or apparent conflict in the terms or provisions of this
Lease and the Combination Lease, arises on account of any combination of leases
pursuant to this Section39, such ambiguity or
conflict shall be resolved by Landlord, in its reasonable
discretion.




40.  New
Lease.  Landlord shall have the right, at any time and from
time to time during the Term, by written notice to Tenant, to require Tenant to
execute an amendment to this Lease whereby one or more Leased Properties
(individually, a “Transferred
Premises” or collectively, “Transferred Premises”) are
separated and removed from this Lease, and simultaneously to execute a
substitute lease with respect to such Transferred Premises, in which
case:




40.1  New Lease
Terms.  Landlord and Tenant shall execute a new lease (the
“New Lease”) for such
Transferred Premises, effective as of the date specified in Section40.3 below (the “Property Transfer Date”), in
the same form and substance as this Lease, but with the following changes
thereto:




40.1.1  Fixed
Rent.  The initial Fixed Rent for such Transferred Premises
shall be an amount equal to the Fixed Rent applicable to the Transferred
Premises.  Any rental escalations required under this Lease shall be
made under the New Lease on the same date and in the same manner as is required
under this Lease, in the full amount required as if such Transferred Premises
had been under the New Lease for a full year, notwithstanding that the period
from the Property Transfer Date to the rent escalation date may be less than one
full year.  The Base Year Patient Revenues applicable to the
Transferred Premises for purposes of determining whether the Rent Escalation
Condition under such New Lease has been satisfied shall be equal to the
aggregate of the Allocated Base Year Patient Revenues for all of the Transferred
Premises.




40.1.2  Intentionally
Omitted.




40.1.3  Liabilities
and Obligations.  The New Lease shall provide that each Tenant
thereunder shall be responsible for the payment, performance and satisfaction of
all duties, obligations and liabilities arising under this Lease, insofar as
they relate to the Transferred Premises subject to the New Lease, that were not
paid, performed and satisfied in full prior to the commencement date of the New
Lease (and Tenant under this Lease shall also be responsible for the payment,
performance and satisfaction of the aforesaid duties, obligations and
liabilities not paid, performed and satisfied in full prior to the commencement
date of such New Lease), and shall further provide that the Tenant thereunder
shall not be responsible for the payment, performance or satisfaction of any
duties, obligations and liabilities of Tenant under this Lease arising after the
Property Transfer Date.




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40.1.4  Single
Leased Property.  If the New Lease relates to a single Leased
Property, the New Lease shall provide that (i) because, for example, such New
Lease may thereafter be amended by agreement of Landlord and Tenant to include
one or more other leased properties or such New Lease may thereafter be combined
with a Combination Lease pursuant to Section39 of such New Lease, with
such New Lease as the Section 39 Lease, Landlord and Tenant under such New Lease
have, in creating such New Lease, nevertheless retained in such New Lease
references to multiple Leased Properties and provisions and terms that apply to
multiple Leased Properties and (ii) without limitation of and subject to Section39 of such New Lease, for
so long as such New Lease relates to a single Leased Property, the aforesaid
references to multiple Leased Properties, and the aforesaid provisions and terms
applicable to multiple Leased Properties, shall, if the context so requires in
light of such New Lease relating to only a single Leased Property, be treated as
references to a single Leased Property or as provisions and terms applicable to
a single Leased Property.




40.1.5  Deletion
of Provisions.  At the election of Landlord, any one or more of
the provisions of the New Lease pertaining to the REIT status of Ventas, Inc.
shall be deleted.  In addition, Landlord may delete and eliminate from
such New Lease such provisions herein as it elects, provided such deletion and
elimination do not materially and adversely affect the Tenant under such New
Lease.




40.1.6  Security
Deposit; Escrow Deposits; Capital Expenditures Deposits.  Such
New Lease shall contemplate both a security deposit and escrow and capital
expenditures deposits in the same manner or fashion as contemplated by this
Lease.  Such amounts under the New Lease shall initially be funded by
Landlord from the Security Deposit held by Landlord and the escrow and capital
expenditures deposits held in the Escrow Account and Capital Expenditures
Account, with the Security Deposit under the New Lease to include (i) such
portion, if any, of any Coverage Based Security Deposit that is held by Landlord
under this Lease immediately prior to the Property Transfer Date as Landlord, at
its election and in its discretion, deems appropriate, and (ii) an amount equal
to the product of (x) a fraction, the numerator of which is the Fixed Rent
applicable to the Transferred Premises, and the denominator of which is the
Fixed Rent for the Premises immediately prior to the Property Transfer Date, and
(y) the aggregate Security Deposit (exclusive of any portion thereof
constituting a Coverage Based Security Deposit) held by Landlord under this
Lease immediately prior to the Property Transfer Date and with the initial
amounts to be held in the escrow and capital expenditures accounts under the New
Lease to be determined as provided in Section11.3.4
hereof.




40.2  Amendments
to this Lease.  Upon execution of such New Lease, and effective
as of the Property Transfer Date, this Lease shall be deemed to be amended as
follows:  (i) the Transferred Premises shall be excluded from the
Premises hereunder; (ii) Fixed Rent hereunder shall be reduced by the amount of
the Fixed Rent applicable to the Transferred Premises; and (iii) Exhibit C attached hereto and
the Base Year Patient Revenues shall be amended and reduced, respectively, to
delete and eliminate the Transferred Premises therefrom and reduce the Base Year
Patient Revenues by the amount of the Allocated Base Year Patient Revenues
applicable to the Transferred Premises for purposes of determining whether the
Rent Escalation Condition has been satisfied or otherwise under this
Lease.  Such amendments shall occur automatically and without the
necessity of any further action by Landlord or Tenant, but,




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at
Landlord’s election, the same shall be reflected in a formal amendment to this
Lease, which amendment shall be promptly executed by Tenant.




40.3  Effective
Date.  Any New Lease shall be effective on the date which is
the earlier of: (i) the date the New Lease is fully executed and delivered by
the parties thereto and (ii) the date specified in the written notice from
Landlord to Tenant requiring a New Lease as described above, which date shall be
no sooner than ten (10) days, nor later than sixty (60) days, after the date
such notice is issued.




40.4  Other
Undertakings.  Tenant shall take such actions and execute and
deliver such documents, including without limitation the New Lease and new or
amended Memorandum(s) of Lease and, if requested by Landlord, an amendment to
this Lease, as are reasonably necessary and appropriate to effectuate fully the
provisions and intent of this Section40, and Landlord shall
execute and deliver such new or amended Memorandum(s) of Lease as are reasonably
necessary and appropriate to effectuate fully the provisions and intent of this
Section40 and an amendment of
this Lease in accordance with Section40.2 above, as
applicable.




41.  Intentionally
Omitted.




42.  Miscellaneous.




42.1  Survival.  Anything
contained in this Lease to the contrary notwithstanding, all claims against, and
liabilities of, Tenant or Landlord arising prior to any date of expiration or
termination of this Lease shall survive such expiration or termination, and,
without limitation of the foregoing, Tenant’s obligation to pay any Rent owing
hereunder with respect to any period on or prior to the expiration or
termination of this Lease, as this Lease applies to any or all of the Premises,
shall survive any such expiration or termination.




42.2  Non-Business
Day Payments.  Notwithstanding anything herein to the contrary,
if any payment required to be made hereunder falls on a date that is not a
Business Day, then such required payment shall be made on the Business Day
immediately preceding the date on which such payment would otherwise be
due.




42.3  Brokers.  Tenant
warrants that, except for Apollo Real Estate Investment Fund III, L.P. (“Apollo”), it has not had any
contact or dealings with any Person that would give rise to the payment of any
fee or brokerage commission in connection with this Lease, and Tenant shall
indemnify, protect, hold harmless and defend Landlord from and against any
liability with respect to any fee or brokerage commission arising out of any act
or omission of Tenant (but, except as provided in the hereinafter described
Indemnity Agreement, not including any liability for any amounts, if any, that
become due from Landlord to Apollo under the Agreement for Finder’s Fee
referenced below).  Landlord warrants that, except for Apollo, it has
not had any contact or dealings with any Person that would give rise to the
payment of any fee or brokerage commission in connection with this Lease, and
Landlord shall indemnify, protect, hold harmless and defend Tenant from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Landlord.  Subject to the hereinafter
described Indemnity Agreement, all amounts, if any, that become due from
Landlord to Apollo under the terms of that certain Agreement for Finder’s Fee
dated July 29, 2004 between Landlord and Apollo shall be paid by Landlord
to Apollo.  Notwithstanding the foregoing or anything to
the




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contrary
contained in this Lease, nothing in this Section42.3 shall affect or
impair the obligations of the “Indemnitor” as defined in and under that certain
Indemnity Agreement dated as of the Effective Date by and among Tenant, Emeritus
and Landlord, and, in the event of any conflict between the terms of this Lease
and the terms of such Indemnity Agreement, the terms of such Indemnity Agreement
shall govern and control.




42.4  Headings.  The
headings in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.




42.5  Counterparts.  This
Lease may be executed in any number of counterparts, each of which shall be a
valid and binding original, but all of which together shall constitute one and
the same instrument.




42.6  Integration;
Modification; Interpretation.  This Lease (including, without
limitation, the preamble, recitals, schedules and exhibits hereto, each of which
is fully incorporated into and made a part of this Lease) contains the entire
agreement between Landlord and Tenant with respect to the subject matter
hereof.  Landlord and Tenant hereby agree that all prior or
contemporaneous oral understandings, agreements or negotiations relative to the
leasing of the Premises are merged into and revoked by this Lease.  No
representations, warranties or agreements have been made by Landlord except as
set forth in this Lease.  This Lease may be only be modified by a
writing signed by both Landlord and Tenant.  Both Landlord and Tenant
have been represented by counsel, and this Lease and every provision hereof has
been freely and fairly negotiated.  Consequently, all provisions of
this Lease shall be interpreted according to their fair meaning and shall not be
strictly construed against any party.  Landlord and Tenant agree that
nothing contained in any previous purchase and sale agreement between Landlord
and Tenant, or their respective Affiliates, or in the Purchase Agreements, shall
abrogate or impair any of the rights, duties and obligations of Landlord and
Tenant under this Lease and that, in the event of any conflict between the terms
and provisions of this Lease and the terms and provisions of any such purchase
and sale agreement or Purchase Agreements, the terms and provisions of this
Lease shall govern.




42.7  Time of
Essence.  Time is of the essence of this Lease and each
provision hereof in which time of performance is established.




42.8  Force
Majeure.  In the event that either Landlord or Tenant is
delayed in performing its respective obligations pursuant to this Lease by any
cause beyond the reasonable control of the party required to perform such
obligation, the time period for performing such obligation shall be extended by
a period of time equal to the period of the delay.  For purposes of
this Lease: (i) a cause shall be beyond the reasonable control of a party to
this Lease when such cause would affect any Person similarly situated (such as a
power outage, labor strike, Act of God or trucker’s strike) but shall not be
beyond the reasonable control of such party when peculiar to such party (such as
financial inability or failure to order long lead time material sufficiently in
advance); (ii) this Section shall not apply to any obligation to pay money or
otherwise perform any financial obligation hereunder; and (iii) in the event of
any occurrence that a party believes constitutes a cause beyond the reasonable
control of such party and that will delay any performance by such party, such
party shall promptly in writing notify the other party of the occurrence and
nature of such cause, the anticipated period of delay and the steps being taken
by such party to mitigate the effects of such delay.




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42.9  Severability;
Maximum Rate.  If any term or provision of this Lease is held
or deemed to be invalid or unenforceable, such term or provision shall be
modified as slightly as possible so as to render it valid and enforceable; if
such term or provision, as modified, shall be held or deemed invalid or
unenforceable, such holding shall not affect the remainder of this Lease and
same shall remain in full force and effect.  If any late charges or
interest computations provided for in any provision of this Lease are based upon
a rate in excess of the maximum rate permitted by applicable law, the parties
agree that such charges or interest computations shall be fixed at the maximum
permissible rate.




42.10  Governing
Law; Venue.  This Lease was negotiated in the State of
Illinois, which State the parties agree has a substantial relationship to the
parties and to the underlying transaction embodied hereby.  In all
respects, the internal laws of the State of Illinois (without regard to
principles of conflicts of laws) and any applicable laws of the United States of
America shall govern the validity, enforceability and construction of the
obligations of the parties set forth herein, but all provisions hereof relating
to the creation of the leasehold estate and remedies set forth in Section17 shall be governed by
the laws of the State in which each applicable Leased Property that is the
subject of dispute is located.  The parties hereto will submit to
jurisdiction and the laying of venue for any suit on this Lease in the
Commonwealth of Kentucky.




42.11  Waiver of
Trial by Jury.  EACH OF LANDLORD AND TENANT ACKNOWLEDGES THAT
IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO
TRIAL BY JURY.  EACH OF LANDLORD AND TENANT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS LEASE OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF LANDLORD AND TENANT WITH RESPECT TO THIS LEASE OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.  EACH OF LANDLORD AND TENANT HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A
COURT TRIAL WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS
SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF SUCH PARTY TO
THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.




42.12  Waivers;
Forbearance.  All waivers, consents and releases provided for
in this Lease are effective only to the extent permitted by applicable
law.  No waiver of any condition or covenant herein contained, or of
any breach of any such condition or covenant, shall be held or taken to be a
waiver of any subsequent breach of such covenant or condition, or to permit or
excuse its continuance or any future breach thereof, or of Landlord’s right to
terminate this Lease or exercise any other remedy granted herein on account of
such existing breach.  No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or breach by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.




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42.13  Binding
Character.  This Lease shall be binding upon and shall inure to
the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.




43.  Renewal
Options.




43.1  Exercise
of Renewal Options.  Tenant is hereby granted the right to
renew this Lease, with respect to all, but not less than all, of the Mentor
Properties under this Lease and/or with respect to all, but not less than all,
of the Farm Pond Properties under this Lease, for two (2), 5-year option renewal
terms (collectively, the “Extended Terms” and each an
“Extended Term”) upon
giving written notice (a “Renewal Notice”) to Landlord
of each such renewal, and of Tenant’s election to renew all such Mentor
Properties or Farm Pond Properties, as applicable, at least nine (9) months but
not more than eighteen (18) months prior to the expiration of the then current
Term applicable to all such Mentor Properties or Farm Pond Properties, as
applicable, provided and on the conditions that, at the time Tenant gives a
Renewal Notice as set forth above and at the time of the commencement of the
applicable Extended Term, an Event of Default shall not have occurred and be
continuing under this Lease.  Tenant may not exercise its option for
more than one Extended Term at a time.




43.2  Renewal
Terms.  During each Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, subject,
however, to the following provisions.  If the Fixed Rent applicable to
any Leased Property(ies) for the first Lease Year of any Extended Term is based
upon Fair Market Rental as determined pursuant to this Section43.2 and Section43.3 hereof, the Fixed
Rent applicable to such Leased Property(ies) in the remaining Lease Years of
such Extended Term shall be escalated in accordance with the escalation
provisions set forth in Section3.1.2 of this
Lease.




43.3  Fair
Market Rental Determination.  At any time within thirty (30)
days after receipt from Tenant of a Renewal Notice under Section43.1 hereof relating to
either the first or second Extended Term of this Lease as it applies to any
Mentor Property or relating to the second Extended Term of this Lease as it
applies to any Farm Pond Property, Landlord may, by written notice to Tenant,
request that the Fair Market Rental of the Mentor Properties or Farm Pond
Properties, as applicable, to which such Renewal Notice relates, and the Fair
Market Rental of each such Leased Property, be determined by appraisal under the
procedures of Exhibit G
attached hereto and in such event such Fair Market Rentals shall be so
determined in accordance with the procedures of such Exhibit
G.  Landlord’s failure to deliver such notice to Tenant within
thirty (30) days after receiving Tenant’s Renewal Notice shall preclude Landlord
from any claim that the Fixed Rent applicable to the aforesaid Leased Properties
for the first Lease Year of the Extended Term to which such Renewal Notice
relates should be based upon the Fair Market Rental of such Leased Properties,
and the Fixed Rent applicable to the aforesaid Leased Properties for such
Extended Term (but only for that particular Extended Term) shall be determined
as set forth in Section3.1.2 of this Lease,
without any application of the Fair Market Rental provisions of Section43.2.




43.4  Intentionally
Omitted.




43.5  Other
Leases.  Notwithstanding anything to the contrary contained in
this Section43 or elsewhere in this
Lease, Tenant acknowledges and agrees that (i) any purported Renewal Notice sent
by it under this Lease shall be void and of no force or effect
unless,




85


simultaneously
with the issuance of any such Renewal Notice, the tenant under each of the Other
Leases that remains in effect also issues a Renewal Notice with respect to all,
but not less than all, of the Mentor Properties (if the Renewal Notice under
this Lease relates to Mentor Properties) or Farm Pond Properties (if the Renewal
Notice under this Lease relates to Farm Pond Properties) to which each such
Other Lease applies and (ii) an Event of Default by any such other tenant of its
obligations under its Other Lease shall constitute an immediate Event of Default
hereunder and preclude Tenant’s exercise of renewal rights
hereunder.




44.  Option to Purchase and Right
of First Offer.




44.1  Option
Terms.  Provided no Event of Default exists and is continuing
hereunder at the time Tenant exercises the Option (as hereinafter defined) or at
the closing of the sale of the Subject Mentor Properties to Tenant, Tenant shall
have the option (the “Option”) to purchase all (but
not less than all) of the Subject Mentor Properties during the period beginning
on October 1, 2011 and ending on September 30, 2016, at the greater of
(i) the Minimum Option Purchase Price or (ii) the Fair Market Value of the
Subject Mentor Properties (the “Option Purchase
Price”).  Tenant may exercise such Option by giving written
notice to Landlord of its exercise of the Option (an “Option Exercise Notice”) no
earlier than April 1, 2011 and not later than March 30, 2016 and
depositing with Landlord one and one half percent (1.5%) of the Minimum Option
Purchase Price (the “Purchase
Option Earnest Money”) simultaneously with the delivery of the Option
Exercise Notice.  Any exercise by Tenant of the Option shall void any
right of Tenant to extend the Term as to the Subject Mentor Properties for any
Extended Term.  Landlord and Tenant shall proceed to the closing (the
“Option Closing”) on the
date that is the later of October 1, 2011 or six (6) months after the exercise
of the Option (or on the next Business Day thereafter, if the aforesaid later
date is not a Business Day).  If Tenant fails to proceed to the Option
Closing for any reason other than a default by Landlord with respect to its
obligations pursuant to the terms of Exhibit H attached hereto
relative to the Option and the Option Closing, Landlord shall have the
unconditional right to:  (x) retain the Purchase Option Earnest Money,
as fixed and liquidated damages (and not as a penalty); and (y) declare an
immediate Event of Default hereunder.  The Option shall be exercised
subject to, and in accordance with, the terms and conditions applicable to the
exercise of the Option set forth in Exhibit Hattached
hereto.  Upon the consummation of the Option Closing, the Subject
Mentor Properties shall be deleted from this Lease pursuant to Section 17.9.




44.2  Other
Leases with Option Provision.  Notwithstanding anything to the
contrary contained in this Section44 or elsewhere in this
Lease, Tenant acknowledges and agrees that (a) any purported Option Exercise
Notice sent by it under this Lease shall be void and of no force or effect
unless, simultaneously with the issuance of any such Option Exercise Notice, the
tenant under each of the Other Leases that remains in effect (and which provides
for an Option (e.g. neither the Brighton Lease nor the Whitehall Lease includes
any Option in favor of Tenant)) also issues an Option Exercise Notice with
respect to all, but not less than all, of the Mentor Properties to which each
such Other Lease applies and makes the corresponding required earnest money
deposit, (b) an Event of Default by any such other tenant of its obligations
under its Other Lease shall constitute an immediate Event of Default hereunder
and preclude Tenant’s exercise of its Option hereunder, and (c) Landlord shall
not be obligated to proceed to the Option Closing unless, simultaneously
therewith, the option closings occur under the aforesaid Other
Leases.




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44.3  Right of
First Offer.  If Landlord elects to sell any one or more entire
Subject Farm Pond Property(ies) during the Term, then, provided no Event of
Default exists, Landlord shall give Tenant an opportunity to purchase such
Subject Farm Pond Property(ies) (the “Right of First Offer”) by
giving Tenant notice of its intent to sell (the “Right of First Offer Notice”),
which Right of First Offer Notice shall include the sale price (the “Offer Price”) and terms
Landlord is willing to offer to third parties for such Subject Farm Pond
Property(ies) (“Offer”).  Tenant
will then have two (2) Business Days either to accept or reject such
Offer.  Should Tenant fail to accept such Offer on the terms and
conditions set forth therein in writing within two (2) Business Days after
receipt of such Right of First Offer Notice from Landlord, Landlord may sell or
otherwise transfer such Subject Farm Pond Property(ies) to any other party at
any time on terms and conditions acceptable to Landlord provided the purchase
price paid by such other party is at least 85% of the Offer Price and the
closing of such sale or transfer occurs no later than the date two years after
the date Landlord delivers the Right of First Offer Notice.  Prior to
(x) selling such Subject Farm Pond Property(ies) during such two-year period for
a purchase price of less than 85% of the Offer Price, or (y) selling such
Subject Farm Pond Property(ies) after the end of such two-year period, Landlord
must reoffer such Subject Farm Pond Property(ies) to Tenant pursuant to this
Section44.3.  At the
end of the Term of this Lease as it applies to each Subject Farm Pond Property,
Tenant’s rights under this Section44.3 with respect to such
Subject Farm Pond Property shall be deemed forever
extinguished.  Should Tenant elect to accept such Offer on the terms
and conditions set forth therein, promptly but in any event no more than five
(5) Business Days after Tenant’s acceptance, Tenant must deposit with Landlord
in cash a nonrefundable (except upon Landlord’s material default of any
obligation it may have under the terms of the accepted Offer or as otherwise
provided in this Section44.3) earnest money
deposit equal to five percent (5%) of the purchase price stated in the accepted
Offer, and within five (5) Business Days of Tenant’s acceptance of such Offer,
Landlord and Tenant must enter into a binding agreement (the “Offer Purchase Agreement”) to
purchase such Subject Farm Pond Property(ies), which Offer Purchase Agreement
(i) must  be on the terms and conditions of the accepted Offer, (ii)
must provide that the purchase price will be paid in cash at closing,
(iii) must provide that the closing of Tenant’s purchase of such Subject
Farm Pond Property(ies) must take place no later than thirty (30) days from the
date Tenant accepts Landlord’s Offer, (iv) will not provide Tenant with any
right or entitlement to any due diligence or investigation period of or about
such Subject Farm Pond Property(ies) pursuant to which Tenant would have any
unilateral right not to proceed to closingand (v) must
otherwise be reasonably acceptable to Landlord.  If Tenant fails to
enter into the Offer Purchase Agreement Tenant shall not be in default under the
Lease, but rather Tenant shall be deemed to have rejected the Offer. Without
limitation of the foregoing, Tenant’s obligation to close shall be absolute and
there shall be no conditions precedent or contingencies to Tenant’s obligation
to consummate its acquisition of any Subject Farm Pond Property(ies) (e.g. financing
contingency) pursuant to the Right of First Offer.  The sale of any
Subject Farm Pond Property(ies) pursuant to the Right of First Offer and the
Offer Purchase Agreement shall (A) include a quitclaim bill of sale with
respect to any personal property that both (1) is leased to Tenant pursuant to
the Lease and (2) relates exclusively to the Subject Farm Pond Property(ies) to
which the Right of First Offer and Offer Purchase Agreement relates,
(B) include a special warranty deed(s) from Landlord with respect to such
Subject Farm Pond Property(ies), subject only to (1) Impositions not yet due and
payable; (2) those matters and exceptions shown in Landlord’s existing owner’s
policy of title insurance obtained in connection with Landlord’s purchase of the
Subject Farm Pond Property(ies) and (3) any Permitted Encumbrances; provided,
however, that Landlord shall be obligated to remove any third party monetary
liens affecting the Subject Farm Pond Property(ies)




87


that
arose, or were assumed in writing by Landlord, after Landlord’s acquisition of
the Subject Farm Pond Property(ies), are due solely to Landlord’s actions and
for the payment of which Tenant is not responsible by the terms of this Lease
(e.g. if, after the aforesaid acquisition, Landlord employs a contractor to
perform work at the Subject Farm Pond Property(ies), which work results in a
mechanic’s lien upon the Subject Farm Pond Property(ies), Landlord shall be
obligated to remove the same, unless, by the terms of this Lease, Tenant is
obligated to reimburse Landlord, or otherwise pay, for the aforesaid work), and
(C) be made on a strictly “AS IS,” “WHERE-IS” basis as of the date of sale,
without any representations, warranties or covenants, of any nature whatsoever
(other than the warranties contained in the special warranty deed(s) conveying
same), from Landlord, except that (a) if Landlord would covenant to a third
party purchaser to have removed or bonded over any third party monetary liens of
the nature described above and that are of a definite and ascertainable amount
prior to the closing, then the Offer Purchase Agreement shall contain a similar
covenant, provided that Tenant’s sole remedy for Landlord’s breach of such
covenant shall be to terminate the Offer Purchase Agreement and receive a refund
of its earnest money deposit, and (b) Landlord shall covenant not to
intentionally place any material encumbrances on such Subject Farm Pond
Property(ies) between the time of the Offer and the closing under the Offer
Purchase Agreement.  Within thirty (30) days after Tenant’s acceptance
of Landlord’s Offer, Tenant must purchase the Subject Farm Pond Property(ies)
that were the subject of the accepted Offer for cash at the agreed upon purchase
price (minus the earnest money down payment previously paid to
Landlord).  Should (I) Landlord sell any Subject Farm Pond
Property(ies) to a third party after complying with its obligations under this
Section44.3, (II) Tenant fail to
make the nonrefundable earnest money deposit within the five (5) Business Days
period described above, (III) Landlord and Tenant fail to enter into a binding
agreement to purchase the Subject Farm Pond Property(ies) to which Tenant’s
accepted Offer relates within the five (5) Business Days period described above,
or (IV) Tenant fail to purchase said Subject Farm Pond Property(ies) after
entering into such binding agreement for any reason (other than a material
default of Landlord) within the thirty (30) day period described above, then
Tenant’s rights under this Section44.3 with respect to such
Subject Farm Pond Property(ies) shall be deemed forever extinguished, Tenant
shall have no further rights under thisSection44.3 with respect to such
Subject Farm Pond Property(ies) and Landlord may sell or otherwise transfer such
Subject Farm Pond Property(ies) to any other party at any time on terms and
conditions acceptable to Landlord; provided however, with respect to clause
(III), Landlord shall return the earnest money deposit to Tenant and with
respect to clause (IV), Tenant shall forfeit and Landlord shall be entitled to
keep the nonrefundable earnest money deposit.  The Right of First
Offer shall be personal to Tenant and may only be exercised by Tenant, Emeritus
or any Affiliate of Emeritus, as a permitted assignee of the Tenant’s interest
in this Lease, or any other permitted assignee of such interest pursuant to a
transaction on account of which a fee and reimbursements as referenced in Section24.1.2.1 hereof are paid
to Landlord, and not any other assignee, or other transferee, of the Tenant’s
interest in this Lease, and, further, notwithstanding the foregoing, shall in
all events terminate and be of no further force or effect in the event, and from
and after the date of, any assignment or other transfer of the Tenant’s interest
in this Lease to a Person other than (X) Emeritus or any Affiliate of Emeritus
or (Y) any other permitted assignee of such interest pursuant to a transaction
on account of which the aforesaid fee and reimbursements are paid to
Landlord.Upon the
consummation of the sale of any Subject Farm Pond Property(ies) to Tenant as
provided in this Section44.3, such Subject Farm
Pond Property(ies) shall be deleted from this Lease pursuant to Section17.9.




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45.  Special
Purpose Entity Obligations.  Tenant agrees to comply with the
representations, warranties and covenants set forth in Exhibit I attached
hereto.




46.  Memorandums
of Lease.  Landlord and Tenant shall, promptly upon the request
of either, enter into short form memorandums of this Lease, in form suitable for
recording under the laws of the State in which each Leased Property is located,
in which reference to this Lease, and all renewal options and options to
purchase contained herein, shall be made.  Tenant shall pay all costs
and expenses of recording any such Memorandums of Lease or amendments thereto
and for releasing any such Memorandums of Lease that relate to a particular
Leased Property(ies) upon any expiration or termination of this Lease as it
relates to any such Leased Property(ies).




47.  Confidentiality.




47.1  Confidentiality.  Each
of Landlord and Tenant agrees that, except as otherwise provided in this Section47, all Information (as
defined below) provided by Landlord to Tenant or by Tenant to Landlord (the
party providing Information being referred to as “Disclosing Party” and the
party receiving Information being referred to as “Recipient”) will be kept
confidential and will not, without Disclosing Party’s prior written consent, be
disclosed by Recipient, in whole or in part, to any Person.




47.2  Permitted
Disclosures.  Recipient may disclose Information:




(i)  to those
of Recipient’s officers, directors and employees who are informed by Recipient
of the confidential nature of the Information and who agree, for Disclosing
Party’s benefit, to act in accordance with the terms and conditions of this
Section47; Recipient will be
responsible for any breach of this Section47 by such persons;
or




(ii)  in the
case where Landlord is the Recipient:




(a)           to
the extent the Information is both (x) of a financial, operating, regulatory,
business or similar nature, and (y) has been aggregated to relate to this Lease,
a jurisdiction or jurisdictions (such as a state or region) or any other
category; or




(b)           to
the extent the Information either:




(w)           is
provided to Facility Mortgagees, prospective Facility Mortgagees, purchasers,
prospective purchasers, tenants or prospective tenants of a Leased
Property(ies); provided that any such party listed in this clause (w) who
receives such Information is informed by Landlord of the confidential nature of
the Information and agrees with Landlord to keep such Information confidential
pursuant to a standard confidentiality agreement; and provided further that such
Information may be disclosed to tenants or prospective tenants only if either
(i) Tenant has not, at least nine (9) months prior to the expiration of the then
current Term, given to Landlord written notice of Tenant’s intention to renew
this Lease, or (ii) an Event of Default has occurred; or




89


(x)           is
disclosed in connection with or following a sale, closure, material casualty,
default or prospective default with respect to a Leased Property(ies);
or




(y)           relates
to the location or size of, or the number of licensed beds or units at, a Leased
Property(ies); or




(z)           is
of the type customarily disclosed by a public healthcare real estate investment
trust; or




(iii)  to the
extent Recipient reasonably determines that disclosure of the Information is
required by any Legal Requirement applicable to Recipient or any applicable
rule, regulation, or requirement of any securities exchange on which the
Recipient’s securities are listed or admitted for trading (a “Disclosure Law”) pursuant to
the procedures set forth in Section47.7 below;
or




(iv)  in
connection with any proceeding in which Recipient is attempting to protect or
enforce any rights and/or remedies in connection with this Lease or any of the
Other Leases, but only to the extent necessary to protect or enforce such rights
and/or remedies; or




(v)  to any
person in a confidential relationship with Recipient, including Recipient’s
auditors, advisors, consultants, lawyers, and others who agree with Recipient to
be bound by a standard confidentiality agreement, such as lenders, prospective
lenders, purchasers, potential purchasers, tenants and prospective tenants;
provided, however, that Recipient shall not be liable to Disclosing Party for
any breach by such persons of such confidential relationship or confidentiality
arrangements; provided further, however, that Recipient shall assign to
Disclosing Party the Recipient’s rights under such confidentiality agreement or
obligations; or




(vi)  to the
extent legally compelled to disclose any of the Information pursuant to a
subpoena or other legal process having the force of law.  Recipient
will provide Disclosing Party with prompt notice so that Disclosing Party or any
of its representatives may seek a protective order or other appropriate
remedy.  In the event that such protective order or other remedy is
not obtained, Recipient will furnish only that portion of the Information which
Recipient has been advised is legally required and Recipient will exercise its
reasonable efforts to attempt to obtain reliable assurance that confidential
treatment will be accorded the Information so to be furnished.  In any
event, Recipient will cooperate with (and not oppose) any reasonable action by
Disclosing Party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded such
Information.




47.3  Information.Information means
(i) all and any data, reports, forecasts, records, agreements and other
information furnished after the Effective Date by Disclosing Party or by any of
its representatives or advisors to Recipient that is both (x) material and
proprietary, and (y) in the case where Tenant is the Disclosing Party, that is
required to be furnished pursuant to Section11.4 or Section25.5 of this Lease and
(ii) the economic terms and provisions of this Lease.




90


47.4  Excluded
Information.  The obligations under Section47.1will not apply to any
Information that (i) was known to Recipient prior to Disclosing Party’s
disclosure of such Information to Recipient (unless Recipient’s knowledge was
obtained confidentially or from a source that to Recipient’s knowledge was not
permitted to disclose such Information to Recipient) or (ii) becomes available
to Recipient on a nonconfidential basis from a source (other than Disclosing
Party or any of its employees, agents, representatives or advisors) who to the
knowledge of Recipient is not prohibited from disclosing such Information to
Recipient by any legal, contractual or fiduciary obligation.




47.5  Injunctive
Relief.  Recipient acknowledges that remedies at law may be
inadequate to protect against breach of the provisions of this Section47, and Recipient hereby
in advance agrees that Disclosing Party shall not be obligated to establish
actual damages or the inadequacy of monetary damages in seeking an
injunction.  Such injunctive relief will not be deemed to be the
exclusive remedy for a breach by Recipient of the provisions of this Section,
but will be in addition to all other remedies available at law or equity to
Disclosing Party.




47.6  Suspension
Period.  Landlord shall have the right to temporarily suspend
Tenant’s obligation to provide it with Information pursuant to the terms of this
Lease or otherwise for a specified period of time or for a period of time
terminating upon the occurrence of a specified event, including notice from
Landlord (the “Suspension
Period”).  During the Suspension Period, Tenant shall, if
requested by Landlord, deliver such Information to a third party in a
confidential relationship with Landlord.  Upon expiration or
termination of the Suspension Period, Tenant will deliver to Landlord within
three (3) Business Days all Information that Tenant otherwise would have been
required to deliver during the Suspension Period and shall immediately, once
again, be subject to all of the information delivery requirements set forth in
this Lease.




47.7  Disclosure
Notice.  In connection with any proposed disclosure pursuant to
Section47.2(iii),Recipient shall provide
Disclosing Party with advance written notice of the proposed disclosure and
shall set forth the Information to be disclosed, the proposed date of disclosure
(the “Disclosure Date”),
the basis for such disclosure as well as the manner of such disclosure (the
“Disclosure
Notice”).  The Disclosure Notice shall be delivered to
Disclosing Party no later than the Disclosure Notification Date (as defined
below).  Recipient and Disclosing Party shall cooperate with one
another and negotiate in good faith to seek a mutually satisfactory resolution
with respect to such proposed disclosure.  In the event Disclosing
Party has not, prior to the Disclosure Date, either (i) consented to the
proposed disclosure (or such modified disclosure as Recipient and Disclosing
Party may mutually agree) or (ii) itself made disclosure of the Information
contained in such Disclosure Notice (or such modified disclosure as Recipient
and Disclosing Party may mutually agree), Recipient may disclose such
Information to the extent and in the manner set forth in such Disclosure
Notice.  “Disclosure
Notification Date” shall mean the latest of the following
dates:  (a) five (5) Business Days prior to the Disclosure Date; and
(b) in the case of Section47.2(iii), such shorter
period of time prior to the Disclosure Date which is reasonable (in light of the
nature of the Information to be disclosed and the Disclosure Law applicable
thereto).




48.  State
Specific Provisions.  The following provisions shall apply to
those Leased Properties that are located within the following
states:




48.1  Connecticut.




91


48.1.1  Waiver of
Notice to Quit.Tenant hereby
waives the right to a formal demand to leave any Leased Property located in
Connecticut upon expiration of this Lease, as it applies to any such Leased
Property,  by lapse of time, known as a “Notice to Quit” under
§47a-25 of the Connecticut General Statutes, should Landlord use summary process
to evict Tenant or regain possession of any such Leased Property.




48.1.2  Prejudgment
Remedy Waiver.  TENANT HEREBY REPRESENTS, COVENANTS AND AGREES
THAT THE TRANSACTION OF WHICH THIS LEASE IS A PART IS A “COMMERCIAL TRANSACTION”
AS DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT.  TENANT HEREBY
WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et seq., AS AMENDED,
OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES LANDLORD MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER.  MORE SPECIFICALLY, TENANT ACKNOWLEDGES THAT LANDLORD’S
ATTORNEY MAY, PURSUANT TO CONNECTICUT GENERAL STATUTES SECTION 52-278f, ISSUE A
WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER.  TENANT
ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE
ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY BY LANDLORD’S ATTORNEY, AND LANDLORD
ACKNOWLEDGES TENANT’S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID
WRIT.  TENANT FURTHER HEREBY WAIVES ANY REQUIREMENT OR OBLIGATION OF
LANDLORD TO POST A BOND OR OTHER SECURITY IN CONNECTION WITH ANY PREJUDGMENT
REMEDY OBTAINED BY LANDLORD AND WAIVES ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY
OBTAINED BY LANDLORD BASED ON ANY OFFSETS, CLAIMS, DEFENSES OR COUNTERCLAIMS OF
TENANT OR ANY OTHER PARTY PRIMARILY OR SECONDARILY LIABLE UNDER THE LEASE TO ANY
ACTION BROUGHT BY LANDLORD.  TENANT ACKNOWLEDGES AND AGREES THAT ALL
OF THE WAIVERS CONTAINED IN THIS SECTION HAVE BEEN MADE KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND INTELLIGENTLY, AND WITH THE ADVISE OF ITS
COUNSEL.




48.2  California.




48.2.1  Relative
to Sections 3.4.1 and
8.2.5 of this Lease and
any other provisions of this Lease relating to the Security Deposit, Tenant
waives the provisions of any applicable law or statute affording tenants rights
with respect to security deposits (including, without limitation, Section 1950.7
of the California Civil Code) and agrees that the provisions of Sections 3.4.1 and 8.2.5 of this Lease and any
other provisions of this Lease relating to the Security Deposit shall govern the
treatment of the Security Deposit in all respects.




48.2.2  Relative
to Section 9.1.1 of this
Lease, Tenant agrees that the waiver contained in the last sentence thereof
shall include, without limitation, to the extent permitted by law, a waiver of
any rights Tenant may have under the provisions of California Civil Code
Sections 1941 and 1942 and any successor statutes or laws of a similar
nature.




48.2.3  Relative
to Section 15.10 of this
Lease, Tenant waives any statutory rights of termination that may arise by
reason of any Casualty (including, without




92


limitation,
the provisions of California Civil Code Section 1932, Subsection 2, and Section
1933, Subsection 4 and any successor statutes or laws of a similar nature) or
Condemnation (including, without limitation, the provisions of California Code
of Civil Procedure Sections 1265.110 through 1265.160 and any successor statutes
or laws of a similar nature).




48.2.4  Relative
to Section 17.1.1 of
this Lease and the other subsections of Section 17.1, Tenant agrees
that the provision of any notice of default as set forth in such subsections
shall be in lieu of, and not in addition to, any notice required under
applicable law (including, without limitation, California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions and any successor
statute or similar law).




48.2.5  Relative
to Sections 17.3 and
17.4 of this Lease,
Landlord and Tenant agree that, if an Event of Default occurs and, on account
thereof, this Lease is terminated as to all of the Leased Properties or Landlord
makes a Limited Termination Election (other than a Limited Termination Election
involving only a Leased Property(ies) located outside of California), the
provisions of Section
17.3 and 17.4 of
this Lease shall be revised in their entirety to apply to any such complete
termination or Limited Termination Election, as applicable, as
follows:




“17.3                      Certain
Remedies.  If an Event of Default giving rise to termination
under Section 17.2 shall
have occurred, Tenant shall, if and to the extent required by Landlord so to do,
immediately surrender to Landlord the Leased Property(ies) specified by Landlord
and as to which the Lease has been or may be terminated pursuant to Section 17.2 or otherwise, and
Landlord may enter upon and repossess such Leased Property(ies) by summary
proceedings, ejectment or otherwise, and may remove Tenant and all other Persons
and all personal property from such Leased Property(ies) subject to the rights
of any occupants or patients and to any requirement of law.  Landlord
also has the remedy described in California Civil Code Section 1951.4, providing
that Landlord may continue this Lease in effect after Tenant's breach and
abandonment and recover Rent as to the Leased Properties (or as to the
Terminated Lease Properties, in the event of a Limited Termination Election) as
it becomes due, if Tenant has the right to sublet or assign, subject only to
reasonable limitations (and, in such regard, Tenant agrees that the limitations
on subletting and assignment that are set forth in Section 24 hereof are
reasonable).




17.4.                      Damages.  To the extent
permitted by law, neither (i) the termination of this Lease pursuant to Section 17.2, (ii) the
repossession of any or all of the Leased Properties or any portion thereof,
(iii) the failure of Landlord to relet any or all of the Leased Properties or
any portion thereof, (iv) the reletting of any or all of the Leased Properties
or any portion thereof, (v) the failure of Landlord to collect or receive any
rentals due upon any such reletting, nor (vi) the election by Landlord not to
terminate the Lease but rather to seek all damages provided at law or in equity,
shall relieve Tenant of any of its liabilities or obligations hereunder, all of
which shall survive any such termination, repossession or
reletting.  In the event of any such termination of this Lease (or any
termination of this Lease as to less than all of the Leased Properties in the
event of a Limited Termination Election or the election by Landlord not to
terminate this Lease as to such Leased Properties, but rather to pursue its
damages at law or in equity), without limitation




93


of Section 17.5 and Section 19 below, Landlord
shall be entitled to collect from Tenant:




(a)           The
worth at the time of award of any unpaid Rent (or any unpaid Rent as to the
Terminated Lease Properties, in the event of a Limited Termination Election)
which had been earned at the time of such termination; plus




(b)           The
worth at the time of award of the amount by which the unpaid Rent for the Leased
Properties (or for the Terminated Lease Properties, in the event of a Limited
Termination Election) which would have been earned after termination until the
time of award exceeds the amount of such Rent loss relative to the Leased
Properties (or relative to the Terminated Lease Properties, in the event of a
Limited Termination Election) that Tenant proves could have been reasonably
avoided; plus




(c)           The
worth at the time of award of the amount by which the unpaid Rent for the Leased
Properties (or for the Terminated Lease Properties, in the event of a Limited
Termination Election) for the balance of the Term after the time of award
exceeds the amount of such Rent loss relative to the Leased Properties (or
relative to the Terminated Lease Properties, in the event of a Limited
Termination Election) that Tenant proves could be reasonably avoided;
plus




(d)           Any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which,
in the ordinary course of things, results therefrom.




As used
in Sections 17.4(a) and
(b) above, the “worth at
the time of award” is computed by allowing interest at the Overdue
Rate.  As used in Section 17.4(c) above, the
“worth at the time of award” is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%) per annum.




In case of any Event of Default,
Landlord may, with or without terminating this Lease (but subject, in the case
of any Leased Property(ies) located in California, to any provisions of
California law providing that this Lease will be deemed terminated as to any
Leased Property(ies) as to which Tenant’s right to possession is terminated by
Landlord due to an Event of Default), (x) relet any or all of the Premises or
any part or parts thereof, for a term or terms that may, at Landlord’s option,
be equal to, less than or exceed the period that would otherwise have
constituted the balance of the Term and may grant concessions or free rent to
the extent that Landlord considers advisable or necessary to relet the same, and
(y) make such reasonable alterations, repairs and decorations in the applicable
Leased Property(ies) or any portion thereof as Landlord, in its sole judgment,
considers advisable or necessary for the purpose of reletting the applicable
Leased Property(ies); and such reletting and the making of such alterations,
repairs and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid.  Landlord shall in no event be
liable in any way whatsoever for failure to relet any Leased Property, or, in
the event




94


that any
Leased Property is relet, for failure to collect the rent under such
reletting.  To the fullest extent permitted by law, Tenant hereby
expressly waives the service of any notice of intention to re-enter provided for
in any statute, and also waives any and all rights of redemption or re-entry or
re-possession in case Tenant shall be dispossessed by a judgment or by warrant
of any court or judge or in case of re-entry or re-possession by Landlord or in
case of any expiration or termination of this Lease.  The terms
“enter”, “re-enter”, “entry”, or “re-entry” as used in this Lease are not
restricted to their technical legal meanings.”




48.2.6  Relative
to Section 17.5of this
Lease, Tenant agrees that, in addition to the waivers referenced therein, Tenant
waives, to the maximum extent permitted by applicable law, any right it may have
under California Code of Civil Procedure Section 1179 to apply to a court to
relieve Tenant from forfeiture of this Lease following a judgment for possession
of the applicable Leased Property(ies).”




49.  Intentionally
Omitted.




50.  Restrictive
Covenants.  Tenant, each Guarantor and their respective
Affiliates shall be subject to the restrictive covenants and conditions
governing the ownership, leasing, management or operation of additional
healthcare facilities contained in Exhibit J attached
hereto.









[The
remainder of this page is intentionally left blank]




95





IN
WITNESS WHEREOF, the parties have caused this Lease to be executed and their
respective corporate seals to be hereunto affixed and attested by their
respective officers hereunto duly authorized.




Witness:
              
              /s/ Trish Kelley
              Name:
      Trish
      Kelley
              
              /s/ Nicole
      Tudela
              Name:
      Nicole
      Tudela
            LANDLORD:
              VENTAS REALTY, LIMITED
      PARTNERSHIP, a Delaware limited partnership
              By:Ventas,
      Inc., a Delaware corporation, as its general partner
              
              By:
      /s/ T. Richard
      Riney
              Name:                      T.
      Richard Riney
              Title:             Executive
      Vice PresidentWitness:
              
              /s/ Trish
      Kelley
              Name:
      Trish
      Kelley
              
              s/ Nicole Tudela
              Name:
      Nicole
      Tudela
            VENTAS FRAMINGHAM, LLC,
      a Delaware limited liability company
              
              By:
      /s/ T. Richard
      Riney
              Name:                      T.
      Richard Riney
              Title:             Executive
      Vice PresidentWitness:
              
              
              /s/ Marrji Padden
              Name:                      Marrji
      Padden
              
              
              /s/ Melanie Pennington
              Name:
      Melanie Pennington
            TENANT:
              
              SW
      ASSISTED LIVING, LLC
              SUMMERVILLE
      AT MENTOR, LLC
              SUMMERVILLE
      AT HERITAGE PLACE, LLC
              SUMMERVILLE
      AT ATHERTON COURT LLC
              SUMMERVILLE
      AT BARRINGTON COURT LLC
              SUMMERVILLE
      AT ROSEVILLE GARDENS LLC
              SUMMERVILLE
      AT GOLDEN POND LLC
              SUMMERVILLE
      3, LLC
              SUMMERVILLE
      5 LLC
              SUMMERVILLE
      14 LLC
              SUMMERVILLE
      15 LLC
              SUMMERVILLE
      16 LLC
              SUMMERVILLE
      17 LLC
              
              Each
      of which entities is a Delaware limited liability company
              
              By:/s/ Eric Mendelsohn
              Name:Eric
      Mendelsohn
              Title:SVP Corporate Development





State
of  IL




County
of  Cook





Before me
a notary public in and for said county, personally appeared T. Richard Riney,
known to me to be the person who, as Executive Vice President of Ventas
Framingham, LLC, a Delaware limited liability company, executed the foregoing
instrument, signed the same, and acknowledged to me that (s)he did so sign said
instrument in the name and upon behalf of said company as such officer; that the
same is his/her free act and deed as such officer, and the free act and deed of
said company.





In
testimony whereof, I have hereunto subscribed my name and affixed my official
seal (if official has one) at Chicago, IL this 25th day of
July, 2008.





(Seal)


/s/ Cielo
Aquino-Remmington


(signature
of person taking acknowledgment)


(Title or
rank)Notary Public


(Serial
number, if any)







State
of  IL




County
of  Cook





Before me
a notary public in and for said county, personally appeared T. Richard Riney,
known to me to be the person who, as Executive Vice President of Ventas, Inc., a
Delaware corporation, in its capacity as the general partner of Ventas Realty,
Limited Partnership, a Delaware limited partnership, executed the foregoing
instrument, signed the same, and acknowledged to me that (s)he did so sign said
instrument in the name and upon behalf of said corporation as such officer; that
the same is his/her free act and deed as such officer, and the free and
corporate act and deed of said corporation, in its capacity as the general
partner, and on behalf, of such limited partnership.





In
testimony whereof, I have hereunto subscribed my name and affixed my official
seal (if official has one) at Chicago, IL  this 25thday of July,
2008.





(Seal)


/s/ Cielo
Aquino-Remmington


(signature
of person taking acknowledgment)


(Title or
rank)Notary
Public


(Serial
number, if any)










State of Washington




County ofKing







Before me
a notary public in and for said county, personally appeared Eric Mendelsohn,
known to me to be the person who, as SVP Corporate Development of SW Assisted
Living, LLC, Summerville at Mentor, LLC, Summerville at Heritage Place, LLC,
Summerville at Atherton Court LLC, Summerville at Barrington Court LLC,
Summerville at Roseville Gardens LLC, Summerville at Golden Pond LLC,
Summerville 3, LLC, Summerville 5 LLC, Summerville 14 LLC, Summerville 15 LLC,
Summerville 16 LLC and Summerville 17 LLC, each of which entities is a Delaware
limited liability company, signed the foregoing instrument, and acknowledged to
me that (s)he did so sign said instrument in the name and upon behalf of each of
said companies as such SVP Corporate Development; that the same is his/her free
act and deed as such SVP Corporate Development, and the free act and deed of
each of said companies.





In
testimony whereof, I have hereunto subscribed my name and affixed my official
seal (if official has one) at Seattle, WA  this 25th day of
July, 2008.








(Seal)





/s/ Marrji
Padden


(signature
of person taking acknowledgment)


(Title or
rank)Notary Public


My
Commission expires 12/19/08


(Serial
number, if any)