Document:

exv10w2

 

Exhibit 10.2

[Citrus Heights, CA]

[THIS LEASE IS NOT TO BE RECORDED]

 

L E A S E

between

HCP CROSSWOOD, INC.

as Lessor

and

CSL LEASECO, INC.

as Lessee

Dated as of May 31, 2006

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	ARTICLE I	 	 
	 	 	1	 
	 	1.1	 	 	Leased Property; Term
	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II	 	 
	 	 	2	 
	 	2.1	 	 	Definitions
	 	 	2	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III	 	 
	 	 	15	 
	 	3.1	 	 	Rent
	 	 	15	 
	 	3.2	 	 	Confirmation of Gross Resident Revenues
	 	 	16	 
	 	3.3	 	 	Additional Charges
	 	 	16	 
	 	3.4	 	 	Late Payment of Rent
	 	 	17	 
	 	3.5	 	 	Net Lease
	 	 	18	 
	 	3.6	 	 	Separate Account
	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IV	 	 
	 	 	18	 
	 	4.1	 	 	Impositions
	 	 	18	 
	 	4.2	 	 	Utility Charges
	 	 	19	 
	 	4.3	 	 	Insurance Premiums
	 	 	19	 
	 	4.4	 	 	Impound Account
	 	 	19	 
	 	4.5	 	 	Tax Service
	 	 	20	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V	 	 
	 	 	20	 
	 	5.1	 	 	No
Termination, Abatement, etc.
	 	 	20	 
	 	5.2	 	 	[Intentionally Omitted]
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI	 	 
	 	 	21	 
	 	6.1	 	 	Ownership of the Leased Property
	 	 	21	 
	 	6.2	 	 	Personal Property
	 	 	21	 
	 	6.3	 	 	Transfer of Personal Property and Capital Additions to Lessor
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VII	 	 
	 	 	22	 
	 	7.1	 	 	Condition of the Leased Property
	 	 	22	 
	 	7.2	 	 	Use of the Leased Property
	 	 	22	 
	 	7.3	 	 	Lessor to
Grant Easements, etc.
	 	 	23	 
	 	7.4	 	 	Preservation of Facility Value
	 	 	23	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII	 	 
	 	 	24	 
	 	8.1	 	 	Compliance
with Legal and Insurance Requirements, Instruments, etc.
	 	 	24	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX	 	 
	 	 	25	 
	 	9.1	 	 	Maintenance and Repair
	 	 	25	 
	 	9.2	 	 	Encroachments, Restrictions, Mineral Leases, etc.
	 	 	26	 
	 	9.3	 	 	Annual Minimum Capital Project Amount; Replacement Reserve
	 	 	26	 
	 	9.4	 	 	Required Repair
	 	 	28	 
	 	9.5	 	 	O&M Plan
	 	 	28	 
	 	9.6	 	 	Inspections; Due Diligence Fee
	 	 	29	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE X	 	 
	 	 	29	 
	 	10.1	 	 	Construction of Capital Additions and Other Alterations to the Leased Property
	 	 	29	 

i

 

	 	 	 	 	 	 	 	 	 
	 	10.2	 	 	Construction Requirements for all Alterations
	 	 	29	 
	 	10.3	 	 	[Intentionally Omitted]
	 	 	32	 
	 	10.4	 	 	Rights of Facility Mortgagees
	 	 	32	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XI	 	 
	 	 	32	 
	 	11.1	 	 	Liens
	 	 	32	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XII	 	 
	 	 	32	 
	 	12.1	 	 	Permitted Contests
	 	 	32	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XIII	 	 
	 	 	33	 
	 	13.1	 	 	General Insurance Requirements
	 	 	33	 
	 	13.2	 	 	Replacement Cost
	 	 	34	 
	 	13.3	 	 	Additional Insurance
	 	 	34	 
	 	13.4	 	 	Waiver of Subrogation
	 	 	34	 
	 	13.5	 	 	Policy Requirements
	 	 	35	 
	 	13.6	 	 	Increase in Limits
	 	 	35	 
	 	13.7	 	 	Blanket Policies and Policies Covering Multiple Locations
	 	 	35	 
	 	13.8	 	 	No Separate Insurance
	 	 	36	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XIV	 	 
	 	 	36	 
	 	14.1	 	 	Insurance Proceeds
	 	 	36	 
	 	14.2	 	 	Insured Casualty
	 	 	36	 
	 	14.3	 	 	Uninsured Casualty
	 	 	37	 
	 	14.4	 	 	No Abatement of Rent
	 	 	37	 
	 	14.5	 	 	Waiver
	 	 	37	 
	 	14.6	 	 	Rights of Facility Mortgagees
	 	 	37	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XV	 	 
	 	 	38	 
	 	15.1	 	 	Condemnation
	 	 	38	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XVI	 	 
	 	 	38	 
	 	16.1	 	 	Events of Default
	 	 	38	 
	 	16.2	 	 	Certain Remedies
	 	 	41	 
	 	16.3	 	 	Damages
	 	 	41	 
	 	16.4	 	 	Receiver
	 	 	42	 
	 	16.5	 	 	Lessee’s Obligation to Purchase
	 	 	42	 
	 	16.6	 	 	Waiver
	 	 	43	 
	 	16.7	 	 	Application of Funds
	 	 	43	 
	 	16.8	 	 	Facility Operating Deficiencies
	 	 	43	 
	 	16.9	 	 	[Intentionally Omitted]
	 	 	43	 
	 	16.10	 	 	Lessor’s Security Interest
	 	 	43	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XVII	 	 
	 	 	45	 
	 	17.1	 	 	Lessor’s Right to Cure Lessee’s Default
	 	 	45	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XVIII	 	 
	 	 	45	 
	 	18.1	 	 	Purchase of the Leased Property
	 	 	45	 
	 	18.2	 	 	Rights of Lessee Prior to Closing
	 	 	45	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XIX	 	 
	 	 	46	 
	 	19.1	 	 	Renewal Terms
	 	 	46	 

ii

 

	 	 	 	 	 	 	 	 	 
	 	19.2	 	 	Lessor’s Rights of Renewal and Early Termination
	 	 	46	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XX	 	 
	 	 	47	 
	 	20.1	 	 	Holding Over
	 	 	47	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXI	 	 
	 	 	47	 
	 	21.1	 	 	Letters of Credit or Cash Security Deposit
	 	 	47	 
	 	21.2	 	 	Requirements for Letters of Credit
	 	 	47	 
	 	21.3	 	 	Cash Security Deposit
	 	 	48	 
	 	21.4	 	 	Timing for Letters of Credit or Cash Security Deposit
	 	 	48	 
	 	21.5	 	 	Uses of Letters of Credit or Cash Security Deposit
	 	 	49	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXII	 	 
	 	 	49	 
	 	22.1	 	 	Risk of Loss
	 	 	49	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXIII	 	 
	 	 	49	 
	 	23.1	 	 	General Indemnification
	 	 	49	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXIV	 	 
	 	 	50	 
	 	24.1	 	 	Transfers
	 	 	50	 
	 	24.2	 	 	Certain Permitted Transactions
	 	 	54	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXV	 	 
	 	 	55	 
	 	25.1	 	 	Officer’s Certificates and Financial Statements
	 	 	55	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXVI	 	 
	 	 	57	 
	 	26.1	 	 	Lessor’s Right to Inspect and Show the Leased Property and Capital Additions
	 	 	57	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXVII	 	 
	 	 	58	 
	 	27.1	 	 	No Waiver
	 	 	58	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXVIII	 	 
	 	 	58	 
	 	28.1	 	 	Remedies Cumulative
	 	 	58	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXIX	 	 
	 	 	58	 
	 	29.1	 	 	Acceptance of Surrender
	 	 	58	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXX	 	 
	 	 	58	 
	 	30.1	 	 	No Merger
	 	 	58	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXI	 	 
	 	 	58	 
	 	31.1	 	 	Conveyance by Lessor
	 	 	58	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXII	 	 
	 	 	60	 
	 	32.1	 	 	Quiet Enjoyment
	 	 	60	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXIII	 	 
	 	 	60	 
	 	33.1	 	 	Notices
	 	 	60	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXIV	 	 
	 	 	61	 
	 	34.1	 	 	Appraiser
	 	 	61	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXV	 	 
	 	 	62	 
	 	35.1	 	 	Lessor May Grant Liens
	 	 	62	 
	 	35.2	 	 	Attornment
	 	 	62	 

iii

 

	 	 	 	 	 	 	 	 	 
	 	35.3	 	 	Compliance with Facility Mortgage Documents
	 	 	62	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXVI	 	 
	 	 	64	 
	 	36.1	 	 	Hazardous Substances and Mold
	 	 	64	 
	 	36.2	 	 	Notices
	 	 	64	 
	 	36.3	 	 	Remediation
	 	 	65	 
	 	36.4	 	 	Indemnity
	 	 	65	 
	 	36.5	 	 	Inspection
	 	 	66	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXVII	 	 
	 	 	66	 
	 	37.1	 	 	Memorandum of Lease
	 	 	66	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXVIII	 	 
	 	 	66	 
	 	38.1	 	 	Sale of Assets
	 	 	66	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XXXIX	 	 
	 	 	67	 
	 	39.1	 	 	[Intentionally Omitted]
	 	 	67	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XL	 	 
	 	 	67	 
	 	40.1	 	 	Authority
	 	 	67	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XLI	 	 
	 	 	67	 
	 	41.1	 	 	Attorneys’ Fees
	 	 	67	 
	 	41.2	 	 	Administrative Expenses
	 	 	67	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XLII	 	 
	 	 	68	 
	 	42.1	 	 	Brokers
	 	 	68	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XLIII	 	 
	 	 	68	 
	 	43.1	 	 	ARBITRATION OF DISPUTES
	 	 	68	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XLIV	 	 
	 	 	70	 
	 	44.1	 	 	Miscellaneous
	 	 	70	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XLV	 	 
	 	 	75	 
	 	45.1	 	 	[Intentionally Omitted]
	 	 	75	 
	 	45.2	 	 	Treatment of Lease
	 	 	75	 

iv

 

	 	 	 
	Exhibit A

	 	Legal Description of the Land
	Exhibit B

	 	List of Lessor’s Personal Property
	Exhibit C

	 	Form of Amendment
	Exhibit D

	 	Description of Facility and Certain Material Terms
	Exhibit E

	 	Form of Letter of Credit
	Exhibit F

	 	Permitted Competing Facility(ies)
	 
	 	 
	Schedule A

	 	Related Leases
	Schedule 9.4

	 	Required Repair Work

v

 

LEASE

          THIS LEASE (“Lease”) is dated as of May ___, 2006, and is between HCP CROSSWOOD, INC., a
Delaware corporation (“Lessor”) and CSL LEASECO, INC., a Delaware corporation (“Lessee”).

ARTICLE I.

          1.1 Leased Property; Term.

          Upon and subject to the terms and conditions hereinafter set forth, Lessor leases to Lessee
and Lessee leases from Lessor all of Lessor’s rights and interests in and to the following
(collectively the “Leased Property”):

               (a) the real property described in Exhibit A attached hereto (the “Land”);

               (b) all buildings, structures, Fixtures (as hereinafter defined) and other improvements of
every kind now or hereafter located on the Land, including alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site to the extent Lessor has
obtained any interest in the same), parking areas and roadways appurtenant to such buildings and
structures and Capital Additions funded by Lessor (collectively, the “Leased Improvements”);

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

               (d) all equipment, machinery, fixtures, and other items of real and/or personal property,
including all components thereof, now and hereafter located in, on or used in connection with and
permanently affixed to or incorporated into the Leased Improvements, including all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning
systems, apparatus, sprinkler systems, fire and theft protection equipment, and built-in oxygen and
vacuum systems, all of which, to the greatest extent permitted by law, are hereby deemed to
constitute real estate, together with all replacements, modifications, alterations and additions
thereto (collectively, the “Fixtures”); and

               (e) the machinery, equipment, furniture and other personal property described on Exhibit
B attached hereto, together with all replacements, modifications, alterations and substitutes
therefor (whether or not constituting an upgrade) (collectively, “Lessor’s Personal Property”).

          SUBJECT, HOWEVER, to the easements, encumbrances, covenants, conditions and restrictions and
other matters which affect the Leased Property (whether of record or apparent) as of the date
hereof or the Commencement Date or which are created thereafter as permitted hereunder to have and
to hold for (1) the Fixed Term (as defined below), and (2) the Extended Terms provided for in
Article XIX unless this Lease is earlier terminated as hereinafter provided. During the Term,
Lessee shall also have the benefit of Lessor’s Intangible Property.

1

 

Following the Commencement Date, the parties shall execute an amendment to this Lease in
substantially the form attached hereto as Exhibit C to confirm certain matters, including
the Commencement Date and the Minimum Rent as determined pursuant to Section 3.1 below. Upon any
change in the Minimum Rent in accordance with the provisions of Section 3.1 below or otherwise
pursuant to this Lease, the parties shall similarly execute an amendment to this Lease confirming
such matters. Notwithstanding the foregoing, the failure of Lessee to so execute and deliver any
such amendment shall not affect Lessor’s determination of the matters to be confirmed thereby.

ARTICLE II.

          2.1 Definitions. For all purposes of this Lease, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this Article have the
meanings assigned to them in this Article and include the plural as well as the singular; (ii) all
accounting terms not otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable; (iii) all references in this Lease to designated “Articles,”
“Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions
of this Lease; (iv) the word “including” shall have the same meaning as the phrase “including,
without limitation,” and other similar phrases; and (v) the words “herein,” “hereof” and
“hereunder” and other similar words refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:

          AAA: As defined in Article XLIII.

          ACMs: As defined in Section 9.5.

          Additional Charges: As defined in Article III.

          Affiliate: Any Person which, directly or indirectly (including through one or more
intermediaries), controls or is controlled by or is under common control with any other Person,
including any Subsidiary of a Person. For purposes of this definition, the definition of
“Controlling Person” below, and Article XXIV below, the term “control” (including the correlative
meanings of the terms “controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly (including through one or more
intermediaries), of the power to direct or cause the direction of the management and policies of
such Person, through the ownership or control of voting securities, partnership interests or other
equity interests or otherwise. Without limiting the generality of the foregoing, when used with
respect to any corporation, the term “Affiliate” shall also include (i) any Person which owns,
directly or indirectly (including through one or more intermediaries), Fifty Percent (50%) or more
of any class of voting security or equity interests of such corporation, (ii) any Subsidiary of
such corporation and (iii) any Subsidiary of a Person described in clause (i).

          Annual Minimum Capital Project Amount: The Annual Minimum Capital Project Amount as
set forth on Exhibit D attached hereto.

          Appraiser: As defined in Article XXXIV.

          Assumed Facility Mortgage: As defined in Article XXXV.

2

 

          Award: All compensation, sums or anything of value awarded, paid or received on a
total or partial Condemnation.

          Bankruptcy Code: The United States Bankruptcy Code (11 U.S.C. § 101 et
seq.), and any successor statute or legislation thereto.

          Base Appraisal Period: The period commencing on that date which is eighteen (18)
months prior to the date any appraisal of the Facility is made pursuant to the provisions of
Article XXXIV and ending on the date which is six (6) months prior to the date any such appraisal
of the Facility is made.

          Base Month: With respect to any Lease Year, the month which is twelve (12) months
prior to the applicable Comparison Month.

          Base Resident Revenues: For each Lease Year during the Term (including the Extended
Term(s), if any), the aggregate of the Base Resident Revenues set forth on Exhibit D
attached hereto.

          BLS: Bureau of Labor Statistics, U.S. Department of Labor.

          Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day
on which national banks in the City of Los Angeles, California are authorized, or obligated, by law
or executive order, to close.

          Capital Additions: One or more new buildings, or one or more additional structures
annexed to any portion of any of the Leased Improvements of the Facility, or the material expansion
of existing improvements, which are constructed on any parcel or portion of the Land during the
Term including the construction of a new wing or new story, or the repair, replacement,
restoration, remodeling or rebuilding of the existing Leased Improvements of the Facility or any
portion thereof where the purpose and effect of such work is to provide a functionally new facility
in order to provide services not previously offered in the Facility.

          Capital Addition Costs: The costs of any Capital Addition made to the Leased Property
whether paid for by Lessee or Lessor, including (i) all permit fees and other costs imposed by any
governmental authority, the cost of site preparation, the cost of construction including materials
and labor, the cost of supervision and related design, engineering and architectural services, the
cost of any fixtures, and if and to the extent approved by Lessor, the cost of construction
financing; (ii) fees paid to obtain necessary licenses and certificates; (iii) if and to the extent
approved by Lessor in writing and in advance, the cost of any land contiguous to the Leased
Property which is to become a part of the Leased Property purchased for the purpose of placing
thereon the Capital Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same; (iv) the cost of insurance,
real estate taxes, water and sewage charges and other carrying charges for such Capital Addition
during construction; (v) the cost of title insurance; (vi) reasonable fees and expenses of legal
counsel; (vii) filing, registration and recording taxes and fees; (viii) documentary stamp and
similar taxes; (ix) development fees; and (x) all reasonable costs and expenses of Lessor and any
Person which has committed to finance the Capital Addition, including (a) the reasonable fees and
expenses of their respective legal counsel; (b) printing

3

 

expenses; (c) filing, registration and recording taxes and fees; (d) documentary stamp and
similar taxes; (e) title insurance charges and appraisal fees; (f) rating agency fees; and (g)
commitment fees charged by any Person advancing or offering to advance any portion of the financing
for such Capital Addition.

          Capital Project: Repairs and replacements to the Leased Property, or any portion
thereof, which (i) are not incurred for ordinary wear and tear, and (ii) are categorized under GAAP
as a capital expense and not as an operating expense.

          Capital Project Costs: All out-of-pocket costs reasonably incurred by Lessee in
connection with a Capital Project.

          Closing Date: As defined in the Contract of Acquisition.

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

          Collateral: As defined in Section 16.10.1.

          Commencement Date: The Commencement Date as set forth on Exhibit D attached
hereto.

          Commercial Occupancy Arrangement: Any commercial (as opposed to resident or patient)
Occupancy Arrangement.

          Comparison Month: With respect to any Lease Year, the month which is two (2) months
prior to the commencement of the applicable Lease Year.

          Competing Facility: As defined in Section 7.4.1.

          Condemnation: The exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor or a voluntary sale or transfer by Lessor to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.

          Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of Condemnation.

          Consolidated Financials: For any fiscal year or other accounting period for any
Person and its consolidated Subsidiaries, statements of earnings and retained earnings and of
changes in financial position for such period and for the period from the beginning of the
respective fiscal year to the end of such period and the related balance sheet as of the end of
such period, together with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the preceding fiscal
year, and prepared in accordance with GAAP.

          Consolidated Net Worth: At any time, the sum of the following for any Person and its
consolidated Subsidiaries, on a consolidated basis determined in accordance with GAAP:

4

 

               (i) the amount of capital or stated capital (after deducting the cost of any shares, if
applicable, held in its treasury), plus

               (ii) the amount of capital surplus and retained earnings (or, in the case of a capital
surplus or retained earnings deficit, minus the amount of such deficit), minus

               (iii) the sum of the following (without duplication of deductions in respect of items
already deducted in arriving at surplus and retained earnings):
(a) intangible assets as defined and calculated in accordance with GAAP; (b)
unamortized debt discount and expense; and (c) any write-up in book value of assets
resulting from a revaluation thereof subsequent to the most recent Consolidated Financials,
excluding, however, any (i) net write-up in value of foreign currency in accordance with
GAAP, (ii) write-up resulting from a reversal of a reserve for bad debts or depreciation,
and (iii) write-up resulting from a change in methods of accounting for inventory.

          Contract of Acquisition: The agreement dated as of March 7, 2006 by and among Lessor
and certain Affiliates of Lessor, successors-by-assignment to HCP, as “Buyer,” and Capital Senior
Living Properties 2 – Crosswood Oaks, Inc., Capital Senior Living Properties 2 – Tesson Heights,
Inc. and Capital Senior Living Properties 2 – Veranda Club, Inc., as “Seller,” relative to the
acquisition by Lessor of the Leased Property and certain additional property, as the same may have
been amended, supplemented or modified from time to time.

          Controlling Person: Any (i) Person(s) which, directly or indirectly (including
through one or more intermediaries), controls Lessee and would be deemed an Affiliate of Lessee,
including any partners, shareholders, principals, members, trustees and/or beneficiaries of any
such Person(s) to the extent the same control Lessee and would be deemed an Affiliate of Lessee,
and (ii) Person(s) which controls, directly or indirectly (including through one or more
intermediaries), any other Controlling Person(s) and which would be deemed an Affiliate of any such
Controlling Person(s).

          Cost of Living Index: The Consumer Price Index for All Urban Consumers, U.S. City
Average (1982-1984 = 100), published by the BLS, or such other renamed index. If the BLS changes
the publication frequency of the Cost of Living Index so that a Cost of Living Index is not
available to make a cost-of-living adjustment as specified herein, the cost-of-living adjustment
shall be based on the percentage difference between the Cost of Living Index for the closest
preceding month for which a Cost of Living Index is available and the Cost of Living Index for the
comparison month as required by this Lease. If the BLS changes the base reference period for the
Cost of Living Index from 1982-84 = 100, the cost-of-living adjustment shall be determined with the
use of such conversion formula or table as may be published by the BLS. If the BLS otherwise
substantially revises, or ceases publication of the Cost of Living Index, then a substitute index
for determining cost-of-living adjustments, issued by the BLS or by a reliable governmental or
other nonpartisan publication, shall be reasonably selected by Lessor.

          County: The County or Township in which the Leased Property is located.

5

 

          CPI Increase: For each applicable Lease Year, the percentage increase (rounded to two
(2) decimal places), if any, in (i) the Cost of Living Index published for the applicable
Comparison Month, over (ii) the Cost of Living Index published for the applicable Base Month.

          Date of Taking: The date the Condemnor has the right to possession of the property
being condemned.

          Environmental Costs: As defined in Article XXXVI.

          Environmental Laws: Environmental Laws shall mean any and all federal, state,
municipal and local laws, statutes, ordinances, rules, regulations, guidances, policies, orders,
decrees, judgments, whether statutory or common law, as amended from time to time, now or hereafter
in effect, or promulgated, pertaining to the environment, public health and safety and industrial
hygiene, including the use, generation, manufacture, production, storage, release, discharge,
disposal, handling, treatment, removal, decontamination, clean-up, transportation or regulation of
any Hazardous Substance, including the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Comprehensive Environmental Response Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Safe
Drinking Water Act and the Occupational Safety and Health Act.

          Event of Default: As defined in Article XVI.

          Excluded Property: As defined in the Contract of Acquisition.

          Extended Term(s): As defined in Article XIX and set forth on Exhibit D
hereto.

          Facility: Each facility being (and to be) operated or proposed to be operated on the
Leased Property, together with any Capital Additions, as more particularly described on Exhibit
D attached hereto and incorporated herein by this reference.

          Facility Mortgage: Any mortgage, deed of trust or other security agreement
encumbering the Leased Property, or any portion thereof, and securing an indebtedness of Lessor or
any Affiliate of Lessor or any other Lessor’s Encumbrance.

          Facility Mortgage Loan Documents: With respect to each Facility Mortgage and Facility
Mortgagee, the applicable Facility Mortgage, loan or credit agreement, lease, note, collateral
assignment instruments, guarantees, indemnity agreements and other documents or instruments
evidencing, securing or otherwise relating to the loan made, credit extended, lease or other
financing vehicle pursuant thereto.

          Facility Mortgagee: The holder or beneficiary of a Facility Mortgage and any other
rights of the lender, credit party or lessor under the Facility Mortgage Loan Documents.

          Facility Mortgage Reserve Account: As defined in Section 35.3.2.

          Facility Operating Deficiency: A deficiency in the conduct of the operation of the
Facility which, in the reasonable determination of Lessor, if not corrected within a reasonable

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time, would have the likely effect of jeopardizing the Facility’s licensure or certification
under government reimbursement programs.

          Fair Market Rental: The higher of the following (including any appropriate periodic
escalations therein) determined in accordance with the appraisal procedures set forth in Article
XXXIV and this definition: (i) the fair market rental value of the Leased Property and all Capital
Additions of the Facility, or applicable portion(s) thereof, based upon the Fair Market Value
thereof multiplied by the then current lease rate available in the open market for sale-leaseback
transactions of similar facilities, and (ii) the fair market rental value of the Leased Property
and all Capital Additions of the Facility, or applicable portion(s) thereof, assuming the same is
exposed on the open market at the time of the appraisal and taking into account, among other
relevant factors, the income generated from the Leased Property and all Capital Additions of the
Facility, or applicable portion(s) thereof, but specifically excluding brokerage commissions and
other Lessor payments that do not directly inure to the benefit of lessees.

          Fair Market Value: The fair market value of the Leased Property and all Capital
Additions of the Facility, or applicable portion(s) thereof, determined in accordance with the
appraisal procedures set forth in Article XXXIV and this definition. Fair Market Value shall be
the higher value obtained by assuming that the Leased Property and all Capital Additions of the
Facility, or applicable portion(s) thereof, is either unencumbered by this Lease or encumbered by
this Lease (including any sublease or other Occupancy Arrangement). Fair Market Value shall also
be the higher value obtained by valuing the Leased Property and all Capital Additions of the
Facility, or applicable portion(s) thereof, for their highest and best use or as a fully-permitted
Facility operated in accordance with the provisions of this Lease. In addition, the following
specific matters shall be factored in or out, as appropriate, in determining Fair Market Value:

               (i) The negative value of (a) the cost of any maintenance or other items of repair or
replacement of the Leased Property or any Capital Additions of the Facility reasonably
required to restore such Leased Property or Capital Additions to the condition required
pursuant to Sections 9.1.1 and 9.1.4 below including, without limitation, the cost of
remediating any Hazardous Substances or Mold Conditions, (b) any then current or prior
licensure or certification violations and/or admissions holds and (c) any other breach or
failure of Lessee to perform or observe its obligations hereunder shall not be taken
into account; rather, the Leased Property and all Capital Additions of the Facility shall be
deemed to be in the condition required by this Lease (i.e., good order and repair) and
Lessee shall at all times be deemed to have operated the Facility in compliance with and to
have performed all obligations of the Lessee under this Lease.

               (ii) The occupancy level of the Facility shall be deemed to be the greatest of (a) the
occupancy level as of the date any appraisal of the Facility is performed in accordance with
the provisions of Article XXXIV, (b) the average occupancy level during the Base Appraisal
Period, or (c) the average occupancy level for facilities similar to the Facility in the
same general geographic area as of the date any appraisal of the Facility is performed in
accordance with the provisions of Article XXXIV.

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               (iii) If the Facility’s Primary Intended Use includes a mixed use, then whichever of
the following produces the highest positive value shall be taken into account: (a) the
resident mix, patient mix, case mix, and/or diagnostic related group or acuity mix, as
applicable, as of the date any appraisal of the Facility is performed in accordance with the
provisions of Article XXXIV, (b) the average of such mix during the Base Appraisal Period,
or (c) the average of such mix for facilities similar to the Facility in the same general
geographic area as of the date any appraisal of the Facility is performed in accordance with
the provisions of Article XXXIV.

          Finally, in determining Fair Market Value in connection with a sale or transfer of the Leased
Property and all Capital Additions of the Facility pursuant to the terms of this Lease, the
positive or negative effect on the value of the Leased Property and all Capital Additions or
applicable portion(s) thereof attributable to such factors as the interest rate, amortization
schedule, maturity date, prepayment penalty and other terms and conditions of any encumbrance
placed thereon by Lessor which will not be removed at or prior to the date of such sale or transfer
shall be taken into account.

          Fixed Term: The period of time commencing on the Commencement Date and ending at
11:59 p.m. Los Angeles time on the expiration of the tenth (10th) Lease Year.

          Fixtures: The Fixtures (as defined in Article I) of the Facility.

          GAAP: Generally accepted accounting principles.

          Gross Resident Revenues: All revenues received or receivable for the use of or
otherwise attributable to units, rooms, beds and other facilities provided, meals served, services
performed (including ancillary services), or goods sold on or from the Leased Property and Capital
Additions of the Facility.

          Gross Resident Revenues for each Lease Year shall include all cost report settlement amounts
received in or payable during such Lease Year in accordance with GAAP relating to health care
accounting, regardless of the year that such settlement amounts are applicable to; provided,
however, that to the extent settlement amounts are applicable to years, or portions thereof, prior
to the Commencement Date, such settlement amounts shall not be included in Gross Resident Revenues
for the Lease Year in which such settlement amounts are received or paid.

          Guarantors: Collectively, Capital Senior Living Properties, Inc., a Texas
corporation, and any present or future guarantor of Lessee’s obligations pursuant to this Lease
(each individually, a “Guarantor”).

          Guaranty: The Guaranty of even date herewith executed by Capital Senior Living
Properties, Inc., as a Guarantor, and any future written guaranty of Lessee’s obligations hereunder
executed by a Guarantor.

          Handling: As defined in Article XXXVI.

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          Hazardous Substances: Collectively, any petroleum, petroleum product or byproduct or
any substance, material or waste regulated or listed pursuant to any Environmental Law.

          HCP: Health Care Property Investors, Inc., a Maryland corporation, and its successors
and assigns.

          Impositions: Collectively, all taxes, including capital stock, franchise and other
state taxes of Lessor (and, if Lessor is not HCP, of HCP or any Affiliate of HCP as a result of its
investment in Lessor), ad valorem, sales, use, single business, gross receipts, transaction
privilege, rent or similar taxes; assessments including assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and whether or not to be
completed within the Term; ground rents; water, sewer and other utility levies and charges; excise
tax levies; fees including license, permit, inspection, authorization and similar fees; and all
other governmental charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property, any Capital Additions
and/or the Rent and all interest and penalties thereon attributable to any failure in payment by
Lessee which at any time prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (i) Lessor or Lessor’s interest in the Leased
Property or any Capital Additions, (ii) the Leased Property, any Capital Additions or any parts
thereof or any rent therefrom or any estate, right, title or interest therein, or (iii) any
occupancy, operation, use or possession of, or sales from or activity conducted on or in connection
with the Leased Property, any Capital Additions or the leasing or use of the Leased Property, any
Capital Additions or any parts thereof; provided, however, that nothing contained in this Lease
shall be construed to require Lessee to pay (a) any tax based on net income or net profit (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or any other Person
(including on HCP, if HCP is not the Lessor hereunder), (b) any transfer, or net revenue tax of
Lessor or any other Person except Lessee and its successors, (c) any tax imposed with respect to
the sale, exchange or other disposition by Lessor of any Leased Property, any Capital Additions or
the proceeds thereof, or (d) except as expressly provided elsewhere in this Lease, any principal or
interest on any indebtedness on the Leased Property for which Lessor is the obligor, except to the
extent that any tax, assessment, tax levy or charge, of the type described in any of clauses (a),
(b), (c) or (d) above is levied, assessed or imposed in lieu of or as or as a substitute for any
tax, assessment, levy or charge which is otherwise included in this definition of an “Imposition.”

          Initial Investment. At any given time, the Initial Investment set forth on
Exhibit D attached hereto.

          Insurance Requirements: The terms of any insurance policy required by this Lease and
all requirements of the issuer of any such policy and of any insurance board, association,
organization or company necessary for the maintenance of any such policy.

          Land: As defined in Article I.

          Lease: As defined in the preamble.

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          Lease Rate: Eight Percent (8.0%).

          Lease Year: Each period of twelve (12) full calendar months from and after the
Commencement Date, unless the Commencement Date is a day other than the first (1st) day of a
calendar month, in which case the first Lease Year shall be the period commencing on the
Commencement Date and ending on the last day of the eleventh (11th) month following the month in
which the Commencement Date occurs and each subsequent Lease Year shall be each period of twelve
(12) full calendar months after the last day of the prior Lease Year; provided, however, that the
last Lease Year during the Term may be a period of less than twelve (12) full calendar months and
shall end on the last day of the Term.

          Leased Improvements: As defined in Article I.

          Leased Property: As defined in Article I.

          Leasehold FMV: The fair market value of Lessee’s leasehold interest relating to the
Facility if exposed on the open market taking into account, among other relevant factors, the
income generated from the Leased Property and Capital Additions for the Facility, determined by
appraisal in accordance with the appraisal procedures set forth in Article XXXIV.

          Legal Requirements: (i) All federal, state, county, municipal and other governmental
statutes, laws (including common law and Environmental Laws), rules, policies, guidance, codes,
orders, regulations, ordinances, permits, licenses, covenants, conditions, restrictions, judgments,
decrees and injunctions, including those affecting the Leased Property, Lessee’s Personal Property
and all Capital Additions or the construction, use or alteration thereof, whether now or hereafter
enacted and in force, including any which may (A) require repairs, modifications or alterations in
or to the Leased Property, Lessee’s Personal Property and all Capital Additions, (B) in any way
adversely affect the use and enjoyment thereof, or (C) regulate the transport, handling, use,
storage or disposal or require the cleanup or other treatment of any Hazardous Substance, and (ii)
all covenants, agreements, restrictions, and encumbrances either now or hereafter of record or
known to Lessee (other than encumbrances created by Lessor without the consent of Lessee except as
otherwise expressly permitted hereunder) affecting the Leased Property.

          Lessee: As defined in the preamble.

          Lessee’s Intangible Property: All accounts, proceeds of accounts, rents, profits,
income or revenues derived from the use of rooms or other space within the Leased Property or the
providing of services in or from the Leased Property and all Capital Additions; documents, chattel
paper, instruments, contract rights, deposit accounts, general intangibles, commercial tort claims,
causes of action, now owned or hereafter acquired by Lessee (including any right to any refund of
any Impositions) arising from or in connection with Lessee’s operation or use of the Leased
Property and all Capital Additions; all licenses and permits now owned or hereinafter acquired by
Lessee, which are necessary or desirable for Lessee’s use of the Leased Property and all Capital
Additions for the Primary Intended Use, including, if applicable, any certificate of need or
similar certificate; the right to use any trade name or other name associated with the

10

 

Facility (excluding, however, the name “Capital Senior Living” or any variation thereof); and
any and all third-party provider agreements (including Medicare and Medicaid).

          Lessor’s Intangible Property: The “Intangible Property” with respect to the Facility,
as defined in the Contract of Acquisition.

          Lessee’s Personal Property: The Personal Property other than Lessor’s Personal
Property allocable or relating to the Facility.

          Lessor: As defined in the preamble.

          Lessor’s Encumbrance: As defined in Section 35.1.

          Lessor’s Personal Property: As defined in Article I.

          Letter of Credit Date: As defined in Section 21.4.

          Maintenance Program: As defined in Section 9.5.

          Master Lease(s): As defined in Section 31.2.

          Master Sublease: A Master Sublease (as defined in Article XXIV) of the Facility.

          Minimum Rent: The amount of Minimum Rent as set forth in Exhibit D attached
hereto (subject to increase as set forth in Article III).

          Minimum Rent Escalation Condition: As of the commencement of each Lease Year,
commencing with the second (2nd) Lease Year of the Term, the Gross Resident Revenues for
the Facility for the period from the applicable Base Month through the applicable Comparison Month
shall equal or exceed Eighty Percent (80%) of the applicable Base Resident Revenues for the
immediately prior Lease Year; provided, however, that for purposes of the determining whether the
Minimum Rent Escalation Condition has been satisfied as of the commencement of the second
(2nd) Lease Year, the Gross Resident Revenues for the Facility for the period from the
Commencement Date through the applicable Comparison Month immediately prior to the commencement of
the second (2nd) Lease Year shall be annualized instead of referring back to the Base
Month since the Base Month would have occurred prior to the Commencement Date and Lessee would not
have received or been entitled to receive the Gross Resident Revenues for the period prior to the
Commencement Date.

          Minimum Repurchase Price: At any given time, the sum of (i) the Initial Investment
with respect to the Facility, as increased by the CPI Increase each Lease Year cumulative and
compounded annually commencing upon the expiration of the first (1st) Lease Year, and
upon the expiration of each Lease Year thereafter, plus (ii) any Capital Addition Costs paid,
funded or accrued by Lessor, as increased by the CPI Increase each Lease Year cumulative and
compounded annually from and after the date of each payment, funding or accrual by Lessor of any
such Capital Addition Costs.

          Mold: Mold, mildew, fungus or other potentially dangerous organisms.

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     Mold Condition: The presence or suspected presence of Mold or any condition(s) that
reasonably can be expected to give rise to or indicate the presence of Mold, including observed or
suspected instances of water damage or intrusion, the presence of wet or damp wood, cellular
wallboard, floor coverings or other materials, inappropriate climate control, discoloration of
walls, ceilings or floors, complaints of respiratory ailment or eye irritation by Lessee’s
employees or any other occupants or invitees in the Leased Property, or any notice from a
governmental agency of complaints regarding the indoor air quality at the Leased Property.

     Mold Inspector: An industrial hygienist certified by the American Board of Industrial
Hygienists (“CIH”) or an otherwise qualified mold consultant selected by or otherwise acceptable to
Lessor.

     Mold Remediation Requirements: The relevant provisions of the document Mold
Remediation in Schools and Commercial Buildings (EPA 402-K-01-001, March 2001), published by the
U.S. Environmental Protection Agency, as may be amended or revised from time to time, or any other
applicable Legal Requirements, regulatory standards or guidelines relating to Mold or Mold
Conditions.

     Occupancy Arrangement: Any sublease, license or other arrangement with a Person for
the right to use, occupy or possess any portion of the Leased Property and/or any Capital
Additions.

     Occupant: Any Person having rights of use, occupancy or possession under an Occupancy
Arrangement.

     Officer’s Certificate: A certificate of Lessee signed by an officer authorized to so
sign by its board of directors or by-laws or by equivalent governing documents or managers.

     Overdue Rate: On any date, a rate equal to Two Percent (2%) above the Prime Rate, but
in no event greater than the maximum rate then permitted under applicable law.

     Parent: Capital Senior Living Corporation, a Delaware corporation, and any successors
or assigns of Parent that become a Controlling Person following the Commencement Date (subject to
Lessor’s rights to consent to the same pursuant to the terms of Article XXIV).

     Payment Date: Any due date for the payment of the installments of Minimum Rent or any
other sums payable under this Lease.

     Permitted Competing Facility(ies): As defined in Section 7.4.1.

     Person: Any individual, corporation, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other form of entity.

     Personal Property: All machinery, furniture and equipment, including phone systems
and computers, trade fixtures, inventory (including raw materials, work in process and finished
goods), supplies and other personal property used or useful in the use of the Leased Property and
Capital Additions for their Primary Intended Use, other than Fixtures.

12

 

     Primary Intended Use: The “Primary Intended Use” as set forth on Exhibit D
attached hereto and incorporated herein by this reference.

     Prime Rate: On any date, a rate equal to the annual rate on such date announced by
the Bank of New York to be its prime, base or reference rate for 90-day unsecured loans to its
corporate borrowers of the highest credit standing but in no event greater than the maximum rate
then permitted under applicable law. If the Bank of New York discontinues its use of such prime,
base or reference rate or ceases to exist, Lessor shall designate the prime, base or reference rate
of another state or federally chartered bank based in New York to be used for the purpose of
calculating the Prime Rate hereunder.

     Purchase Right/Obligation Exercise: As defined in Section 18.2.

     Put Event: An Event of Default hereunder arising out of (i) a breach or default by
Lessee during the Term of any of its obligations or covenants pursuant to Sections 36.1 or 36.2,
(ii) any failure of Lessee to obtain and maintain all material health care licenses, required to
use and operate the Facility for its Primary Intended Use in accordance with all Legal Requirements
or (iii) any closure of the Facility. Notwithstanding that Lessor and Lessee have specifically
defined a “Put Event” for the limited purpose of setting forth the circumstances under which Lessor
shall be entitled to the remedy set forth in Section 16.5, in no event shall this definition
derogate the materiality of any other Event of Default (including any Event of Default which does
not constitute a Put Event) or otherwise limit Lessor’s rights and remedies upon the occurrence of
any such Event of Default, including those rights and remedies set forth in Sections 16.2, 16.3,
16.4, 16.8 and/or 16.10.

     Quarter: During each Lease Year, the first three (3) calendar month period commencing
on the first (1st) day of such Lease Year and each subsequent three (3) calendar month period
within such Lease Year; provided, however, that the last Quarter during the Term may be a period of
less than three (3) calendar months and shall end on the last day of the Term; provided, further,
that if the Commencement Date is a day other than the first (1st) day of a calendar month, the
first Quarter shall be the period commencing on the Commencement Date and ending on the last day of
the second (2nd) month following the month in which the Commencement Date occurs.

     Related Contract of Acquisition: The agreement dated as of March 7, 2006 by and
between Texas HCP AL, L.P., successor by assignment to Texas HCP Holding, L.P., a Delaware limited
partnership, as “Buyer,” and Capital Senior Living Acquisition, LLC, as “Seller,” relative to the
acquisition by Texas HCP AL, L.P. of certain assisted living and independent living facilities
located in Abilene, Texas, Burleson, Texas, Cedar Hill, Texas, North Richland Hills, Texas and
Waxahachie, Texas, as the same may have been amended, supplemented or modified from time to time.

     Related Leases: Those certain lease agreements between Lessor or certain Affiliates
of Lessor and Lessee or certain Affiliates of Lessee more particularly described on Schedule
A attached hereto and incorporated herein by this reference.

     Related Rights: The Related Rights (as defined in Article I) of the Facility.

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     Rent: Collectively, the Minimum Rent, Additional Charges and all other amounts
payable under this Lease.

     Replacement Reserve: As defined in Section 9.3.

     Required Repair Work: As defined in Section 9.4.

     Sale of Business: A Transfer of the type described in any of clauses (iv), (v) or
(vi) of Section 24.1.1 below, unless such Transfer involves only the stock, memberships, equity
interests and/or assets of Lessee and Lessee has no substantial assets other than (a) its interest
in the Leased Property and any Capital Additions pursuant to this Lease, (b) the business and
operations on the Leased Property and any Capital Additions and (c) Lessee’s Personal Property.

     SEC: Securities and Exchange Commission.

     Security Amount: As defined in Section 21.1.

     State: The State or Commonwealth in which the Leased Property is located.

     Subsidiaries: Corporations, partnerships, limited liability companies, business
trusts or other legal entities with respect to which a Person owns, directly or indirectly
(including through one or more intermediaries), more than fifty percent (50%) of the voting stock
or partnership, membership or other equity interest, respectively.

     Term: The Fixed Term and any Extended Terms unless earlier terminated pursuant to the
provisions hereof.

     Transfer: As defined in Article XXIV.

     Transfer Consideration: With respect to any Transfer constituting a Master Sublease
(other than a Master Sublease entered into in connection with a Sale of Business), “Transfer
Consideration” shall mean Fifty Percent (50%) of the positive difference, if any, between the total
rent payable by the Sublessee under the Master Sublease and the Minimum Rent payable by Lessee
under this Lease determined on a monthly basis, prorating such Minimum Rent, as appropriate, if
less than all of the Facility is Master Subleased. Fifty Percent (50%) of the difference shall be
paid by Lessee to Lessor monthly when the Minimum Rent of the Facility is due; provided, however,
that in no event shall the total Transfer Consideration to which Lessor is entitled in connection
with any such Master Sublease exceed the total consideration given directly or indirectly
(including through one or more intermediaries) to Lessee, to any Controlling Person(s) or to any
other Person in exchange for, in connection with, related to or arising out of the transaction(s)
as to which such Master Sublease is a part. With respect to any other Transfer (i.e., a
Transfer other than pursuant to a Master Sublease, but including a Master Sublease which is part of
a Sale of Business), “Transfer Consideration” shall mean Fifty Percent (50%) of the Leasehold FMV
of the Facility. As used herein, the term “consideration” shall mean and include money, services,
property and other things of value, including payment of costs, cancellation or forgiveness of
indebtedness, discounts, rebates, barter and the like. For purposes of the payment of Transfer
Consideration to Lessor as provided in this Lease, if any such consideration given in exchange for,
in connection with, related to or

14

 

arising out of such Transfer is in a form other than cash (such as in kind, equity interests,
indebtedness, earn-outs or other deferred payments, consulting or management fees, etc.), Lessor
shall be entitled to receive the applicable Transfer Consideration on account thereof in cash based
upon the present fair market value of such consideration at the time of the Transfer. Lessee
acknowledges and agrees that the terms under which Lessor is entitled to the payment of Transfer
Consideration pursuant to this Lease and the amount thereof has been freely negotiated and
represents a fair and equitable division with Lessor of the consideration payable in connection
with a Transfer taking into account, among other things, Lessor’s investment in the Leased
Property, the terms of this Lease and the inherent risks of owning and leasing real property.

     Unsuitable for Its Primary Intended Use: A state or condition of the Facility such
that by reason of damage or destruction or Condemnation, in the good faith judgment of Lessor, the
Facility cannot be operated on a commercially practicable basis for its Primary Intended Use.

ARTICLE III.

     3.1 Rent. Lessee shall pay to Lessor in lawful money of the United States of America
which shall be legal tender for the payment of public and private debts, without offset or
deduction, the amounts set forth hereinafter as Minimum Rent during the Term. Payments of Minimum
Rent shall be made in advance in equal monthly installments on or before the first (1st) day of
each calendar month from and after the Commencement Date by wire transfer of funds initiated by
Lessee to Lessor’s account or to such other Person as Lessor from time to time may designate in
writing.

          3.1.1 Minimum Rent.

          (a) For the period from the Commencement Date through the expiration of the first Lease Year,
Lessee shall pay to Lessor as monthly “Minimum Rent” for the Facility, in advance on or before the
first day of each calendar month, the amount determined pursuant to the formula set forth on
Exhibit D attached hereto and incorporated herein by this reference. The first monthly
payment of Minimum Rent shall be payable on the Commencement Date (prorated as to any partial
calendar month at the beginning of the Term).

          (b) Upon the commencement of the second (2nd) Lease Year of the Fixed Term, and
upon the commencement of each Lease Year thereafter during the Term (including the Extended
Term(s), if any), and provided that the Minimum Rent Escalation Condition has been satisfied as of
the commencement of such Lease Year, the then current monthly Minimum Rent for such Lease Year
shall be increased (but not decreased) by a percentage equal to the CPI Increase. Notwithstanding
anything to the contrary contained in this Section 3.1.1(b), in the event that the Minimum Rent
Escalation Condition as of the commencement of any Lease Year has not been satisfied, but an Event
of Default, or an event or circumstance which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, has occurred and is continuing under this Lease as of
the commencement of such Lease Year, then the Minimum Rent Escalation Condition shall nevertheless
be deemed satisfied and the then current monthly Minimum Rent for such Lease Year shall be increased by
a percentage equal to the CPI Increase.

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     If any adjustment provided for in subsection (b) shall not have been made at the commencement
of the Lease Year for which applicable, Lessee shall continue to pay monthly Minimum Rent at the
last rate applicable until Lessee receives Lessor’s written notice as to such adjustment. Within
ten (10) days after Lessee’s receipt of Lessor’s notice, Lessee shall pay to Lessor an amount equal
to the new monthly Minimum Rent times the number of months from the commencement of the
then current Lease Year to the date of receipt of Lessor’s notice, less the aggregate
amount paid by Lessee on account of monthly Minimum Rent for the same period. Thereafter, Lessee
shall pay monthly Minimum Rent for the applicable Lease Year at the new rate set forth in Lessor’s
notice.

     3.2 Confirmation of Gross Resident Revenues.

          3.2.1 Not less than thirty (30) days prior to the commencement of the second (2nd)
Lease Year, and not less than thirty (30) days prior the commencement of each Lease Year thereafter
during the Term (including the Extended Term(s), if any), Lessee shall deliver to Lessor an
Officer’s Certificate setting forth the Gross Resident Revenues for the period from the applicable
Base Month through the applicable Comparison Month and whether the Minimum Rent Escalation
Condition for the ensuing Lease Year has been satisfied; provided, however, that the Officer’s
Certificate to be delivered prior to the commencement of the second (2nd) Lease Year
shall annualize the Gross Resident Revenues for the period from the Commencement Date through the
Comparison Month immediately prior to the commencement of the second (2nd) Lease Year.

          3.2.2 Lessee shall utilize, or cause to be utilized, an accounting system for the Leased
Property and all Capital Additions in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Resident Revenues for the Facility and
Lessee shall retain for at least seven (7) years after the expiration of each Lease Year reasonably
adequate records conforming to such accounting system showing all Gross Resident Revenues for such
Lease Year for the Facility. Lessor, at its own expense except as provided hereinbelow, shall have
the right from time to time by its accountants or representatives, to review and/or audit the
information set forth in the Officer’s Certificate referred to in Section 3.2.1 and in connection
with such review and/or audit to examine Lessee’s records with respect thereto (including
supporting data and sales tax returns) subject to any prohibitions or limitations on disclosure of
any such data under applicable law or regulations including any duly enacted “Patients’ Bill of
Rights” or similar legislation, or as may be necessary to preserve the confidentiality of the
Facility-patient relationship and the physician-patient privilege. If for any Lease Year in which
the Minimum Rent Escalation Condition has not been satisfied, any such review and/or audit
discloses that such Minimum Rent Escalation Condition was indeed satisfied, then, Lessee shall
forthwith pay to Lessor the amount of the increased Minimum Rent that should have been paid
pursuant to Section 3.1.1(b) together with (a) interest thereon at the Overdue Rate compounded
monthly from the date when such increase of Minimum Rent should have been made to the date of
payment thereof and (b) the costs of such review and/or audit.

     3.3 Additional Charges. In addition to the Minimum Rent, (i) Lessee shall also pay
and discharge as and when due and payable all other amounts, liabilities, obligations and
Impositions which Lessee assumes or agrees to pay under this Lease; and (ii) in the event of

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any failure on the part of Lessee to pay any of those items referred to in clause (i) above, Lessee
shall also promptly pay and discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses (i) and (ii) above
being referred to herein collectively as the “Additional Charges”), and Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent.

     3.4 Late Payment of Rent.

          (a) LESSEE HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY LESSEE TO LESSOR OF RENT WILL CAUSE LESSOR
TO INCUR COSTS NOT CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH IS PRESENTLY ANTICIPATED TO BE
EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS MAY INCLUDE PROCESSING AND ACCOUNTING CHARGES AND
LATE CHARGES WHICH MAY BE IMPOSED ON LESSOR BY THE TERMS OF ANY LOAN AGREEMENT AND OTHER EXPENSES
OF A SIMILAR OR DISSIMILAR NATURE. ACCORDINGLY, IF ANY INSTALLMENT OF RENT OTHER THAN ADDITIONAL
CHARGES PAYABLE TO A PERSON OTHER THAN LESSOR SHALL NOT BE PAID WITHIN SEVEN (7) BUSINESS DAYS
AFTER ITS DUE DATE, LESSEE WILL PAY LESSOR ON DEMAND A LATE CHARGE EQUAL TO THE LESSER OF (I) TWO
AND FIFTY ONE HUNDREDTHS PERCENT (2.5%) OF THE AMOUNT OF SUCH INSTALLMENT OR (II) THE MAXIMUM
AMOUNT PERMITTED BY LAW. THE PARTIES AGREE THAT THIS LATE CHARGE REPRESENTS A FAIR AND REASONABLE
ESTIMATE OF THE COSTS THAT LESSOR WILL INCUR BY REASON OF LATE PAYMENT BY LESSEE. THE PARTIES
FURTHER AGREE THAT SUCH LATE CHARGE IS RENT AND NOT INTEREST AND SUCH ASSESSMENT DOES NOT
CONSTITUTE A LENDER OR BORROWER/CREDITOR RELATIONSHIP BETWEEN LESSOR AND LESSEE. IN ADDITION, THE
AMOUNT UNPAID, INCLUDING ANY LATE CHARGES, SHALL BEAR INTEREST AT THE OVERDUE RATE COMPOUNDED
MONTHLY FROM THE DUE DATE OF SUCH INSTALLMENT TO THE DATE OF PAYMENT THEREOF, AND LESSEE SHALL PAY
SUCH INTEREST TO LESSOR ON DEMAND. THE PAYMENT OF SUCH LATE CHARGE OR SUCH INTEREST SHALL NOT
CONSTITUTE WAIVER OF, NOR EXCUSE OR CURE, ANY DEFAULT UNDER THIS LEASE, NOR PREVENT LESSOR FROM
EXERCISING ANY OTHER RIGHTS AND REMEDIES AVAILABLE TO LESSOR.

Lessor’s Initials:                                         

Lessee’s Initials:                                         

          (b) If Lessee shall, during any six (6) month period, be more than seven (7) days delinquent
in the payment of any Rent due and payable by Lessee hereunder on three (3) or more occasions then,
notwithstanding anything herein to the contrary, Lessor may, by written notice to Lessee, elect to
require Lessee to pay all Minimum Rent payable hereunder quarterly in advance. Such right of
Lessor shall be in addition to and not in lieu of any other

17

 

right of remedy available to Lessor
hereunder or at law on account of an Event of Default by Lessee hereunder.

     3.5 Net Lease. This Lease is and is intended to be what is commonly referred to as a
“net, net, net” or “triple net” lease. The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount or benefit, as applicable, of the installments of
Minimum Rent and Additional Charges throughout the Term.

     3.6 Separate Account. Lessee shall deposit the gross receipts of the Facility into a
separate, segregated bank account, and Lessee shall provide copies of all bank statements of such
account to Lessor upon Lessor’s request.

ARTICLE IV.

     4.1 Impositions.

          4.1.1 Subject to Article XII relating to permitted contests, Lessee shall pay, or cause to be
paid, all Impositions before any fine, penalty, interest or cost may be added for nonpayment.
Lessee shall make such payments directly to the taxing authorities where feasible, and promptly
furnish to Lessor copies of official receipts or other satisfactory proof evidencing such payments.
Lessee’s obligation to pay Impositions shall be absolutely fixed upon the date such Impositions
become a lien upon the Leased Property, any Capital Additions or any part(s) thereof. If any
Imposition may, at the option of the taxpayer, lawfully be paid in installments, whether or not
interest shall accrue on the unpaid balance of such Imposition, Lessee may pay the same, and any
accrued interest on the unpaid balance of such Imposition, in installments as the same respectively
become due and before any fine, penalty, premium, further interest or cost may be added thereto.

          4.1.2 Lessor shall prepare and file all tax returns and reports as may be required by Legal
Requirements with respect to Lessor’s net income, gross receipts, franchise taxes and taxes on its
capital stock, and Lessee shall prepare and file all other tax returns and reports as may be
required by Legal Requirements with respect to or relating to the Leased Property, all Capital
Additions and Lessee’s Personal Property.

          4.1.3 Any refund due from any taxing authority in respect of any Imposition paid by Lessee
shall be paid over to or retained by Lessee if no Event of Default shall have occurred hereunder
and be continuing. Any other refund shall be paid over to or retained by Lessor and applied to the
payment of Lessee’s obligations under this Lease in such order of priority as Lessor shall
determine.

          4.1.4 Lessor and Lessee shall, upon request of the other, provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property and all Capital
Additions as may be necessary to prepare any required returns and reports. If any property covered
by this Lease is classified as personal property for tax purposes, Lessee shall file all personal
property tax returns in such jurisdictions where it must legally so file. Lessor, to the extent it
possesses the same, and Lessee, to the extent it possesses the same, shall provide the other party,
upon request, with cost and depreciation records necessary for filing returns for any property so
classified as personal property. Where Lessor is legally

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required to file personal property tax
returns and to the extent practicable, Lessee shall be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Lessee to file a protest.
Nothing contained in this Section 4.1.4 shall limit Lessee’s obligation to prepare and file all
tax returns and reports as may be required by Legal Requirements with respect to or relating to the
Leased Property, all Capital Additions and Lessee’s Personal Property, other than those tax returns
and reports as may be required by Legal Requirements with respect to Lessor’s net income, gross
receipts, franchise taxes and taxes on its capital stock, and any personal property tax returns
Lessor is legally required to file.

          4.1.5 Lessee may, upon notice to Lessor, at Lessee’s option and at Lessee’s sole cost and
expense, protest, appeal, or institute such other proceedings as Lessee may deem appropriate to
effect a reduction of real estate or personal property assessments and Lessor, at Lessee’s expense
as aforesaid, shall reasonably cooperate with Lessee in such protest, appeal, or other action but
at no cost or expense to Lessor. Billings for reimbursement by Lessee to Lessor of personal
property or real property taxes shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property or real property with respect to which such payments
are made.

          4.1.6 Lessor shall give prompt notice to Lessee of all Impositions payable by Lessee hereunder
of which Lessor has knowledge, but Lessor’s failure to give any such notice shall in no way
diminish Lessee’s obligations hereunder to pay such Impositions.

          4.1.7 Impositions imposed or assessed in respect of the tax-fiscal period during which the
Term terminates shall be adjusted and prorated between Lessor and Lessee, whether or not such
Imposition is imposed or assessed before or after such termination, and Lessee’s obligation to pay
its prorated share thereof shall survive such termination.

     4.2 Utility Charges. Lessee shall pay or cause to be paid all charges for
electricity, power, gas, oil, water and other utilities used in the Leased Property and all Capital
Additions. Lessee shall also pay or reimburse Lessor for all costs and expenses of any kind
whatsoever which at any time with respect to the Term hereof may be imposed against Lessor by
reason of any of the covenants, conditions and/or restrictions affecting the Leased Property, any
Capital Additions and/or any part(s) thereof, or with respect to easements, licenses or other
rights over, across or with respect to any adjacent or other property which benefits the Leased
Property and/or any Capital Additions, including any and all costs and expenses associated with any
utility, drainage and parking easements.

     4.3 Insurance Premiums. Lessee shall pay or cause to be paid all premiums for the
insurance coverage required to be maintained by Lessee hereunder.

     4.4 Impound Account.

          4.4.1 Lessor may, at its option to be exercised by thirty (30) days’ written notice to Lessee,
require Lessee to deposit, at the time of any payment of Minimum Rent, an amount equal to
one-twelfth (1/12) of Lessee’s estimated annual taxes, of every kind and nature, required pursuant
to Section 4.1 plus one-twelfth of Lessee’s estimated annual insurance premiums required pursuant
to Section 4.3 with Lessor or into an impound account as directed by Lessor. Lessor shall not be
required to keep any amounts deposited by Lessee with Lessor

19

 

pursuant to this Section separate from
its general funds. Such amounts shall be applied to the payment of the obligations in respect of
which said amounts were deposited in such order of priority as Lessor shall determine, on or before
the respective dates on which the same or any of them would become delinquent. The cost of
administering any such impound account shall be paid by Lessee.

          4.4.2 So long as no Event of Default, or any event which, with notice or lapse of time or
both, would constitute an Event of Default, has occurred hereunder, the amounts deposited by Lessee
pursuant to Section 4.4.1 shall accrue interest at a rate equal to (a) if such amounts are
deposited into an impound account, the rate of interest received by Lessor from time to time on the
amounts deposited in such impound account and (b) if such amounts are commingled with Lessor’s
general funds, the rate of interest received by Lessor from time to time on the funds held by
Lessor in its deposit accounts, and such accrued interest shall be applied by Lessor to the payment
of Lessee’s annual taxes required pursuant to Section 4.1 and/or Lessee’s insurance premiums
required pursuant to Section 4.3, as Lessor shall determine. In the event of a transfer of
Lessor’s interest in the Leased Property, Lessor shall have the right to transfer to the transferee
the amounts deposited by Lessee with Lessor or in any impound account established by Lessor
pursuant to Section 4.4.1 on account of the taxes and insurance premiums and thereupon shall,
without any further agreement between the parties, be released by Lessee from all liability
therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment
of such amounts to a new Lessor. The amounts deposited by Lessee with Lessor or in any impound
account established by Lessor pursuant to Section 4.4.1 may be assigned as security in connection
with a Facility Mortgage.

          4.4.3 Nothing contained in this Section 4.4 shall be deemed to affect any right or remedy of
Lessor hereunder. In addition, nothing contained in this Section 4.4 shall entitle Lessee to any
interest on any amounts funded by Lessee into any Facility Mortgage Reserve Account pursuant to
Section 35.3 below; provided, however, that Lessor shall apply any interest actually received from
a Facility Mortgagee on account of any amounts funded by Lessee into any Facility Mortgage Reserve
Account to the payment of Lessee’s annual taxes required pursuant to Section 4.1 and/or Lessee’s
insurance premiums required pursuant to Section 4.3, as Lessor shall determine.

     4.5 Tax Service. If requested by Lessor, Lessee shall, at its sole cost and expense,
cause to be furnished to Lessor a tax consulting service to be designated by Lessor, covering the
Leased Property and all Capital Additions. Such tax consulting service shall be subject to
Lessee’s prior approval, which approval shall not be unnecessarily withheld.

ARTICLE V.

     5.1 No Termination, Abatement, etc. Except as otherwise specifically provided in this
Lease, Lessee shall remain bound by this Lease in accordance with its terms and shall not seek or
be entitled to any abatement, deduction, deferment or reduction of Rent, or set-off against the
Rent. Except as otherwise specifically provided in this Lease, the respective obligations of
Lessor and Lessee shall not be affected by reason of (i) any damage to or destruction of the Leased
Property, any Capital Additions and/or any part(s) thereof from whatever cause and/or any
Condemnation of the Leased Property, any Capital Additions and/or

20

 

any part(s) thereof; (ii) the
lawful or unlawful prohibition of, or restriction upon, Lessee’s use of the Leased Property, any
Capital Additions and/or any part(s) thereof, or the interference with such use by any Person or by
reason of eviction by paramount title; (iii) any claim that Lessee has or might have against Lessor
by reason of any default or breach of any warranty by Lessor hereunder or under any other agreement
between Lessor and Lessee or to which Lessor and Lessee are parties; (iv) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or
other proceedings affecting Lessor or any assignee or transferee of Lessor; or (v) for any other
cause, whether similar or dissimilar to any of the foregoing, other than a discharge of Lessee from
any such obligations as a matter of law. Lessee hereby specifically waives all rights arising from
any occurrence whatsoever which may now or hereafter be conferred upon it by law (a) to modify,
surrender or terminate this Lease or quit or surrender the Leased Property, any Capital Additions
and/or any part(s) thereof; or (b) which may entitle Lessee to any abatement, reduction, suspension
or deferment of the Rent or other sums payable by Lessee hereunder, except as otherwise
specifically provided in this Lease. The obligations of Lessor and Lessee hereunder shall be
separate and independent covenants and agreements and the Rent and all other sums payable by Lessee
hereunder shall continue to be payable in all events unless the obligations to pay the same shall
be terminated pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.

     5.2 [Intentionally Omitted].

ARTICLE VI.

     6.1 Ownership of the Leased Property. Lessee acknowledges that the Leased Property is
the property of Lessor and that Lessee has only the right to the exclusive possession and use of
the Leased Property upon the terms and conditions of this Lease. Upon the expiration or earlier
termination of this Lease Lessee shall, at its expense, repair and restore the Leased Property to the conditions
required by Sections 9.1.1 and 9.1.4.

     6.2 Personal Property. During the Term, Lessee shall, as necessary and at its
expense, install, affix or assemble or place on any parcels of the Land or in any of the Leased
Improvements, any items of Lessee’s Personal Property and replacements thereof which shall be the
property of and owned by Lessee. Except as provided in Sections 6.3 and 16.10, Lessor shall have
no rights to Lessee’s Personal Property. Lessee shall provide and maintain during the entire Term
all Personal Property necessary in order to operate the Facility in compliance with all licensure
and certification requirements, all Legal Requirements and all Insurance Requirements and otherwise
in accordance with customary practice in the industry for the Primary Intended Use.

     6.3 Transfer of Personal Property and Capital Additions to Lessor. Upon the
expiration or earlier termination of this Lease, all Capital Additions not owned by Lessor and
Lessee’s Personal Property (including all motor vehicles used to transport residents/patients)
relating to the Facility shall become the property of Lessor, free of any encumbrance, and Lessee
shall execute all documents and take any actions reasonably necessary to evidence such ownership
and discharge any encumbrance. Notwithstanding anything to the contrary in this Lease, upon the
expiration or earlier termination of this Lease, Lessor shall not be obligated to

21

 

reimburse Lessee for any replacements, rebuildings, alterations, additions, substitutions, and/or improvements that
are surrendered as part of or with the Leased Property or Capital Additions.

ARTICLE VII.

     7.1 Condition of the Leased Property. Lessee acknowledges receipt and delivery of
possession of the Leased Property and confirms that Lessee has examined and otherwise has knowledge
of the condition of the Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair, free from Hazardous Substances not in compliance
with Legal Requirements, and satisfactory for its purposes hereunder. Regardless, however, of any
examination or inspection made by Lessee and whether or not any patent or latent defect or
condition was revealed or discovered thereby, Lessee is leasing the Leased Property “AS IS” in its
present condition. Lessee waives any claim or action against Lessor in respect of the condition of
the Leased Property including any defects or adverse conditions not discovered or otherwise known
by Lessee as of the date hereof. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, MOLD OR MOLD
CONDITION, IT BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY LESSEE
INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR
ANY (I) ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS AND (II) MOLD
REMEDIATION AND COMPLIANCE WITH ALL MOLD REMEDIATION REQUIREMENTS.

     7.2 Use of the Leased Property.

          7.2.1 Lessee covenants that it will obtain and maintain all authorizations and approvals
needed to use and operate the Leased Property, all Capital Additions and the Facility for the
Primary Intended Use and any other use conducted on the Leased Property and any Capital Additions
as may be permitted from time to time hereunder in accordance with Legal Requirements including
applicable licenses, provider agreements, permits, and Medicare and/or Medicaid certification.

          7.2.2 Lessee shall use or cause to be used the Leased Property, all Capital Additions and the
improvements thereon for the Primary Intended Use. Lessee shall not use the Leased Property, any
Capital Additions or any part(s) thereof for any other use without the prior written consent of
Lessor, which consent Lessor may withhold in its sole discretion.

          7.2.3 Lessee shall operate continuously the entire Leased Property and all Capital Additions
of the Facility in accordance with the Primary Intended Use. Lessee shall devote the entirety of
the Facility and all Capital Additions thereto to the Primary Intended Use, except for areas
reasonably required for office, storage space or ancillary service uses incidental to the Primary
Intended Use. Lessee shall not modify the services offered or take any other action (e.g.,
removing patients or residents from the Facility or directing patients or residents, or

22

 

prospective
patients or residents, to another facility) which would materially reduce Gross Resident Revenues
or the Fair Market Value of the Facility. Lessee shall at all times maintain an adequate staff for
the service of its residents and/or patients, in each case assuming an occupancy and/or use level
for the Facility which is not less than the average occupancy and/or use level for similar
facilities in the State. Lessee shall employ its best judgment, efforts and abilities to operate
the entirety of the Facility in such a manner so as to maximize Gross Resident Revenues and to
enhance the reputation and attractiveness of the Facility.

          7.2.4 Lessee shall conduct its business at the Facility in conformity with professional
standards of patient or resident care practice.

          7.2.5 Lessee shall not commit or suffer to be committed any waste on the Leased Property
and/or on or to any Capital Additions or cause or permit any nuisance to exist thereon or with
respect thereto.

          7.2.6 Lessee shall neither suffer nor permit the Leased Property, any Capital Additions, or
any part(s) thereof, or Lessee’s Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Lessor’s title thereto or to any portion thereof or (ii) may make
possible a claim of adverse use or possession, or an implied dedication of the Leased Property, any
Capital Additions or any part(s) thereof.

     7.3 Lessor to Grant Easements, etc. Lessor shall, from time to time so long as no Event of Default has occurred and is continuing,
at the request of Lessee and at Lessee’s cost and expense, but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed (i) grant easements and other rights
in the nature of easements; (ii) release existing easements or other rights in the nature of
easements which are for the benefit of the Leased Property; (iii) dedicate or transfer unimproved
portions of the Leased Property for road, highway or other public purposes; (iv) execute petitions
to have the Leased Property annexed to any municipal corporation or utility district; (v) execute
amendments to any covenants, conditions and restrictions affecting the Leased Property; and (vi)
execute and deliver to any Person any instrument appropriate to confirm or effect such grants,
releases, dedications and transfers to the extent of its interest in the Leased Property, but only
upon delivery to Lessor of an Officer’s Certificate stating that such grant release, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of the business of Lessee
on the Leased Property and does not materially reduce the value of the Leased Property.

     7.4 Preservation of Facility Value. Lessee acknowledges that a fair return to Lessor
on its investment in the Leased Property is dependent, in part, on the concentration on the Leased
Property and all Capital Additions during the Term of the senior housing and care business of
Lessee and its Affiliates in the geographical area of the Leased Property. Lessee further
acknowledges that diversion of residents and/or patients, as applicable, from the Facility to other
facilities or institutions and/or reemployment by Lessee of management or supervisory personnel
working at the Facility following the expiration or earlier termination of this Lease at other
facilities or institutions owned, operated or managed, whether directly or indirectly, by Lessee or
its Affiliates will have a material adverse impact on the value and utility of the Leased Property
and all Capital Additions. Accordingly, Lessor and Lessee agree as follows:

23

 

          7.4.1 During the Term and for a period of two (2) years thereafter, neither Lessee nor any of
its Affiliates, directly or indirectly, shall operate, own, manage or have any interest in or
otherwise participate in or receive revenues from any other facility or institution providing
services or similar goods to those provided in connection with the Facility and its Primary
Intended Use (a “Competing Facility”), within a five (5) mile radius outward from the outside
boundary of the Leased Property of the Facility. All distances shall be measured on a straight
line rather than on a driving distance basis. In the event that any portion of such other facility
or institution is located within such restricted area the entire facility or institution shall be
deemed located within such restricted area. Notwithstanding the foregoing, this Section 7.4.1
shall not apply to (a) any of those facilities currently owned and/or operated by Lessee or an
Affiliate of Lessee located within such five (5) mile radius and set forth on Exhibit F
hereto (the “Permitted Competing Facility(ies)”) or (b) any existing facility then-currently in
operation that is acquired by Lessee or its Affiliates together with two (2) or more facilities as
part of a single purchase and sale transaction with a single third party seller, so long as not
more than one (1) of such facilities acquired by Lessee or its Affiliates as part of such single
purchase and sale transaction would constitute a Competing Facility.

          7.4.2 For a period of one (1) year following the Term, neither Lessee nor any of its
Affiliates shall, without the prior written consent of Lessor, which consent may be
given or withheld in Lessor’s sole discretion, hire, engage or otherwise employ any management
or supervisory personnel working at the Facility.

          7.4.3 Except as required for medically appropriate reasons, prior to and after the expiration
or earlier termination of this Lease, Lessee shall not recommend or solicit the removal or transfer
of any resident or patient from the Facility to any other facility or institution.

ARTICLE VIII.

     8.1 Compliance with Legal and Insurance Requirements, Instruments, etc. Subject to
Article XII regarding permitted contests, Lessee, at its expense, shall promptly (i) comply in all
material respects with all Legal Requirements and Insurance Requirements regarding the use,
operation, maintenance, repair and restoration of the Leased Property, Lessee’s Personal Property
and all Capital Additions whether or not compliance therewith may require structural changes in any
of the Leased Improvements or any Capital Additions or interfere with the use and enjoyment of the
Leased Property and (ii) procure, maintain and comply with all licenses, certificates of need,
provider agreements and other authorizations required for the use of the Leased Property, Lessee’s
Personal Property and all Capital Additions for the Primary Intended Use and any other use of the
Leased Property, Lessee’s Personal Property and all Capital Additions then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property, Lessee’s Personal
Property and all Capital Additions. Lessor may, but shall not be obligated to, enter upon the
Leased Property and all Capital Additions and take such actions and incur such costs and expenses
to effect such compliance as it deems advisable to protect its interest in the Leased Property and
all Capital Additions, and Lessee shall reimburse Lessor for all costs and expenses incurred by
Lessor in connection with such actions. Lessee covenants and agrees that the Leased Property,
Lessee’s Personal Property and all Capital Additions shall not be used for any unlawful purpose.

24

 

ARTICLE IX.

     9.1 Maintenance and Repair.

          9.1.1 Lessee, at its expense, shall maintain the Leased Property, and every portion thereof,
Lessee’s Personal Property and all Capital Additions, and all private roadways, sidewalks and curbs
appurtenant to the Leased Property, and which are under Lessee’s control in good order and repair
whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the
elements or the age of the Leased Property, Lessee’s Personal Property and all Capital Additions,
and, with reasonable promptness, make all necessary and appropriate repairs thereto of every kind
and nature, including those necessary to comply with changes in any Legal Requirements, 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 Date. All
repairs shall be at least equivalent in quality to the original work. Lessee will not take or omit
to take any action the taking or omission of which might materially impair the value or the
usefulness of the Leased Property, any Capital Additions, or any part(s) thereof for the Primary
Intended Use. The provisions of this Section 9.1.1 are subject to the provisions of Section 9.1.4 below which expressly permit the Leased
Property, Lessee’s Personal Property and all Capital Additions to be surrendered at the expiration
or earlier termination of the Term in the condition in which such Leased Property was originally
received from Lessor and such Lessee’s Personal Property and Capital Additions were originally
introduced to the Facility, except as repaired, rebuilt, restored, altered or added to as permitted
or required by the provisions of this Lease and except for ordinary wear and tear.

          9.1.2 Lessor shall not under any circumstances be required to (i) build or rebuild any
improvements on the Leased Property or any Capital Additions; (ii) make any repairs, replacements,
alterations, restorations or renewals of any nature to the Leased Property, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto; or (iii) maintain the Leased Property or any Capital Additions in
any way. Lessee hereby waives, to the extent permitted by law, the right to make repairs at the
expense of Lessor pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.

          9.1.3 Nothing contained in this Lease and no action or inaction by Lessor shall be construed
as (i) constituting the consent or request of Lessor, expressed 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 the Leased Property, any Capital Additions or any part(s) thereof; or
(ii) giving Lessee any right, power or permission to contract for or permit the performance of any
labor or services or the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis for, any right, title, interest, lien, claim or other
encumbrance upon the estate of Lessor in the Leased Property, any Capital Additions or any part(s)
thereof.

          9.1.4 Unless Lessor shall convey any of the Leased Property to Lessee pursuant to the
provisions of this Lease, Lessee shall, upon the expiration or earlier termination

25

 

of the Term,
vacate and surrender the Leased Property, Lessee’s Personal Property, and all Capital Additions to
Lessor in the condition in which the Leased Property was originally received from Lessor and
Lessee’s Personal Property and any Capital Additions were originally introduced to the Facility,
except as repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear.

     9.2 Encroachments, Restrictions, Mineral Leases, etc. If any of the Leased
Improvements or Capital Additions shall, at any time, encroach upon any property, street or
right-of-way, or shall violate any restrictive covenant or other agreement affecting the Leased
Property, any Capital Additions or any parts thereof, or shall impair the rights of others under
any easement or right-of-way to which the Leased Property is subject, or the use of the Leased
Property or any Capital Additions is impaired, limited or interfered with by reason of the exercise
of the right of surface entry or any other provision of a lease or reservation of any oil, gas,
water or other minerals, then promptly upon the request of Lessor or any Person affected by any
such encroachment, violation or impairment, Lessee, at its sole cost and expense, but subject to
its right to contest the existence of any such encroachment, violation or impairment, shall protect, indemnify, save harmless and defend
Lessor from and against all losses, liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and
expenses) based on or arising by reason of any such encroachment, violation or impairment. In the
event of an adverse final determination with respect to any such encroachment, violation or
impairment, Lessee shall either (i) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment, violation or impairment,
whether the same shall affect Lessor or Lessee; or (ii) make such changes in the Leased
Improvements and any Capital Addition, and take such other actions, as Lessee in the good faith
exercise of its judgment deems reasonably practicable, to remove such encroachment or to end such
violation or impairment, including, if necessary, the alteration of any of the Leased Improvements
or any Capital Addition, 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 and any Capital Addition for the Primary
Intended Use substantially in the manner and to the extent the Leased Improvements and Capital
Additions were operated prior to the assertion of such encroachment, violation or impairment.
Lessee’s obligations under this Section 9.2 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, to the
extent the recovery thereof is not necessary to compensate Lessor for any damages incurred by any
such encroachment, violation or impairment, Lessee shall be entitled to a credit for any sums
recovered by Lessor under any such policy of title or other insurance.

     9.3 Annual Minimum Capital Project Amount; Replacement Reserve.

          9.3.1 Without in any way limiting Lessee’s obligations under this Article IX, Lessee shall
expend during each Lease Year on account of Capital Projects for the Facility, no less than the
applicable Annual Minimum Capital Project Amount. Such Capital Projects shall be performed and
completed in compliance with the applicable provisions of this Lease, including the applicable
provisions of Article X hereof. Promptly following the expiration of each Lease Year, Lessee shall
furnish to Lessor reasonable documentary evidence as to the completion of all Capital Projects for
such Lease Year required pursuant to this Section 9.3.1, together with the costs thereof. If
Lessee fails to expend during each Lease Year the applicable

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Annual Minimum Capital Project Amount
for Capital Projects to the Facility, then, without limiting any rights or remedies afforded Lessor
pursuant to the terms of this Lease for a breach by Lessee of its obligation hereunder, Lessee
shall promptly deposit with Lessor as a repair and replacement reserve with respect to the Facility
(a “Replacement Reserve”) for Capital Projects to the Facility, an amount equal to (a) the Annual
Minimum Capital Project Amount less (b) the amounts expended by Lessee during such Lease Year on
account of Capital Projects to the Facility. So long as no Event of Default or an event or
circumstance has occurred which with notice or passage of time, or both, would constitute an Event
of Default hereunder, if (i) a Replacement Reserve has been established and (ii) Lessee expends
during the next two (2) Lease Years immediately following the Lease Year in which such Replacement
Reserve was established, an amount in excess of the applicable Annual Minimum Capital Project
Amount for Capital Projects for the Facility (including on account of any Capital Projects required
by Lessor pursuant to the terms of Section 9.3.2 below to be performed and completed by Lessee),
Lessor shall, to the extent funds are available for such purpose in such Replacement Reserve,
disburse to Lessee the Capital Project Costs incurred and paid by Lessee during such Lease Year in
performing such Capital Projects to the Facility in excess of the applicable Annual Minimum Capital
Project Amount for the Facility for such Lease Year. Any such disbursement from any Replacement
Reserve shall be paid by Lessor to Lessee within fifteen (15) days following: (a) receipt by Lessor
of a written request from Lessee for disbursement from the Replacement Reserve and a certification
by Lessee in form and substance satisfactory to Lessor that the applicable item of Capital Project
for the Facility has been completed; (b) delivery to Lessor of paid invoices, receipts or other
evidence satisfactory to Lessor, verifying (1) the Capital Project Costs for such Capital Project
and (2) that Lessee has expended in the applicable Lease Year an amount in excess of the applicable
Annual Minimum Capital Project Amount for Capital Projects for the Facility; and (c) delivery to
Lessor of affidavits, lien waivers or other evidence satisfactory to Lessor showing that all
materialmen, laborers, subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to the Leased Property of
the Facility have been paid all amounts due for labor and materials furnished to the Leased
Property of the Facility. Lessor shall not be required to make advances from any Replacement
Reserve more frequently than once in any thirty (30) day period. If, upon the expiration of the
second (2nd) Lease Year immediately following the Lease Year in which any Replacement
Reserve was established, any funds remain in such Replacement Reserve, then the same shall be paid
over to Lessor as an Additional Charge and Rent under this Lease and shall be in addition to
Minimum Rent and all other Additional Charges payable hereunder. The payment to Lessor of any
funds remaining in any Replacement Reserve as an Additional Charge and Rent pursuant to the terms
of the preceding sentence shall not limit in any manner Lessor’s rights and remedies set forth in
this Lease on account of Lessee’s failure to expend in any Lease Year the applicable Annual Minimum
Capital Project Amount for Capital Projects to the Facility.

          9.3.2 Lessor may, at Lessee’s expense, make or cause to be made during the Term an annual
inspection of the Leased Property to determine the need, as determined by Lessor in its reasonable
discretion, for further Capital Projects of the Leased Property to maintain the same in accordance
with the requirements of Section 9.1 of this Lease. If such inspection reveals that further
Capital Projects of the Leased Property are required, Lessor may provide Lessee with a written
description of the required Capital Projects and Lessee shall commence such Capital Projects within
thirty (30) days following Lessee’s receipt of such written

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description from Lessor, and shall
thereafter diligently prosecute the same to completion to the satisfaction of Lessor.

          9.3.3 The Replacement Reserves shall not be or be deemed to be escrow or trust funds, but, at
Lessor’s option and in Lessor’s discretion, may either be held in a separate account or be
commingled by Lessor with the general funds of Lessor. Lessee shall not be entitled to any
interest on any funds contained in any Replacement Reserve. The Replacement Reserves are solely
for the protection of Lessor and the Leased Property and entail no responsibility on Lessor’s part
beyond the payment of the respective items for which they are held following receipt of bills,
invoices or statements therefor in accordance with the terms of this Section 9.3 and beyond the
allowing of due credit for the sums actually received. Upon assignment of this Lease by Lessor,
any funds in any Replacement Reserve shall be turned over to the assignee and any responsibility of
Lessor, as assignor, with respect thereto shall terminate. If any funds remain in any Replacement
Reserve upon the expiration or earlier termination of
this Lease, the same shall be paid over to Lessor as an Additional Charge and Rent under this
Lease and shall be in addition to Minimum Rent and all other Additional Charges payable hereunder.

     9.4 Required Repair. Lessee shall, at its own cost and expense, complete all repair
and maintenance work to the Leased Property set forth on Schedule 9.4 attached hereto (the
“Required Repair Work”) in good and workmanlike manner and otherwise in the manner required
pursuant to the terms of this Article IX and Article X on or before the applicable date specified
in Schedule 9.4 for the completion of such Required Repair Work. Upon completion of the
Required Repair Work, Lessee shall provide to Lessor copies of all paid invoices, receipts or other
commercially reasonable evidence or supporting information as is customary to evidence the
expenditures relating to the completion of such Required Repair Work, along with an Officer’s
Certificate certifying that such Required Repair Work has been completed, and to the extent
applicable, affidavits, lien waivers or other evidence reasonably satisfactory to Lessor showing
that all materialmen, laborers, subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished material or labor to the Leased
Property have been (or upon receipt of a sum certain will be) paid all amounts due for labor and
materials furnished to the Leased Property subject to Lessee’s right to contest such amounts
pursuant to the terms of Article XII below.

     9.5 O&M Plan. Lessee shall institute, within ninety (90) days after the Commencement
Date, an operations and maintenance program (the “Maintenance Program”) designed by an
environmental consultant satisfactory to Lessor, with respect to asbestos-containing materials
(“ACMs”), consistent with “Guidance for Controlling Asbestos-Containing Materials in Buildings”
(USEPA, 1985), “Managing Asbestos in Place: A Building Owner’s Guide to Operations and Maintenance
Programs” (USEPA, 1990) and other relevant guidelines, and such Maintenance Program will remain in
effect throughout the Term. In furtherance of the foregoing, Lessee shall inspect and maintain all
ACMs on a regular basis and ensure that all ACMs shall be maintained in a condition that prevents
exposure of residents to ACMs at all times. Without limiting the generality of the preceding
sentence, Lessor may require (i) periodic notices or reports to Lessor in form, substance and at
such intervals as Lessor may specify, (ii) an amendment to such Maintenance Program to address
changing circumstances, laws, USEPA guidance or other matters, (iii) at Lessee’s sole expense,
supplemental examination of the Leased

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Property by consultants specified by Lessor, and (iv)
variation of the Maintenance Program in response to the reports provided by any such consultants.

     9.6 Inspections; Due Diligence Fee. Without limiting Lessor’s rights pursuant to
Section 9.3.2 or Section 26.1 hereof, from time to time during the Term, Lessor and its agents
shall have the right to inspect the Leased Property and all systems contained therein at any
reasonable time to determine Lessee’s compliance with its obligations under this Lease. Lessee
shall pay to Lessor all reasonable out-of-pocket costs incurred by Lessor on account of such
inspections within thirty (30) days following its receipt of Lessor’s invoice therefore, and the same shall be deemed an
Additional Charge hereunder; provided, however, that if Lessor makes more than one such inspection
of the Facility during any two (2) consecutive Lease Year period, Lessee shall only be required to
pay to Lessor Lessor’s reasonable out-of-pocket costs incurred on account of Lessor’s first such
inspection during such two (2) consecutive Lease Year period.

ARTICLE X.

     10.1 Construction of Capital Additions and Other Alterations to the Leased Property.
Without the prior written consent of Lessor, which consent may be given or withheld in Lessor’s
sole and absolute discretion, Lessee shall not (a) make any Capital Additions on or structural
alterations to the Leased Property, (b) enlarge or reduce the size of the Facility or otherwise
materially alter or affect (other than replacement thereof) any main Facility systems, including
any main plumbing, electrical or heating, ventilating and air conditioning systems of the Facility
and/or (c) make any Capital Additions or other alterations which would tie in or connect with any
improvements on property adjacent to the Land. Lessee may, without Lessor’s prior written consent,
make any alterations, additions, or improvements (collectively, “alterations”) to the Leased
Property if such alterations are not of the type described in either clause (a), (b) or (c) above,
so long as in each case: (i) the same do not (A) decrease the value of the Leased Property, (B)
adversely affect the exterior appearance of the Leased Property, or (C) adversely affect the
structural components of the Leased Improvements or the main electrical, mechanical, plumbing or
ventilating and air conditioning systems for the Facility, (ii) the same are consistent in terms of
style, quality and workmanship to the original Leased Improvements and Fixtures, (iii) the same are
constructed and performed in accordance with the provisions of Section 10.2 below and (iv) the cost
thereof does not exceed, in the aggregate, $50,000.00 for any twelve (12) month period. Any other
alterations (i.e., other than alterations described in clauses (a), (b) or (c) above, and other
than alterations which meet the foregoing requirements of clauses (i), (ii), (iii) and (iv) above)
shall be subject to Lessor’s prior written consent, which consent shall not be unreasonably
withheld. To the extent Lessor’s prior written consent shall be required in connection with any
alterations or Capital Additions, Lessor may impose such conditions thereon in connection with its
approval thereof as Lessor deems appropriate. Notwithstanding the foregoing, Lessor agrees that
painting, landscaping, and replacement of floor, wall and window coverings (“minor alterations”)
shall be deemed alterations which do not require Lessor’s consent, regardless of
the cost thereof, so long as the same meet the requirements of clauses (ii) and (iii) above, and
the provisions of Sections 10.2(c), (i), (j), (k) and (l) below shall not apply with respect to the
performance of such minor alterations.

     10.2 Construction Requirements for all Alterations. Whether or not Lessor’s review
and approval is required, for all Capital Additions and other material alterations of the

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Leased
Property, the following shall apply (except to the extent Lessor reasonably determines that,
because of the nature or extent of the material alteration, any such requirement is not
applicable):

          (a) Lessee shall notify Lessor not less than ten (10) Business Days prior to the commencement
of such construction and currently therewith Lessee shall prepare and deliver to Lessor for
approval a notice of non-responsibility with respect to such construction in form acceptable for
recording in the Official Records of the County in which the Leased Property is located, to the
extent the same is provided for pursuant to any applicable Legal Requirements. Such notice of
non-responsibility shall be recorded prior to commencement of any construction;

          (b) Such construction shall not commence until Lessee shall have procured and paid for all
municipal and other governmental permits and authorizations required therefor, and Lessor 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 cost or expense to Lessor; and (ii) any
plans required to be filed in connection with any such application which require the approval of
Lessor as hereinabove provided shall have been so approved by Lessor;

          (c) Such construction shall not, and Lessee’s licensed architect or engineer shall certify to
Lessor that such construction shall not, impair the structural strength of any component of the
Facility or overburden the electrical, water, plumbing, HVAC or other building systems of any such
component;

          (d) Lessee’s licensed architect or engineer shall certify to Lessor that the detailed plans
and specifications conform to and comply with all applicable building, subdivision and zoning
codes, laws, ordinances, regulations and other Legal Requirements imposed by all governmental
authorities having jurisdiction over the Leased Property;

          (e) There shall be no material changes in the plans and specifications for such construction
from those approved by Lessor, if applicable, without first obtaining the prior written approval of
Lessor with respect to such changes;

          (f) Such construction shall, when completed, be of such a character as not to decrease the
value of the Leased Property as it was immediately before such Capital Addition;

          (g) During and following completion of such construction, the parking which is located in the
Facility or on the Land relating to the Facility shall remain adequate for the operation of the
Facility for its Primary Intended Use and in no event shall such parking be less than that which
was or is required by law or which was located in the Facility or on the Land prior to such
construction; provided, however, with Lessor’s prior consent and at no additional expense to
Lessor, (i) to the extent additional parking is not already a part of a Capital Addition, Lessee
may construct additional parking on the Land; or (ii) Lessee may acquire off-site parking to serve
the Facility as long as such parking shall be dedicated to, or otherwise made available to serve,
the Facility;

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          (h) All work done in connection with such construction shall be done promptly and in a good
and workmanlike manner using good quality materials and in conformity with all Legal Requirements;

          (i) To the extent not already maintained or covered by Lessee pursuant to Article XIII hereof,
Lessee shall at all times maintain or cause to be maintained the following insurance during such
construction (including through the date of completion of any punch list items relating thereto):

          (i) Builder’s risk insurance or similar type coverage covering such construction, in a
face amount of not less than the full insurable value thereof and materials supplied in
connection therewith, with appropriate provisions made to include coverage of materials
stored off the Leased Property in an amount not less than the full insurable value of such
materials stored off the Leased Property from time to time; and

          (ii) Errors and omissions insurance by architect and/or engineer selected by Lessee in
connection with such design and construction in an amount at least equal to One Million
Dollars ($1,000,000) which can be applied to such construction, covering the entire period
of design and construction, including completion of any punch-list items.

All such insurance maintained or caused to be maintained by Lessee pursuant to this Section 10.2(i)
shall be on an occurrence (as opposed to claims made) basis and shall name Lessor as an additional
insured. All insurance maintained or caused to be maintained by Lessee pursuant to subsection (i)
above shall name Lessee, Lessor and any contractor, jointly, as loss payee. In addition, all such
insurance to be maintained or caused to be maintained by Lessee shall otherwise, to the extent
applicable, comply with the provisions of and shall be in addition to the insurance specified in
Article XIII hereof;

          (j) With respect to the construction of any alterations costing One Million Dollars
($1,000,000.00) in the aggregate or more, Lessee shall procure or cause to be procured a payment
and performance bond naming Lessor as an additional obligee in form and substance and from an
institution reasonably satisfactory to Lessor. The amount of each bond shall be equal to One
Hundred Twenty-Five Percent (125%) of the estimated construction for the performance bond and One
Hundred Percent (100%) of the estimated construction for the labor and materials bond. Lessee
shall not be obligated to procure the bonds referenced in this Section 10.2(j) in connection with
the construction of any alterations costing less than One Million Dollars ($1,000,000.00) in the
aggregate;

          (k) Promptly following the completion of such construction, Lessee shall deliver to Lessor “as
built” drawings of such addition, certified as accurate by the licensed architect or engineer
selected by Lessee to supervise such work, and copies of any new or revised Certificates of
Occupancy; and

          (l) If by reason of the construction thereof, a new Certificate of Occupancy for any component
of the Facility is required, Lessee shall obtain and furnish a copy of the same to Lessor promptly
upon completion thereof.

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     10.3 [Intentionally Omitted].

     10.4 Rights of Facility Mortgagees. Notwithstanding anything herein to the contrary,
the provisions of this Article X are subject to the rights of the Facility Mortgagees.

ARTICLE XI.

     11.1 Liens. Subject to the provisions of Article XII relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will promptly discharge at its
expense any lien, encumbrance, attachment, title retention agreement or claim upon the Leased
Property or any Capital Additions or any attachment, levy, claim or encumbrance in respect of the
Rent, excluding, however, (i) this Lease; (ii) the matters that exist as of the Commencement Date;
(iii) restrictions, liens and other encumbrances which are consented to in writing by Lessor, or
any easements granted pursuant to the provisions of Section 7.3; (iv) liens for Impositions which
Lessee is not required to pay hereunder; (v) subleases permitted by Article XXIV; (vi) liens for
Impositions not yet delinquent; (vii) liens of mechanics, laborers, materialmen, suppliers or
vendors for amounts not yet due; (viii) any liens which are the responsibility of Lessor pursuant
to the provisions of Article XXXV; and (ix) any judgment liens against Lessor for amounts which are
not otherwise the responsibility of Lessee.

ARTICLE XII.

     12.1 Permitted Contests. Lessee, upon prior written notice to Lessor, on its own or
in Lessor’s name, at Lessee’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
licensure or certification decision, Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim; subject, however, to the further requirement 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 Lessor
and from the Leased Property or any Capital Additions; (ii) neither the Leased Property nor any
Capital Additions, the Rent therefrom nor any part or interest in either thereof would be in any
danger of being sold, forfeited, attached or lost pending the outcome of such proceedings; (iii) in
the case of a Legal Requirement, neither Lessor nor Lessee would be in any danger of liability
(other than the accrual of monetary penalties or fees during the pendency of such contest due to
Lessee’s failure to pay any amounts that are the subject of such contest) for failure to comply
therewith pending the outcome of such proceedings; (iv) if any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000), upon request of Lessor,
Lessee shall deliver to Lessor and its counsel an opinion of legal counsel reasonably acceptable to
Lessor to the effect set forth in clauses (i), (ii) and (iii) above, to the extent applicable; (v)
in the case of a Legal Requirement, Imposition, lien, encumbrance or charge, Lessee shall give such
reasonable security as may be required by Lessor to insure ultimate payment of the same and to
prevent any sale or forfeiture of the Leased Property or any Capital Additions or the Rent by
reason of such nonpayment or noncompliance; and (vi) in the case of an
Insurance Requirement, the coverage required by Article XIII shall be maintained. If any such
contest is finally resolved against Lessor or Lessee, Lessee shall promptly pay the amount required
to be paid, together with all interest and penalties accrued thereon, or comply with the applicable
Legal Requirement or Insurance Requirement.

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Lessor, at Lessee’s expense, shall execute and deliver
to Lessee such authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Lessee or if Lessor so desires, Lessor shall join as a
party therein. The provisions of this Article XII shall not be construed to permit Lessee to
contest the payment of Rent or any other amount payable by Lessee to Lessor hereunder. Lessee
shall indemnify, defend, protect and save Lessor harmless from and against any liability, cost or
expense of any kind that may be imposed upon Lessor in connection with any such contest and any
loss resulting therefrom.

ARTICLE XIII.

     13.1 General Insurance Requirements. During the Term, Lessee shall at all times keep
the Leased Property, and all property located in or on the Leased Property, including all Capital
Additions, the Fixtures and the Personal Property, insured with the kinds and amounts of insurance
described below. Each element of the insurance described in this Article shall be maintained with
respect to the Leased Property of the Facility, including the Capital Additions, Fixtures, Personal
Property and operations thereon. This insurance shall be written by companies authorized to do
insurance business in the State in which the Leased Property is located. All liability type
policies must name Lessor as an “additional insured” and shall be considered primary insurance
without recourse to any insurance maintained by Lessor. All property, loss of rental and business
interruption type policies shall name Lessor as “loss payee.” Losses shall be payable to Lessor
and/or Lessee as provided in Article XIV. In addition, the policies, as appropriate, shall name as
an “additional insured” or “loss payee” any Facility Mortgagee by way of a standard form of
mortgagee’s loss payable endorsement. Any loss adjustment shall require the written consent of
Lessor, Lessee, and each Facility Mortgagee. Evidence of insurance shall be deposited with Lessor
and, if requested, with any Facility Mortgagee(s). If any provision of any Facility Mortgage
requires deposits of insurance to be made with such Facility Mortgagee, Lessee shall either pay to
Lessor monthly the amounts required and Lessor shall transfer such amounts to each Facility
Mortgagee, or, pursuant to written direction by Lessor, Lessee shall make such deposits directly
with such Facility Mortgagee. The policies shall insure against the following risks with respect
to the Facility:

          13.1.1 Loss or damage by fire, vandalism and malicious mischief, extended coverage perils
commonly known as special form perils, earthquake (including earth movement), sinkhole and
windstorm in an amount not less than the insurable value on a replacement cost basis (as defined
below in Section 13.2) and including demolition, building ordinance, increased cost of construction
and a building ordinance coverage endorsement;

          13.1.2 Loss or damage by explosion of steam boilers, pressure vessels or similar apparatus
including what is normally covered by the standard boiler and machinery policy including HVAC,
refrigeration systems and electrical systems, now or hereafter installed
in the Facility, in such limits with respect to any one accident as may be reasonably
requested by Lessor from time to time;

          13.1.3 Flood (when the Leased Property of the Facility is located in whole or in part within a
designated 100-year flood plain area) and such other hazards and in such amounts as may be
customary for comparable properties in the area;

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          13.1.4 Loss of rental value in an amount not less than twelve (12) months’ Rent payable
hereunder or business interruption in an amount not less than twelve (12) months of income and
normal operating expenses including payroll and Rent payable hereunder with an endorsement
extending the period of indemnity by at least ninety (90) days (Building Ordinance — Increased
Period of Restoration Endorsement) necessitated by the occurrence of any of the hazards described
in Sections 13.1.1, 13.1.2 or 13.1.3;

          13.1.5 Claims on an occurrence basis for bodily injury or property damage under a policy of
commercial general liability insurance (including broad form property damage and broad form
contractual liability) with amounts not less than One Million Dollars ($1,000,000.00) per
occurrence and combined single limit and Three Million Dollars ($3,000,000.00) in the annual
aggregate; and

          13.1.6 Medical professional liability with amounts not less than One Million Dollars
($1,000,000) combined single limit and Three Million Dollars ($3,000,000) in the annual aggregate.

     13.2 Replacement Cost. The term “replacement cost” shall mean the actual replacement
cost of the insured property from time to time with new materials and workmanship of like kind and
quality. If either party believes that the replacement cost has increased or decreased at any time
during the Term, it shall have the right to have such replacement cost redetermined by an impartial
national insurance company reasonably acceptable to both parties (the “impartial appraiser”). The
party desiring to have the replacement cost so redetermined shall forthwith, on receipt of such
determination by the impartial appraiser, give written notice thereof to the other party hereto.
The determination of the impartial appraiser shall be final and binding on the parties hereto, and
Lessee shall forthwith increase or decrease the amount of the insurance carried pursuant to this
Article to the amount so determined by the impartial appraiser. Each party shall pay one-half
(1/2) of the fee, if any, of the impartial appraiser. If Lessee has made improvements to the
Leased Property of the Facility, including any Capital Additions thereto, Lessor may at Lessee’s
expense have the replacement cost redetermined at any time after such improvements are made,
regardless of when the replacement cost was last determined.

     13.3 Additional Insurance. In addition to the insurance described above, Lessee shall
maintain such additional insurance as may be reasonably required from time to time by any Facility
Mortgagee and shall further at all times maintain adequate workers’ compensation coverage and any
other coverage required by Legal Requirements for all Persons employed by Lessee on the Leased
Property of the Facility and any Capital Additions thereto in accordance with Legal Requirements.

     13.4 Waiver of Subrogation. All insurance policies carried by either party covering
the Leased Property of the Facility and any Capital Additions thereto and Lessee’s Personal
Property including contents, fire and casualty insurance, shall expressly waive any right of
subrogation on the part of the insurer against the other party. The parties hereto agree that
their policies of insurance will include such waiver clause or endorsement so long as the same are
obtainable without additional material cost. Each party waives any claims it has against the other
party to the extent such claim is covered by insurance.

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     13.5 Policy Requirements. All of the policies of insurance referred to in this
Article shall be written in form satisfactory to Lessor and by insurance companies with a
policyholder rating of “A-” and a financial rating of “X” in the most recent version of Best’s Key
Rating Guide; provided, however, that Lessee may maintain commercial general liability insurance
and medical professional liability insurance written by insurance companies with a policyholder
rating of “A” and a financial rating of “VIII” in the most recent version of Best’s Key Rating
Guide, so long as Lessee at all times also maintains excess commercial general liability insurance
and excess medical professional liability insurance with amounts not less than Three Million
Dollars ($3,000,000.00) with respect to commercial general liability insurance and Three Million
Dollars ($3,000,000.00) with respect to medical professional liability insurance, in each case
written by insurance companies with a policyholder rating of “A-” and a financial rating of “X” in
the most recent version of Best’s Key Rating Guide. Additionally, except as otherwise provided in
this Lease, all of the insurance referred to in this Article shall be on an occurrence (rather than
a claims-made) basis. Lessee shall pay all of the premiums therefor, and deliver such policies or
certificates thereof to Lessor upon or prior to their effective date (and with respect to any
renewal policy, at least ten (10) days prior to the expiration of the existing policy), and in the
event of the failure of Lessee either to effect such insurance in the names herein called for or to
pay the premiums therefor, or to deliver such policies or certificates thereof to Lessor, at the
times required, Lessor shall be entitled, but shall have no obligation, to effect such insurance
and pay the premiums therefor, in which event the cost thereof, together with interest thereon at
the Overdue Rate, shall be repayable to Lessor upon demand therefor. Each insurer shall agree, by
endorsement on the policy or policies issued by it, or by independent instrument furnished to
Lessor, that it will give to Lessor thirty (30) days’ written notice before the policy or policies
in question shall be altered, allowed to expire or canceled. Each policy shall have a deductible
or deductibles, if any, which are no greater than those normally maintained for similar facilities
in the State.

     13.6 Increase in Limits. If Lessor shall at any time believe in its reasonable
discretion that the limits of the insurance required hereunder are insufficient, Lessor shall have
the right notify Lessee in writing of the same and the parties shall thereafter endeavor to agree
in writing on the proper and reasonable limits for such insurance to be carried. If the parties
shall be unable to agree thereon, the proper and reasonable limits for such insurance to be carried
shall be determined by an impartial third party reasonably selected by Lessor, and reasonably
approved by Lessee, and the determination of such impartial third party shall be binding. Upon
agreement by the parties or determination by such third party the new increased limits as so
agreed upon or determined, as the case may be, shall be in effect and carried by Lessee until
further change pursuant to the provisions of this Section. Nothing herein shall permit the amount
of insurance to be reduced below the amount or amounts required by any of the Facility Mortgagees.

     13.7 Blanket Policies and Policies Covering Multiple Locations. Notwithstanding
anything to the contrary contained in this Article, Lessee’s obligations to carry the casualty
insurance provided for herein may be brought within the coverage of a blanket policy or policies of
insurance carried and maintained by Lessee; provided, however, that the coverage afforded Lessor
will not be reduced or diminished or otherwise be different from that which would exist under a
separate policy for the Facility meeting all other requirements of this Lease by reason of the use
of such blanket policy of insurance, and provided further that the

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requirements of this Article
XIII are otherwise satisfied. For any liability policies covering any other facilities in addition
to the Facility, Lessor may require excess limits as Lessor reasonably determines.

     13.8 No Separate Insurance. Lessee shall not, on Lessee’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 Article to be furnished by, or
which may reasonably be required to be furnished by, Lessee or (ii) increase the amounts of any
then existing insurance by securing an additional policy or additional policies, unless all parties
having an insurable interest in the subject matter of the insurance, including in all cases Lessor
and all Facility Mortgagees, are included therein as additional insured and the loss is payable
under such insurance in the same manner as losses are payable under this Lease. Lessee shall
immediately notify Lessor 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 additional
policies.

ARTICLE XIV.

     14.1 Insurance Proceeds. Subject to the rights of any Facility Mortgagees, all
proceeds payable by reason of any loss or damage to the Leased Property, any Capital Additions or
any part(s) or portion(s) thereof, under any policy of insurance required to be carried hereunder
shall be paid to Lessor and made available by Lessor to Lessee from time to time for the reasonable
costs of reconstruction or repair, as the case may be, of any damage to or destruction of the
Leased Property, any Capital Additions or any part(s) or portion(s) thereof. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction of the Leased
Property and any Capital Additions (or in the event neither Lessor nor Lessee is required or elects
to repair and restore, all such insurance proceeds) shall be retained by Lessor except as otherwise
specifically provided below in this Article XIV. Subject to the rights of any Facility Mortgagees,
all salvage resulting from any risk covered by insurance shall belong to Lessor.

     14.2 Insured Casualty.

          14.2.1 If the Leased Property and/or any Capital Additions of the Facility are damaged or
destroyed from a risk covered by insurance carried by Lessee such that the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessee shall either (i) restore the Leased
Property and such Capital Additions to substantially the same condition as existed immediately
before such damage or destruction, or (ii) offer to acquire the Leased Property of the Facility
from Lessor for a purchase price equal to the greater of (y) the Minimum Repurchase Price of the
Facility or (z) the Fair Market Value of the Facility immediately prior to such damage or
destruction. If Lessor does not accept Lessee’s offer to so purchase the Leased Property of the
Facility, Lessee may either withdraw such offer and proceed to restore the Leased Property of the
Facility to substantially the same condition as existed immediately before such damage or
destruction or terminate this Lease in which event Lessor shall be entitled to retain the insurance
proceeds.

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          14.2.2 If the Leased Property and/or any Capital Additions of the Facility are damaged from a
risk covered by insurance carried by Lessee, but the Facility is not thereby rendered Unsuitable
for its Primary Intended Use, Lessee shall restore such Leased Property and such Capital Additions
to substantially the same condition as existed immediately before such damage. Such damage shall
not terminate this Lease; provided, however, that if Lessee cannot within a reasonable time after
diligent efforts obtain the necessary government approvals needed to restore and operate the
Facility for its Primary Intended Use, Lessee may offer to purchase the Leased Property of the
Facility for a purchase price equal to the greater of the Minimum Repurchase Price of the Facility
or the Fair Market Value of the Facility immediately prior to such damage. If Lessee shall make
such offer and Lessor does not accept the same, Lessee may either withdraw such offer and proceed
to restore the Leased Property of the Facility to substantially the same condition as existed
immediately before such damage or destruction, or terminate this Lease, in which event Lessor shall
be entitled to retain the insurance proceeds.

          14.2.3 If the cost of the repair or restoration exceeds the amount of proceeds received by
Lessor from the insurance required to be carried hereunder, Lessee shall contribute any excess
amounts needed to restore the Facility. Such difference shall be paid by Lessee to Lessor together
with any other insurance proceeds, for application to the cost of repair and restoration.

          14.2.4 If Lessor accepts Lessee’s offer to purchase the Leased Property, this Lease shall
terminate upon payment of the purchase price and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property then held by Lessor.

     14.3 Uninsured Casualty. If the Leased Property and/or any Capital Additions of the
Facility is/are damaged or destroyed from a risk not covered by insurance carried by Lessee,
whether or not such damage or destruction renders the Facility Unsuitable for its Primary Intended
Use, Lessee at its expense shall restore the Leased Property and Capital Additions of the Facility
to substantially the same condition it was in immediately before such damage or destruction and
such damage or destruction shall not terminate this Lease.

     14.4 No Abatement of Rent. This Lease shall remain in full force and effect and
Lessee’s obligation to pay the Rent and all other charges required by this Lease shall remain
unabated during the period required for adjusting insurance, satisfying Legal Requirements, repair
and restoration.

     14.5 Waiver. Lessee waives any statutory rights of termination which may arise by
reason of any damage or destruction of the Leased Property and/or any Capital Additions.

     14.6 Rights of Facility Mortgagees. Notwithstanding anything herein to the contrary,
the provisions of this Article XIV are subject to the rights of the Facility Mortgagees. 

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ARTICLE XV.

     15.1 Condemnation.

          15.1.1 Total Taking. If the Leased Property and any Capital Additions of the Facility
are totally and permanently taken by Condemnation, this Lease shall terminate as of the day before
the Date of Taking.

          15.1.2 Partial Taking. If a portion of the Leased Property and any Capital Additions
is taken by Condemnation, this Lease shall remain in effect if the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, but if the Facility is thereby rendered Unsuitable for its
Primary Intended Use, this Lease shall terminate as of the day before the Date of Taking.

          15.1.3 Restoration. If there is a partial taking of the Leased Property and any
Capital Additions and this Lease remains in full force and effect pursuant to Section 15.1.2,
Lessor shall, subject to the rights of Facility Mortgagees, make available to Lessee the portion of
the Award necessary and specifically identified or allocated for restoration of the Leased Property
and any such Capital Additions and Lessee shall accomplish all necessary restoration whether or not
the amount provided or allocated by the Condemnor for restoration is sufficient.

          15.1.4 Award-Distribution. The entire Award shall belong to and be paid to Lessor,
except that, subject to the rights of the Facility Mortgagees, Lessee shall be entitled to receive
from the Award, if and to the extent such Award specifically includes such item, lost profits value
and moving expenses, provided, that in any event Lessor shall receive from the Award, subject to
the rights of the Facility Mortgagees, no less than the greater of the Fair Market Value of the
Facility prior to the institution of the Condemnation or the Minimum Repurchase Price of the
Facility.

          15.1.5 Temporary Taking. The taking of the Leased Property, any Capital Additions
and/or any part(s) thereof, shall constitute a taking by Condemnation only when the use and
occupancy by the taking authority has continued for longer than 180 consecutive days. During any
shorter period, which shall be a temporary taking, all the provisions of this Lease shall remain in
full force and effect and the Award allocable to the Term shall be paid to Lessee.

          15.1.6 Sale Under Threat of Condemnation. A sale by Lessor to any Condemnor, either
under threat of Condemnation or while Condemnation proceedings are pending, shall be deemed a
Condemnation for purposes of this Lease. Lessor may, without any obligation to Lessee, agree to
sell and/or convey to any Condemnor all or any portion of the Leased Property free from this Lease
and the rights of Lessee hereunder without first requiring that any action or proceeding be
instituted or pursued to judgment.

ARTICLE XVI.

     16.1 Events of Default. Any one or more of the following shall constitute an “Event
of Default”:

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          (a) a default shall occur under any other lease or other agreement or instrument, including
the Contract of Acquisition, the Related Contract of Acquisition and the Related Leases, now or
hereafter with or in favor of Lessor or any Affiliate of Lessor and made by or with Lessee or any
Affiliate of Lessee, subject, however, to the express limitations set forth in such lease(s) or
other agreement(s) on the survival of the representations, warranties and covenants contained
therein, where the default is not cured within any applicable notice and cure period set forth
therein;

          (b) [Intentionally Omitted];

          (c) Lessee shall fail to pay any installment of Rent when the same becomes due and payable and
such failure is not cured by Lessee within a period of five (5) days after notice thereof from
Lessor; provided, however, that such notice shall be in lieu of and not in addition to any notice
required under applicable law;

          (d) Lessee shall fail to obtain a letter of credit if required by Article XXI;

          (e) except as otherwise specifically provided for in this Section 16.1, if Lessee shall fail
to observe or perform any other term, covenant or condition of this Lease and such failure is not
cured by Lessee within thirty (30) days after notice thereof from Lessor, unless such failure
cannot with due diligence be cured within a period of thirty (30) days, in which case such failure
shall not be deemed to be an Event of Default if Lessee proceeds promptly and with due diligence to
cure the failure and diligently completes the curing thereof; provided, however, that such notice
shall be in lieu of and not in addition to any notice required under applicable law;

          (f) Lessee or any Guarantor shall:

          (i) admit in writing its inability to pay its debts generally as they become due,

          (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency
act,

          (iii) make an assignment for the benefit of its creditors,

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

          (v) file 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;

          (g) Lessee or any Guarantor shall be adjudicated as bankrupt or a court of competent
jurisdiction shall enter an order or decree appointing, without the consent of Lessee, a receiver
of Lessee or of the whole or substantially all of its property, or approving a petition filed
against it seeking reorganization or arrangement of Lessee under the Federal

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bankruptcy laws or any
other applicable law or statute of the United States of America or any state thereof, and such
judgment, order or decree shall not be vacated or set aside or stayed within ninety (90) days from
the date of the entry thereof;

          (h) Lessee or any Guarantor shall be liquidated or dissolved, or shall begin proceedings
toward such liquidation or dissolution, or shall, in any manner, permit the sale or divestiture of
substantially all its assets;

          (i) the estate or interest of Lessee in the Leased Property, any Capital Additions or any
part(s) thereof shall be 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 thirty
(30) days after receipt by Lessee of notice thereof from Lessor; provided, however, that such
notice shall be in lieu of and not in addition to any notice required under applicable law;

          (j) any Transfer occurs without Lessor’s consent in accordance with the provisions of Article
XXIV;

          (k) any of the representations or warranties made by Lessee or its Affiliate in this Lease or
in the Contract of Acquisition or Related Contract of Acquisition (subject, however, to the express
limitations set forth in the Contract of Acquisition and the Related Contract of Acquisition on the
survival of the representations, warranties and covenants contained therein), or made by any
Guarantor under the Guaranty proves to be untrue when made in any material respect which materially
and adversely affects Lessor;

          (l) the Facility’s applicable license or third-party provider reimbursement agreements
material to the Facility’s operation for its Primary Intended Use are at any time (i) terminated,
(ii) revoked, or (iii) suspended for more than thirty (30) days without a plan of correction being
filed;

          (m) any local, state or federal agency having jurisdiction over the operation of the Facility
removes Ten Percent (10%) or more of the patients or residents located in the Facility;

          (n) Lessee fails to give notice to Lessor not later than ten (10) days after any notice, claim
or demand from any governmental authority or any officer acting on behalf thereof, of any material
violation of any law, order, ordinance, rule or regulation with respect to the operation of the
Facility;

          (o) Lessee fails to cure or abate any material violation occurring during the Term that is
claimed by any governmental authority, or any officer acting on behalf thereof, of any law, order,
ordinance, rule or regulation pertaining to the operation of the Facility, and within the time
permitted by such authority for such cure or abatement;

          (p) Lessee fails to notify Lessor within forty-eight (48) hours after receipt of any notice
from any governmental agency terminating or suspending or threatening termination or suspension, of
any material license or certification relating to the Facility;

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          (q) any proceedings are instituted against Lessee by any governmental authority which are
reasonably likely to result in (i) the revocation of any license granted to Lessee for the
operation of the Facility; (ii) the decertification of the Facility from participation in the
Medicare or Medicaid reimbursement program; or (iii) the issuance of a stop placement order against
Lessee that is not removed within ninety (90) days following the date of issuance thereof;

          (r) any default and acceleration of any indebtedness of Lessee has occurred; and

          (s) any default shall occur and be continuing under any Guaranty after any applicable notice
and cure period provided for therein (including, without limitation, any default relating to the
failure of Guarantor to meet any Consolidated Net Worth Requirements set forth therein).

     16.2 Certain Remedies. If an Event of Default shall have occurred, Lessor may
terminate this Lease by giving Lessee notice of such termination and the Term shall terminate and
all rights of Lessee under this Lease shall cease. Any such notice of termination may, at Lessor’s
option, be given and exercised concurrently with any notice of Event of Default given by Lessor to
Lessee hereunder. In such event, such termination shall be effective immediately upon the
occurrence of the Event of Default. Lessor shall have all rights at law and in equity available to
Lessor as a result of any Event of Default. Lessee shall pay as Additional Charges all costs and
expenses incurred by or on behalf of Lessor, including reasonable attorneys’ fees and expenses, as
a result of any Event of Default hereunder. If an Event of Default shall have occurred and be
continuing, whether or not this Lease has been terminated pursuant to this Section 16.2, Lessee
shall, to the extent permitted by law, if required by Lessor so to do, immediately surrender to
Lessor possession of the Leased Property and any Capital Additions of the Facility and quit the
same and Lessor may enter upon and repossess such Leased Property and such Capital Additions by
reasonable force, summary proceedings, ejectment or otherwise, and may remove Lessee and all other
Persons and any of Lessee’s Personal Property from such Leased Property and such Capital Additions.

     16.3 Damages. (i) The termination of this Lease; (ii) the repossession of the Leased
Property and Capital Additions of the Facility; (iii) the failure of Lessor, notwithstanding
reasonable good faith efforts, to relet the Leased Property or any portion thereof; (iv) the
reletting of all or any portion of the Leased Property; or (v) the failure or inability of Lessor
to collect or receive any rentals due upon any such reletting, shall not relieve Lessee of its
liabilities and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In addition, the termination of this Lease shall not relieve Lessee of
its liabilities and obligations hereunder that are intended to survive the termination of this
Lease, including, without limitation, the obligations set forth in this Section 16.3 and Sections
16.5, 23, 36.4 and 44.1.6. If any such termination occurs, Lessee shall forthwith pay to Lessor
all Rent due and payable to and including the date of such termination. Thereafter, following any
such termination, Lessee shall forthwith pay to Lessor, at Lessor’s option, as and for liquidated
and agreed current damages for an Event of Default by Lessee, the sum of:

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

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

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

          (d) any other amount necessary to compensate Lessor for all the detriment proximately caused
by Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.

As used in clauses (a) and (b) above, the “worth at the time of award” shall be computed by
allowing interest at the Overdue Rate. As used in clause (c) above, the “worth at the time of
award” shall be 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%).

     Alternatively, if Lessor does not elect to terminate this Lease, then Lessee shall pay to
Lessor, at Lessor’s option, as and for agreed damages for such Event of Default without termination
of Lessee’s right to possession of the Leased Property and any Capital Additions or any portion
thereof, each installment of said Rent and other sums payable by Lessee to Lessor under this Lease
as the same becomes due and payable, together with interest at the Overdue Rate from the date when
due until paid, and Lessor may enforce, by action or otherwise, any other term or covenant of this
Lease.

     16.4 Receiver. Upon the occurrence of an Event of Default, and upon commencement of
proceedings to enforce the rights of Lessor hereunder, Lessor shall be entitled, as a matter of
right, to the appointment of a receiver or receivers acceptable to Lessor of the Leased Property
and any Capital Additions of the revenues, earnings, income, products and profits thereof, pending
the outcome of such proceedings, with such powers as the court making such appointment shall
confer.

     16.5 Lessee’s Obligation to Purchase. Upon the occurrence of a Put Event with respect
to the Facility, Lessor shall be entitled to require Lessee to purchase the Leased Property of the
Facility, on the first Minimum Rent Payment Date occurring not less than thirty (30) days after the
date specified in a notice from Lessor requiring such purchase for an amount equal to the greater
of (i) the Fair Market Value of the Facility, or (ii) the Minimum Repurchase Price of the Facility,
plus, in either event, all Rent then due and payable (excluding the installment of Minimum Rent due
on the purchase date) with respect to the Facility. If Lessor exercises such right, Lessor shall
convey the Leased Property of the Facility to Lessee on the date fixed therefor in accordance with
the provisions of Article XVIII upon receipt of the purchase price therefor and this Lease shall
thereupon terminate. Any purchase by Lessee of the Leased Property of the Facility pursuant to
this Section shall be in lieu of the damages specified in Section 16.3 with respect to the
Facility. Notwithstanding anything herein to the contrary, the provisions of this Section 16.5 are
subject to the rights of the Facility Mortgagees.

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     16.6 Waiver. If Lessor initiates judicial proceedings or if this Lease is terminated
by Lessor pursuant to this Article with respect to the Facility, Lessee waives, to the extent
permitted by applicable law, (i) any right of redemption, re-entry or repossession; and (ii) the
benefit of any laws now or hereafter in force exempting property from liability for rent or for
debt.

     16.7 Application of Funds. Any payments received by Lessor under any of the
provisions of this Lease shall be applied to Lessee’s obligations in the order which Lessor may
determine or as may be prescribed by the laws of the State.

     16.8 Facility Operating Deficiencies. On written notice of a request therefor by
Lessor to Lessee, upon the occurrence of a Facility Operating Deficiency specified with
particularity in Lessor’s notice, and for a period of time necessary fully to remedy the Facility
Operating Deficiency, Lessee shall engage the services of a management consultant, unaffiliated
with Lessee and approved by Lessor, which approval shall not be unreasonably withheld, to review
the management of the Facility for the purpose of making recommendations to remedy the Facility
Operating Deficiency(ies). Subject to applicable Legal Requirements governing confidentiality of
patient records, the management consultant shall have complete access to the Facility, its records,
offices and facilities, in order that it may carry out its duties. Lessee shall cause such
management consultant to prepare and deliver to Lessor and Lessee a written report of its
recommendations within thirty (30) days after its engagement. If Lessee shall fail to designate a
management consultant approved by Lessor as provided above within ten (10) days after Lessee’s
receipt of the Lessor’s notice, Lessor may designate such management consultant by further notice
to Lessee. Lessee shall be responsible for payment of all fees and expenses reasonably charged and
incurred by the management consultant in carrying out its duties. Lessee shall promptly implement
any and all reasonable recommendations made by such management consultant in order to promptly
correct or cure such Facility Operating Deficiency; provided, however, that in no event shall
Lessee implement any such recommendations if the same would constitute a violation of applicable
Legal Requirements or would otherwise cause an Event of Default hereunder (e.g., a Transfer or
change in use of the Leased Property), unless Lessor consents in writing to such Event of Default,
which consent may be given or withheld in Lessor’s sole and absolute discretion.

     16.9 [Intentionally Omitted].

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

          16.10.1 Lessee, as debtor, hereby grants to Lessor, as secured party, a security interest and
an express contractual lien upon all of Lessee’s right, title and interest in and to Lessee’s
Personal Property and in and to Lessee’s Intangible Property and any and all products, rents,
proceeds and profits thereof in which Lessee now owns or hereafter acquires an interest or right,
including any leased Lessee’s Personal Property (collectively, the “Collateral”),

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in each case
subject and subordinate to the security interests granted to any Facility Mortgagee(s). This Lease
constitutes a security agreement covering all such Lessee’s Personal Property and Lessee’s
Intangible Property. The security interest granted to Lessor with respect to Lessee’s Personal
Property in this Section 16.10 is intended by Lessor and Lessee to be subordinate to any security
interest granted in connection with the purchase money financing or leasing of all or any portion
of the Lessee’s Personal Property so long as the lessor or financier of such Lessee’s Personal
Property agrees to give Lessor written notice of any default by Lessee under the terms of such
lease or financing arrangement, to give Lessor a reasonable time following such notice to cure any
such default and consents to Lessor’s written assumption of such lease or financing arrangement
upon Lessor’s curing of any such defaults. The security interest granted to Lessor with respect to
Lessee’s accounts receivable in this Section 16.10 is also intended by Lessor and Lessee to be
subordinate to any security interest granted by Lessee to any institutional credit facility lender
of Lessee in and to Lessee’s accounts receivable. This security agreement and the security
interest created herein shall survive the expiration or earlier termination of this Lease.

          16.10.2 Lessee hereby authorizes Lessor to file such financing statements, continuation
statements and other documents as may be necessary or desirable to perfect or continue the
perfection of Lessor’s security interest in the Collateral. In addition, if required by Lessor at
any time during the Term, Lessee shall execute and deliver to Lessor, in form reasonably
satisfactory to Lessor, additional security agreements, financing statements, fixture filings and
such other documents as Lessor may reasonably require to perfect or continue the perfection of
Lessor’s security interest in the Collateral. In the event Lessee fails to execute any financing
statement or other documents for the perfection or continuation of Lessor’s security interest,
Lessee hereby appoints Lessor as its true and lawful attorney-in-fact to execute any such documents
on its behalf, which power of attorney shall be irrevocable and is deemed to be coupled with an
interest. Subject to the terms of Section 41.2 below, if requested by any institutional credit
facility lender(s) of Lessee at any time during the Term, Lessor shall execute and deliver to such
lender(s) and Lessee, in form reasonably satisfactory to such lender(s), such intercreditor
agreements and similar documentation as such lender(s) may reasonably require to perfect or
continue the perfection of such lender’s security interests in Lessee’s accounts receivables.

          16.10.3 Lessee will give Lessor at least thirty (30) days’ prior written notice of any change
in Lessee’s name, identity, jurisdiction of organization or corporate structure. With respect to
any such change, Lessee will promptly execute and deliver such instruments, documents and notices
and take such actions, as Lessor deems necessary or desirable to create, perfect and protect the
security interests of Lessor in the Collateral.

          16.10.4 Upon the occurrence of an Event of Default, Lessor shall be entitled to exercise any
and all rights or remedies available to a secured party under the Uniform Commercial Code, or
available to a lessor under the laws of the State, with respect to Lessee’s Personal Property and
Lessee’s Intangible Property, including the right to sell the same at public or private sale.

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ARTICLE XVII.

     17.1 Lessor’s Right to Cure Lessee’s Default. If Lessee shall fail to make any
payment or to perform any act required to be made or performed hereunder, Lessor, without waiving
or releasing any obligation or default, may, but shall be under no obligation to, make such payment
or perform such act for the account and at the expense of Lessee, and may, to the extent permitted
by law, enter upon the Leased Property and any Capital Additions for such purpose and take all such
action thereon as, in Lessor’s opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and expenses,
including reasonable attorneys’ fees and expenses, so incurred, together with interest thereon at
the Overdue Rate from the date on which such sums or expenses are paid or incurred by Lessor, shall
be paid by Lessee to Lessor on demand.

ARTICLE XVIII.

     18.1 Purchase of the Leased Property. If Lessee purchases the Leased Property from
Lessor pursuant to any provisions of this Lease, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to Lessee an
appropriate special or limited warranty deed conveying the entire interest of Lessor in and to the
Leased Property to Lessee free and clear of all encumbrances other than (i) those that Lessee has
agreed hereunder to pay or discharge; (ii) those mortgage liens, if any, which Lessee has agreed in
writing to accept and to take title subject to; (iii) those liens and encumbrances which were in
effect on the date of conveyance of the Leased Property to Lessor; and (iv) any other encumbrances
permitted hereunder to be imposed on the Leased Property which are assumable at no cost to Lessee
or to which Lessee may take subject without cost to Lessee. The difference between the applicable
purchase price and the total of the encumbrances assumed or taken subject to shall be paid to
Lessor or as Lessor may direct in immediately available funds. All expenses of such conveyance,
including the cost of title insurance, attorneys’ fees incurred by Lessor in connection with such
conveyance and release, transfer taxes and recording and escrow fees, shall be paid by Lessee.

     18.2 Rights of Lessee Prior to Closing. Notwithstanding anything to the contrary in
this Lease, or at law or in equity, if Lessee exercises any right or option of Lessee to purchase
or acquire the Leased Property pursuant to any of the provisions of this Lease, or Lessor shall
exercise its right to require Lessee to purchase the Leased Property pursuant to Section 16.5
hereof (herein, a “Purchase Right/Obligation Exercise”), the following shall pertain:

          (a) Such Purchase Right/Obligation Exercise (and any purchase or other separate contract
formed upon such Purchase Right/Obligation Exercise) shall not under any circumstances cause a
termination of this Lease, and this Lease shall remain in full force and effect to and until the
consummation of the closing in accordance with the terms thereof;

          (b) Lessee hereby acknowledges and agrees that Lessee shall not under any circumstances be
entitled to possession of the Leased Property under the terms of any purchase or other separate
contract formed upon such Purchase Right/Obligation Exercise until

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the closing thereof, and that,
prior thereto, Lessee’s possession of the Leased Property shall be solely by way of this Lease;

          (c) In no event shall Lessee be deemed a vendee in possession; and

          (d) In the event that an Event of Default shall occur at anytime during the period from such
Purchase Right/Obligation Exercise to and until closing, Lessor shall be entitled to exercise any
and all rights or remedies available to a landlord against a defaulting tenant, whether at law or
equity, including those set forth in Article XVI hereof, and specifically including the right to
recover possession of the Leased Property through summary proceedings (such as unlawful detainer or
other similar action permitted by law), and in no event shall Lessor be required to bring an action
for ejectment or any other similar non-expedited proceeding.

ARTICLE XIX.

     19.1 Renewal Terms. Provided that no Event of Default, or event which, with notice or
lapse of time or both, would constitute an Event of Default, has occurred and is continuing, either
at the date of exercise or upon the commencement of an Extended Term (as hereunder defined), then
Lessee shall have the right to renew this Lease for two (2) ten-year renewal terms (each an
“Extended Term”), upon (i) giving written notice to Lessor of such renewal not less than twelve
(12) months and not more than eighteen (18) months prior to the expiration of the then current Term
and (ii) delivering to Lessor concurrent with such notice a reaffirmation of the Guaranty executed
by Guarantor stating, in substance, that Guarantor’s obligations under the Guaranty shall extend to
this Lease, as extended by the Extended Term. During each Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect.

     Notwithstanding anything to the contrary in this Section 19.1, Lessor, in its sole discretion,
may waive the condition to Lessee’s right to renew this Lease that no Event of Default, or event
which, with notice or lapse of time or both, would constitute an Event of Default, have occurred or
be continuing, and the same may not be used by Lessee as a means to negate the effectiveness of
Lessee’s exercise of its renewal right for such Extended Term.

     19.2 Lessor’s Rights of Renewal and Early Termination. In order to facilitate the
transfer of the operations of the Facility to a third party and/or to locate a replacement lessee,
Lessor shall have the one time right with respect to the Facility to extend the Term of this Lease
for up to six (6) months. Such right of extension shall be exercised by Lessor, if at all, by
written notice from Lessor to Lessee given not less than four (4) months prior to the expiration of
the Term and stating the date through which Lessor is extending the Term of this Lease (which date
shall not be later than six (6) months after the originally scheduled expiration date). In the
event that Lessor shall exercise such right of extension, all of the terms and conditions of this
Lease shall continue in full force and effect with respect to the Facility, and Lessee shall
continue to pay Rent for and during such extension period at the same Minimum Rent rates as were in
effect upon the expiration of the originally scheduled Term; provided, however, that Lessor shall
have the right to terminate this Lease during any such extension period upon not less than sixty
(60) days prior written notice to Lessee. In such event, this Lease, as previously extended, shall
terminate upon the date specified in Lessor’s notice of termination.

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ARTICLE XX.

     20.1 Holding Over. Except as provided in Section 19.2, if Lessee shall for any reason
remain in possession of the Leased Property and/or any Capital Additions of the Facility after the
expiration or earlier termination of the Term, such possession shall be as a month-to-month tenant
during which time Lessee shall pay as Minimum Rent each month an amount equal to One Hundred Fifty
Percent (150%) of the monthly Minimum Rent applicable to the prior Lease Year, together with all
Additional Charges and all other sums payable by Lessee pursuant to this Lease. During such period
of month-to-month tenancy, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, 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
Leased Property and/or any Capital Additions of the Facility. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.

ARTICLE XXI.

     21.1 Letters of Credit or Cash Security Deposit. On or prior to the execution and
delivery of this Lease, and for sixty (60) days after the expiration or earlier termination of this
Lease, Lessee shall have either deposited with Lessor a cash security deposit or letters of credit
in an aggregate amount equal to one-half (1/2) of the annual Minimum Rent (estimated for the first
Lease Year if not yet fixed) payable by Lessee under this Lease for the then-current Lease Year
(the “Security Amount”) in accordance with this Article XXI, in either case to secure Lessee’s
obligations hereunder and Lessee’s and the obligations of any Affiliate of Lessee under any other
lease or other agreement or instrument with or in favor of Lessor or any Affiliate of Lessor,
including the Guaranty, the Contract of Acquisition, the Related Contract of Acquisition and the
Related Leases, at the times, for the purposes set forth below.

     21.2 Requirements for Letters of Credit. If Lessee elects to deliver one or more
letters of credit hereunder, then each letter of credit delivered by Lessee to Lessor hereunder
shall be in substantially the form of Exhibit E hereto, and shall be from a financial
institution satisfactory to Lessor but in any event with (a) not less than $100 Million in net
current assets, (b) a financial rating of not less than 60 as rated by Sheshonoff Information
Services, Inc. (or any equivalent rating thereto from any successor or substitute rating service
selected by Lessor) and (c) an investment grade rating from each of Standard and Poors Corporation
and Moody’s Investors Service, naming Lessor as beneficiary. Each letter of credit shall be for a
term of not less than one (1) year and irrevocable during that term. Each letter of credit shall
provide that it will be honored upon a signed statement by Lessor that Lessor is entitled to draw
upon any letter of credit under this Lease, and shall require no signature or statement from any
party other than Lessor. No notice to Lessee shall be required to enable Lessor to draw upon the
letter of credit. Each letter of credit shall also provide that following the honor of any drafts
in an amount less than the aggregate amount of the letter of credit, the financial institution
shall return the original letter of credit to Lessor and Lessor’s rights as to the remaining amount
of the letter of credit will not be extinguished. In the event of a transfer of Lessor’s interest
in the Leased Property, Lessor shall have the right to transfer the letter of credit to the
transferee and thereupon shall, without any further agreement between the parties, be released by
Lessee from all liability therefor, and it is agreed that the provisions hereof shall apply to
every transfer or assignment of the letter of

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credit to a new Lessor. The letter of credit may be
assigned as security in connection with a Facility Mortgage. If the financial institution from
which Lessee has obtained a letter of credit shall admit in writing its inability to pay its debts
generally as they become due, file a petition in bankruptcy or a petition to take advantage of any
insolvency act, make an assignment for the benefit of its creditors, consent to the appointment of
a receiver of itself or of the whole or any substantial part of its property, or file 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, then Lessee shall
obtain a replacement letter of credit within thirty (30) days of such act from another financial
institution satisfactory to Lessor or deliver a cash security deposit in lieu thereof in accordance
with the provisions of this Article XXI.

     21.3 Cash Security Deposit. If Lessee elects to deliver to Lessor a cash security
deposit, then Lessor shall not be required to keep the cash security deposit separate from its
general funds. On the first day of each Quarter, except during any period during which any Event
of Default, or event which, with notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing hereunder, Lessor shall pay to Lessee, or, at Lessor’s
option, credit for the restoration of the required amount of the Security Amount upon any draw
hereunder or any scheduled increase in the Security Amount provided for herein, interest on the
amount of such cash security deposit at a rate equal to the rate of interest received by Lessor
from time to time on the funds held by Lessor in its deposit accounts. In the event of a transfer
of Lessor’s interest in the Leased Property, Lessor shall have the right to transfer the cash
security deposit to the transferee and thereupon shall, without any further agreement between the
parties, be released by Lessee from all liability therefor, and it is agreed that the provisions
hereof shall apply to every transfer or assignment of such cash security deposit to a new Lessor.
The cash security deposit may be assigned as security in connection with a Facility Mortgage. IN
ADDITION, WITH RESPECT TO ANY CASH SECURITY DEPOSIT, LESSEE WAIVES THE PROVISIONS OF ANY APPLICABLE
LAWS NOW IN FORCE OR THAT BECOME IN FORCE AFTER THE DATE OF EXECUTION OF THIS LEASE, THAT PROVIDE
IN SUBSTANCE THAT LESSOR MAY CLAIM FROM A CASH SECURITY DEPOSIT ONLY THOSE SUMS REASONABLY
NECESSARY TO REMEDY DEFAULTS IN THE PAYMENT OF RENT, TO REPAIR DAMAGE CAUSED BY LESSEE, OR TO CLEAN
THE LEASED PROPERTY. LESSOR AND LESSEE AGREE THAT LESSOR MAY, IN ADDITION, CLAIM THOSE SUMS
NECESSARY TO COMPENSATE LESSOR FOR ANY OTHER FORESEEABLE OR UNFORESEEABLE LOSS OR DAMAGE CAUSED BY
ACT OR OMISSION OF LESSEE OR LESSEE’S OFFICERS, AGENTS, EMPLOYEES, INDEPENDENT CONTRACTORS, OR
INVITEES, INCLUDING, BUT NOT LIMITED TO THOSE DAMAGES TO WHICH LESSOR IS ENTITLED PURSUANT TO
ARTICLE XVI.

     21.4 Timing for Letters of Credit or Cash Security Deposit. The initial letter of
credit or cash security deposit shall be obtained and delivered to Lessor on or prior to the
execution and delivery of this Lease. If Lessee has obtained letters of credit pursuant to this
Article XXI, any letters of credit covering subsequent periods shall be obtained and delivered to
Lessor not less than thirty (30) days prior to the expiration of the then existing letter of credit
(“Letter of Credit Date”). The term for each such letter of credit shall begin no later than the
expiration date of the previous letter of credit and shall comply with all requirements of this
Article XXI.

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     21.5 Uses of Letters of Credit or Cash Security Deposit. Lessor shall have the right
to draw upon a letter of credit up to its full amount or apply all or any portion of the cash
security deposit up to its full amount, as applicable, whenever (a) an Event of Default hereunder
has occurred, (b) an event of default has occurred under any other lease or agreement between
Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee (including, without
limitation, the Contract of Acquisition, the Related Contract of Acquisition and the Related
Leases) or under any other letter of credit, guaranty, mortgage, deed of trust, or other instrument
now or hereafter executed by Lessee or an Affiliate of Lessee in favor of Lessor or an Affiliate of
Lessor has occurred, or (c) an event or circumstance has occurred which with notice or passage of
time, or both, would constitute an Event of Default hereunder or an event of default under any such
other lease, agreement, letter of credit, guaranty, mortgage, deed of trust, or other instrument,
notwithstanding that transmittal of any such notice may be barred by applicable law. In addition,
if Lessee fails to obtain a satisfactory letter of credit prior to the applicable Letter of Credit
Date, Lessor may draw upon the full amount of the then existing letter of credit without giving any
notice or time to cure to Lessee. No such draw upon the letter of credit or application of the
cash security deposit, as applicable, shall (i) cure or constitute a waiver of an Event of Default,
(ii) be deemed to fix or determine the amounts to which Lessor is entitled to recover under this
Lease or otherwise, or (iii) be deemed to limit or waive Lessor’s right to pursue any remedies
provided for in this Lease. If all or any portion of a letter of credit is drawn against by
Lessor, Lessee shall, within two (2) business days after demand by Lessor, cause the issuer of such
letter of credit to issue Lessor, at Lessee’s expense, a replacement or supplementary letter of
credit in substantially the form attached hereto as Exhibit E or Lessee shall deposit with
Lessor a cash security deposit such that at all times during the Term Lessor shall have the ability
to draw on one or more letters of credit and/or cash security deposit totaling, in the aggregate,
the Security Amount. Likewise, if any portion of the cash security deposit is applied by Lessor,
Lessee shall, within five (5) Business Days after demand by Lessor, cause an amount equal to the
amount of cash security deposit previously applied to be paid over to and deposited with Lessor or
shall cause a letter of credit meeting the requirements of this Article XXI to be issued to Lessor
such that that at all times during the Term Lessor shall have the ability to draw on one or more
letters of credit and/or cash security deposit totaling, in the aggregate, the Security Amount.

ARTICLE XXII.

     22.1 Risk of Loss. The risk of loss or of decrease in the enjoyment and beneficial
use of the Leased Property and any Capital Additions as a consequence of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than by Lessor and Persons claiming from,
through or under Lessor) is assumed by Lessee, and no such event shall entitle Lessee to any
abatement of Rent.

ARTICLE XXIII.

     23.1 General Indemnification. In addition to the other indemnities contained herein,
and notwithstanding the existence of any insurance carried by or for the benefit of Lessor or
Lessee, and without regard to the policy limits of any such insurance, Lessee shall protect,
indemnify, save harmless and defend Lessor from and against all liabilities, obligations, claims,

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damages, penalties, causes of action, costs and expenses, including reasonable attorneys’,
consultants’ and experts’ fees and expenses, imposed upon or incurred by or asserted against Lessor
by reason of: (i) any accident, injury to or death of Persons or loss of or damage to property
occurring on or about the Leased Property, or any Capital Additions or adjoining sidewalks thereto;
(ii) any use, misuse, non-use, condition, maintenance or repair by Lessee of the Leased Property or
any Capital Additions; (iii) any failure on the part of Lessee to perform or comply with any of the
terms of this Lease; (iv) the non-performance of any of the terms and provisions of any and all
existing and future subleases of the Leased Property or any Capital Additions to be performed by
any party thereunder; (v) any claim for malpractice, negligence or misconduct committed by any
Person on or working from the Leased Property or any Capital Additions; and (vi) the violation of
any Legal Requirement. Any amounts which become payable by Lessee under this Article shall be paid
within ten (10) days after liability therefor is determined by litigation or otherwise, and if not
timely paid shall bear interest at the Overdue Rate from the date of such determination to the date
of payment. Lessee, at its sole cost and expense, shall contest, resist and defend any such claim,
action or proceeding asserted or instituted against Lessor or may compromise or otherwise dispose
of the same as Lessee sees fit; provided, however, that any legal counsel selected by Lessee to
defend Lessor shall be reasonably satisfactory to Lessor. All indemnification covenants are
intended to apply to losses, damages, injuries, claims, etc. incurred directly by the indemnified
parties and their property, as well as by the indemnifying party or third party, and their
property. For purposes of this Article XXIII, any acts or omissions of Lessee, or by employees,
agents, assignees, contractors, subcontractors or others acting for or on behalf of Lessee (whether
or not they are negligent, intentional, willful or unlawful), shall be strictly attributable to
Lessee. It is understood and agreed that payment shall not be a condition precedent to enforcement
of the foregoing indemnification obligations.

ARTICLE XXIV.

     24.1 Transfers.

          24.1.1 Prohibition. Lessee shall not, without Lessor’s prior written consent, which
may be withheld in Lessor’s sole and absolute discretion, 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 Lessee’s leasehold estate hereunder, (ii) Master Sublease all or
any part of the Leased Property and/or any Capital Additions of the Facility, (iii) engage the
services of any Person for the management or operation of all or any part of the Leased Property
and/or any Capital Additions of the Facility, (iv) convey, sell, assign, transfer or dispose of any
stock or partnership, membership or other interests (whether equity or otherwise) in Lessee (which
shall include any conveyance, sale, assignment, transfer or disposition of any stock or
partnership, membership or other interests (whether equity or otherwise) in any Controlling
Person(s)), if such conveyance, sale, assignment, transfer or disposition results, directly or
indirectly, in a change in control of Lessee (or in any Controlling Person(s)), (v) dissolve, merge
or consolidate Lessee (which shall include any dissolution, merger or consolidation of any
Controlling Person) with any other Person, if such dissolution, merger or consolidation, directly
or indirectly, results in a change in control of Lessee or in any Controlling Person(s), (vi) sell,
convey, assign, or otherwise transfer all or substantially all of the

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assets of Lessee (which shall
include any sale, conveyance, assignment, or other transfer of all or substantially all of the
assets of any Controlling Person(s)), (vii) sell, convey, assign, or otherwise transfer any of the
assets of Lessee (which shall include any sale, conveyance, assignment, or other transfer of any of
the assets of any Controlling Person) if the Consolidated Net Worth of Lessee (or such Controlling
Person, as the case may be) immediately following such transaction is not at least equal to
seventy-five percent (75%) of the Consolidated Net Worth of Lessee (or such Controlling Person)
immediately prior to 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 (each of the aforesaid acts referred to in clauses (i) through
(viii) being referred to herein as a “Transfer”). Any Commercial Occupancy Arrangement with
respect to more than Fifteen Percent (15%) of the Facility in the aggregate to any Person and/or
its Affiliates, directly or indirectly, or through one or more step transactions or tiered
transactions, shall be deemed to be a “Master Sublease” hereunder. For any Commercial Occupancy
Arrangement transaction not requiring the consent of Lessor hereunder (i.e., a Commercial Occupancy
Arrangement not constituting a Master Sublease), Lessee shall, within ten (10) days of
entering into any such Commercial Occupancy Arrangement, notify Lessor of the existence of such
Commercial Occupancy Arrangement and the identity of the Occupant and supply Lessor with a copy of
the agreement relating to such Commercial Occupancy Arrangement and any other related
documentation, materials or information reasonably requested by Lessor. Notwithstanding anything
to the contrary contained in this Article XXIV, Lessor acknowledges and agrees that any resident or
patient Occupancy Arrangement transaction shall not constitute a Transfer requiring the consent of
Lessor hereunder.

          24.1.2 Consent and Transfer Consideration.

               24.1.2.1 Prior to any Transfer, Lessee shall first notify Lessor of its desire to do so and
shall submit in writing to Lessor: (i) the name of the proposed Occupant, assignee, manager or
other transferee; (ii) the terms and provisions of the Transfer, including any agreements in
connection therewith; and (iii) such financial information as Lessor reasonably may request
concerning the proposed Occupant, assignee, manager or other transferee. Lessor may, as a
condition to granting such consent, which consent may be given or withheld in the sole and absolute
discretion of Lessor, and in addition to any other conditions imposed by Lessor, require that the
obligations of any Occupant, assignee, manager or other transferee which is an Affiliate of another
Person be guaranteed by its parent or Controlling Person and that any Guaranty of this Lease be
reaffirmed by any Guarantor notwithstanding such Transfer.

               24.1.2.2 In connection with any Transfer, Lessor shall be entitled to receive the applicable
Transfer Consideration.

               24.1.2.3 The consent by Lessor to any Transfer shall not constitute a consent to any
subsequent Transfer or to any subsequent or successive Transfer. Any purported or attempted
Transfer contrary to the provisions of this Article shall be void and, at the option of Lessor,
shall terminate this Lease.

          24.1.3 Attornment and Related Matters. Any Commercial Occupancy Arrangement entered
into following the Commencement Date (whether or not the same

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constitutes a Master Sublease) shall be expressly subject and subordinate to all
applicable terms and conditions of this Lease and provide that upon the expiration or earlier
termination of this Lease Lessor, at its option and without any obligation to do so, may require
any Occupant to attorn to Lessor, in which event Lessor shall undertake the obligations of Lessee,
as sublessor, licensor or otherwise under such Commercial Occupancy Arrangement from the time of
the exercise of such option to the termination of such Commercial Occupancy Arrangement; provided,
however, that in such case Lessor shall not be liable for any prepaid rents, fees or other charges
or for any prepaid security deposits paid by such Occupant to Lessee or for any other prior
defaults of Lessee under such Commercial Occupancy Arrangement. In the event that Lessor shall not
require such attornment with respect to any Commercial Occupancy Arrangement, then such Occupancy
Arrangement shall automatically terminate upon the expiration or earlier termination of this Lease,
including any early termination by mutual agreement of Lessor and Lessee. In addition, any such
Commercial Occupancy Arrangement shall provide that in the event that the Occupant or other
transferee receives a written notice from Lessor stating that an Event of Default has occurred or
that an event or circumstance has occurred which with notice and/or passage of time would
constitute an Event of Default, such Occupant or other transferee thereafter shall without further
consent or instruction of Lessee pay all rentals accruing under such Commercial Occupancy
Arrangement directly to Lessor or as Lessor may direct; provided however that (i) as and to the
extent that the amounts so paid to Lessor, together with other amounts paid to or received by
Lessor on account of this Lease, exceed the amounts then due Lessor from Lessee under this Lease,
the excess shall be promptly remitted to Lessee, and (ii) at such time as the Event of Default has
been cured and this Lease reinstated (if ever), Lessor shall notify and direct the Occupant(s) in
writing to resume making payments of rentals under their Commercial Occupancy Arrangement(s)
directly to Lessee or as Lessee may direct. Any such rentals collected from such Occupant or other
transferee by Lessor shall be credited against the amounts owing by Lessee under this Lease in such
order of priority as Lessor shall reasonably determine. Furthermore, any Commercial Occupancy
Arrangement or other agreement regarding a Transfer shall expressly provide that the Occupant,
assignee, manager or other transferee shall furnish Lessor with such financial, operational and
other information about the physical condition of the Facility, including the information required
by Section 25.2 herein, as Lessor may request from time to time.

          24.1.4 Assignment of Lessee’s Rights Against Occupant Under a Master Sublease. If
Lessor shall consent to a Master Sublease, then the written instrument of consent, executed and
acknowledged by Lessor, Lessee and the Occupant thereunder, shall contain a provision substantially
similar to the following:

          (i) Lessee and such Occupant hereby agree that, if such Occupant shall be in default of
any of its obligations under the Master Sublease, which default also constitutes an Event of
Default by Lessee under this Lease, then Lessor shall be permitted to avail itself of all of
the rights and remedies available to Lessee against such Occupant in connection therewith.

          (ii) Without limiting the generality of the foregoing, Lessor shall be permitted (by
assignment of a cause of action or otherwise) to institute an action or proceeding against
such Occupant in the name of Lessee in order to enforce Lessee’s rights under the Master
Sublease, and also shall be permitted to take all ancillary actions

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(e.g., serve default notices and demands) in the name of Lessee as Lessor reasonably
shall determine to be necessary.

          (iii) Lessee agrees to cooperate with Lessor, and to execute such documents as shall be
reasonably necessary, in connection with the implementation of the foregoing rights of
Lessor.

          (iv) Lessee expressly acknowledges and agrees that the exercise by Lessor of any of the
foregoing rights and remedies shall not constitute an election of remedies, and shall not in
any way impair Lessor’s entitlement to pursue other rights and remedies directly against
Lessee.

          24.1.5 Costs. Lessee shall reimburse Lessor for Lessor’s actual costs and expenses
incurred in conjunction with the processing and documentation of any request to Transfer, including
attorneys’, architects’, engineers’ or other consultants’ fees whether or not such Transfer is
actually consummated.

          24.1.6 No Release of Lessee’s Obligations. No Transfer shall relieve Lessee of its
obligation to pay the Rent and to perform all of the other obligations to be performed by Lessee
hereunder. The liability of Lessee named herein and any immediate and remote successor in interest
of Lessee (i.e., by means of any Transfer), and the due performance of the obligations of
this Lease on Lessee’s part to be performed or observed, shall not in any way be discharged,
released or impaired by any (i) agreement which modifies any of the rights or obligations of the
parties under this Lease, (ii) stipulation which extends the time within which an obligation under
this Lease is to be performed, (iii) waiver of the performance of an obligation required under this
Lease, or (iv) failure to enforce any of the obligations set forth in this Lease. If any Occupant,
assignee, manager or other transferee defaults in any performance due hereunder, Lessor may proceed
directly against the Lessee named herein and/or any immediate and remote successor in interest of
Lessee without exhausting its remedies against such Occupant, assignee, manager or other
transferee.

          24.1.7 REIT Protection. Anything contained in this Lease to the contrary
notwithstanding, (i) no Transfer shall be consummated on any basis such that the rental or other
amounts to be paid by the Occupant, assignee, manager or other transferee thereunder would be
based, in whole or in part, on the income or profits derived by the business activities of the
Occupant, assignee, manager or other transferee; (ii) Lessee shall not furnish or render any
services to an Occupant, assignee, manager or other transferee with respect to whom Transfer
Consideration is required to be paid or manage or operate the Leased Property and/or any Capital
Additions so Transferred with respect to which Transfer Consideration is being paid; (iii) Lessee
shall not consummate a Transfer with any Person in which Lessee or Lessor owns an interest,
directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of
the Code); and (iv) Lessee shall not consummate a Transfer with any Person or in any manner which
could cause any portion of the amounts received by Lessor pursuant to this Lease or any Occupancy
Arrangement to 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 or which could cause any other income of
Lessor to fail to qualify as income described in Section 856(c)(2) of the Code.

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          24.1.8 Transfers In Bankruptcy. In the event of a Transfer pursuant to the provisions
of the Bankruptcy Code, all consideration payable or otherwise to be delivered in connection with
such Transfer shall be paid or delivered to Lessor, shall be and remain the exclusive property of
Lessor and shall not constitute property of Lessee or of the estate of Lessee within the meaning of
the Bankruptcy Code. Any consideration constituting Lessor’s property pursuant to the immediately
preceding sentence and not paid or delivered to Lessor shall be held in trust for the benefit of
Lessor and be promptly paid or delivered to Lessor. For purposes of this Section 24.1.8, the term
“consideration” shall mean and include money, services, property and any other thing of value such
as payment of costs, cancellation or forgiveness of indebtedness, discounts, rebates, barter and
the like. If any such consideration is in a form other than cash (such as in kind, equity
interests, indebtedness earn-outs, or other deferred payments, consulting or management fees,
etc.), Lessor shall be entitled to receive in cash the then present fair market value of such
consideration.

          24.1.9 Public Offering/Public Trading. Notwithstanding anything to the contrary in
this Article XXIV, Lessor’s consent shall not be required in connection with, and the provisions of
Section 24.1.2.2 (i.e., payment of Transfer Consideration) shall not apply to, any Transfer
of any stock of Lessee or any Controlling Person(s) as a result of a public offering of Lessee’s or
such Controlling Person’s stock which (a) constitutes a bona fide public distribution of such stock
pursuant to a firm commitment underwriting or a plan of distribution registered under the
Securities Act of 1933 and (b) results in such stock being listed for trading on the American Stock
Exchange or the New York Stock Exchange or authorized for quotation on the NASDAQ National Market
immediately upon the completion of such public offering. In addition, so long as such stock of
Lessee or any such Controlling Person(s) is listed for trading on any such exchange or authorized
for quotation on such market, the transfer or exchange of such stock over such exchange or market
shall not be deemed a Transfer hereunder unless the same (whether in one transaction or in any step
or series of transactions) results, directly or indirectly, in a change in control of Lessee or
such Controlling Person(s) (including pursuant to a tender or similar offer to acquire the
outstanding and issued securities of Lessee or such Controlling Person(s)).

     24.2 Certain Permitted Transactions.

          24.2.1 Affiliate Transactions. Notwithstanding anything to the contrary contained in
Section 24.1.1, but subject to the provisions of Section 24.1.7 above, Lessor’s consent shall not
be required in connection with any assignment of Lessee’s entire interest in this Lease or a Master
Sublease of the entire Leased Property of the Facility to an Affiliate of Lessee, so long as in
connection therewith, each of the following conditions is met:

          (a) In connection with such assignment or Master Sublease, there is no change in the use of
the Leased Property of the Facility from its Primary Intended Use;

          (b) No Event of Default or other event or circumstance which, with notice or lapse of time or
both, would constitute an Event of Default, shall have occurred and be continuing hereunder;

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          (c) In the case of such an assignment, the assignee shall assume all of the obligations of
Lessee hereunder whether accruing prior to or subsequent to the effective date of such assignment
by an instrument in writing in form and substance reasonably satisfactory to Lessor. A copy of
such executed assumption shall be delivered to Lessor along with the notice specified in clause (f)
below;

          (d) Any Master Subletting shall be subject to the provisions of Section 24.1.3 above;

          (e) Neither the original Lessee nor any Guarantor shall be released from any of its respective
obligations hereunder or under any Guaranty, whether occurring prior to or after the effective date
of such transaction, and if requested by Lessor, the original Lessee shall execute a written
guaranty of the “Lessee’s” obligations under this Lease in a form satisfactory to Lessor and such
Guarantor shall execute a written affirmation of its obligations under such Guaranty in form
satisfactory to Lessor.

          (f) Within ten (10) days after the effectiveness of such transaction, Lessee shall notify
Lessor in writing of the occurrence of such event, the effective date thereof, the facts placing
the same within the provisions of this Section 24.2.1 and any other change in the address for
billings and notices to the Lessee pursuant to this Lease, accompanied by an executed copy of the
assumption, Master Sublease (if any) or written guaranty as required pursuant to this Lease.

ARTICLE XXV.

     25.1 Officer’s Certificates and Financial Statements.

          25.1.1 Officer’s Certificate. At any time and from time to time upon Lessee’s receipt
of not less than ten (10) days’ prior written request by Lessor, Lessee shall furnish to Lessor an
Officer’s Certificate certifying (i) that this Lease is unmodified and in full force and effect, or
that this Lease is in full force and effect as modified and setting forth the modifications; (ii)
the dates to which the Rent has been paid; (iii) whether or not, to the best knowledge of Lessee,
Lessor is in default in the performance of any covenant, agreement or condition contained in this
Lease and, if so, specifying each such default of which Lessee may have knowledge; and (iv)
responses to such other questions or statements of fact as Lessor, any ground or underlying lessor,
any purchaser or any current or prospective Facility Mortgagee shall reasonably request. Lessee’s
failure to deliver such statement within such time shall constitute an acknowledgment by Lessee
that (x) this Lease is unmodified and in full force and effect except as may be represented to the
contrary by Lessor; (y) Lessor is not in default in the performance of any covenant, agreement or
condition contained in this Lease; and (z) the other matters set forth in such request, if any, are
true and correct. Any such certificate furnished pursuant to this Article may be relied upon by
Lessor and any current or prospective Facility Mortgagee, ground or underlying lessor or purchaser
of the Leased Property or any portion thereof.

          25.1.2 Statements. Lessee shall furnish the following statements to Lessor:

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          (a) within 120 days after the end of Parent’s fiscal year, a copy of (i) the audited
consolidated balance sheet of Parent and its Subsidiaries, consolidated statements of income,
shareholders’ equity, and cash flows for Parent for such fiscal year, and (ii) the unaudited
consolidating balance sheet of Parent and its Subsidiaries, consolidating statements of income,
shareholders’ equity, and cash flows for Parent and its Subsidiaries for such fiscal year, all of
which shall be prepared in accordance with GAAP applied on a basis consistently maintained
throughout the period involved, such audited financial statements to be certified by nationally
recognized certified public accountants;

          (b) within 120 days after the end of each of Lessee’s and Guarantor’s fiscal years, a copy of
the unaudited consolidated balance sheets of Lessee, its consolidated Subsidiaries and Guarantor as
of the end of such fiscal year, and related unaudited consolidated statements of income, changes in
common stock and other stockholders’ equity and changes in the financial position of Lessee, its
consolidated Subsidiaries and Guarantor for such fiscal year, prepared in accordance with GAAP
applied on a basis consistently maintained throughout the period involved;

          (c) within 120 days after the end of each of Lessee’s and Guarantor’s fiscal years, and
together with the annual audit report furnished in accordance with clause (a) above, an Officer’s
Certificate stating that to the best of the signer’s knowledge and belief after making due inquiry,
Lessee is not in default in the performance or observance of any of the terms of this Lease, or if
Lessee shall be in default, specifying all such defaults, the nature thereof, and the steps being
taken to remedy the same;

          (d) within forty-five (45) days after the end of each of the first twelve (12) months of the
Term and the last eighteen (18) months of the Term, all consolidated financial reports Lessee
produces for reporting purposes and detailed statements of income and detailed operational
statistics regarding occupancy rates, patient and resident mix and patient and resident rates by
type for the Facility; and otherwise within forty-five (45) days after the end of each of Lessee’s
quarters, all quarterly consolidated financial reports Lessee produces for reporting purposes and
detailed statements of income and detailed operational statistics regarding occupancy rates,
patient and resident mix and patient and resident rates by type for the Facility;

          (e) within thirty (30) days after filing, a copy of each cost report filed with the
appropriate governmental agency for the Facility;

          (f) within thirty (30) days after they are required to be filed with the SEC, copies of any
annual reports and of information, documents and other reports, or copies of such portions of any
of the foregoing as the SEC may prescribe, which Lessee is required to file with the SEC pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934;

          (g) within ten (10) days following Lessee’s receipt thereof, copies of all written
communications received by Lessee from any regulatory agency relating to (i) surveys of the
Facility for purposes of licensure, Medicare and Medicaid certification and accreditation and (ii)
any proceeding, formal or informal, with respect to cited deficiencies with respect to services and
activities provided and performed at the Facility, including patient and resident care, patient and
resident activities, patient and resident therapy, dietary, medical records, drugs and

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medicines, supplies, housekeeping and maintenance, or the condition of the Facility, and
involving an actual or threatened warning, imposition of a fine or a penalty, or suspension,
termination or revocation of the Facility’s license to be operated in accordance with its Primary
Intended Use;

          (h) within 120 days after the end of each fiscal year of the financial institution issuing the
letter of credit required under Article XXI, if any, a copy of the audited consolidated balance
sheets of such financial institution as of the end of such fiscal year, and related unaudited
consolidated statements of income, changes in common stock and other stockholders equity and
changes in the financial position of such financial institution and its consolidated subsidiaries
for each such fiscal year, prepared in accordance with generally accepted accounting principles
applied on a basis consistently maintained throughout the period involved, such consolidated
financial statements to be certified by nationally recognized certified public accountants;

          (i) within ten (10) days following Lessee’s receipt thereof, copies of all material claims,
reports, complaints, notices, warnings or asserted violations relating in any way to the Leased
Property or any Capital Additions or Lessee’s use thereof; and

          (j) with reasonable promptness, such other information respecting (i) the financial and
operational condition and affairs of Lessee, any Guarantor and the Facility, (ii) the physical
condition of the Leased Property and any Capital Additions and (iii) any suspected Transfer,
including the then equity or voting ownership in Lessee or in any Controlling Person(s), in each
case as Lessor may reasonably request, in the form of a questionnaire or otherwise, from time to
time.

          25.1.3 Charges. Lessee acknowledges that the failure to furnish Lessor with any of the
certificates or statements required by this Article XXV will cause Lessor to incur costs and
expenses not contemplated hereunder, the exact amount of which is presently anticipated to be
extremely difficult to ascertain. Accordingly, if Lessee fails to furnish Lessor with any of the
certificates or statements required by this Article XXV, Lessee shall pay to Lessor upon demand
$500.00 for each such failure as Additional Charges. The parties agree that this charge represents
a fair and reasonable estimate of the costs that Lessor will incur by reason of Lessee’s failure to
furnish Lessor with such certificates and statements.

          25.1.4 Lessee’s Submission of Certificates/Statements. Lessee shall be obligated to
furnish Lessor with all certificates and statements required under this Article XXV either by (i)
delivery of printed copies of the same to Lessor at its address set forth in Article XXXIII below
or any other address that Lessor may from time to time designate in writing or (ii) electronic
delivery of the same to Lessor at any electronic mail address that Lessor may from time to time
designate in writing.

ARTICLE XXVI.

     26.1 Lessor’s Right to Inspect and Show the Leased Property and Capital Additions. Lessee shall permit Lessor and its authorized representatives to (i) inspect the Leased
Property and any Capital Additions and (ii) exhibit the same to prospective purchasers and

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lenders,
and during the last twelve (12) months of the Term (to the extent Lessee has not previously and
timely exercised its right to extend the Term for any remaining Extended Terms), to prospective
lessees or managers, in each instance during usual business hours and subject to any reasonable
security, health, safety or confidentiality requirements of Lessee or any Legal Requirement or
Insurance Requirement. Lessee shall cooperate with Lessor in exhibiting the Leased Property and
any Capital Additions to prospective purchasers, lenders, lessees and managers.

ARTICLE XXVII.

     27.1 No Waiver. No failure by Lessor to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy hereunder and no acceptance of full or partial
payment of Rent during the continuance of any default or Event of Default shall constitute a waiver
of any such breach or of any such term. 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.

ARTICLE XXVIII.

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

ARTICLE XXIX.

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

ARTICLE XXX.

     30.1 No Merger. 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 the Leased Property or any part(s) thereof.

ARTICLE XXXI.

     31.1 Conveyance by Lessor. Lessor may, without the consent or approval of Lessee, sell,
transfer, assign, convey or otherwise dispose of any or all of the Leased Property. If Lessor or
any successor owner of the Leased Property shall sell, transfer, assign, convey or otherwise
dispose of the Leased Property other than as security for a debt, Lessor or such successor owner,
as the case may be, shall thereupon be released from all future liabilities and

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obligations of
Lessor with respect to such Leased Property under this Lease arising or accruing from and after the
date of such sale, transfer, assignment or other disposition and all such future liabilities and
obligations with respect to such Leased Property shall thereupon be binding upon such purchaser,
grantee, assignee or transferee.

     31.2 Incorporation of Lease and Related Leases into a Single Master Lease.

          31.2.1 Lessor shall
have the right, at any time during the Term, to require Lessee to enter into one or more lease
agreements covering the Leased Property and any one or more of the facility(ies) that are the
subject of the Related Leases, such that the Leased Property and such facility(ies) designated by
Lessor are leased by Lessor and its applicable Affiliate(s) to Lessee and its applicable
Affiliate(s) pursuant to a single, integrated and indivisible lease agreement(s) (the “Master
Lease(s)”). The lease of the Leased Property and such additional facility(ies) pursuant to such
Master Lease(s) shall be upon the same terms and conditions as are set forth in (a) this Lease with
respect to the Leased Property and (b) the applicable Related Lease(s) with respect to the
additional facility(ies) that are designated by Lessor to be included in such Master Lease(s);
provided, however, that (i) the Master Lease(s) may include such changes to this Lease and the
applicable Related Lease(s) as necessary to reflect the fact that the Master Lease(s) are a single,
integrated and indivisible agreement(s) and (ii) the Security Amount under such Master Lease(s) for
each Lease Year shall be equal to one-fourth (1/4) of the annual Minimum Rent payable by Lessee and
its applicable Affiliate(s) thereunder during such Lease Year. Effective as of the date of
execution of the Master Lease(s), this Lease shall be deemed to be amended and restated in its
entirety by the Master Lease(s); provided, however, that neither Lessee nor any Guarantor shall be
released from any of the obligations of the Lessee hereunder or the Guarantor under the Guaranty
occurring prior to such date. Notwithstanding anything to the contrary contained in this Section
31.2, Lessor’s right to require Lessee to enter into any Master Lease is conditioned upon such
Master Lease not being prohibited by any Facility Mortgage hereunder or under any Facility Mortgage
under the applicable Related Leases or the approval thereof by any Facility Mortgagee hereunder and
the Facility Mortgagees under the applicable Related Lease(s).
Provided that no Event of Default has occurred and is continuing under this Lease or under any Related Lease, and no
event or circumstance has occurred hereunder or under any Related Lease which with notice and/or passage of
time would constitute an Event of Default hereunder or thereunder, then Lessee shall have the
right, at any time during
the Term, to require Lessor and certain Affiliate(s) of Lessor to enter into a single Master
Lease with Lessee covering the Leased Property and the facilities that are the subject of the
Related Lease for the property located in St. Louis, Missouri and the Related Lease for the
property located in Boca Raton, Florida. The lease of the Leased Property and such additional
facilities pursuant to such Master Lease shall be upon the same terms and conditions as are set
forth in (a) this Lease with respect to the Leased Property and (b) the Related Lease for the
property located in St. Louis, Missouri and the Related Lease for the property located in Boca
Raton, Florida with respect to the facilities that are the subject of the Related Lease for the
property located in St. Louis, Missouri, and the Related Lease for the property located in Boca
Raton, Florida, respectively; provided, however, that (i) such Master Lease may include such
changes to this Lease and the Related Lease for the property located in St. Louis, Missouri and the
Related Lease for the property located in Boca Raton, Florida as necessary to reflect the fact that
the Master Lease is a single, integrated and indivisible agreement and (ii) the Security Amount
under such Master Lease for each Lease Year shall be equal to one-fourth (1/4) of the annual
Minimum Rent payable by Lessee thereunder during such Lease Year. Effective as of the date of
execution

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of the Master Lease described in this Section 31.2.2, this Lease shall be deemed to be
amended and restated in its entirety by such Master Lease; provided, however, that neither Lessee
nor any Guarantor shall be released from any of the obligations of the Lessee hereunder or the
Guarantor under the Guaranty occurring prior to such date. Notwithstanding anything to the
contrary contained in this Section 31.2.2, Lessee’s right to require Lessor and certain of its
Affiliate(s) to enter into the Master Lease described in this Section 31.2.2 is conditioned upon
such Master Lease not being prohibited by any Facility Mortgage hereunder or under any Facility
Mortgage under the applicable Related Leases or the approval thereof by any Facility Mortgagee
hereunder and the Facility Mortgagees under the applicable Related Leases. In addition, Lessee
shall reimburse Lessor for all out-of-pocket costs and expenses incurred in connection with any
Master Lease described in this Section 31.2.2, including reasonable attorneys’ fees and costs
incurred in connection therewith.

ARTICLE XXXII.

     32.1 Quiet Enjoyment. So long as Lessee shall pay the Rent as the same becomes due and
shall fully comply with all of the terms of this Lease and fully perform its obligations hereunder,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for the Term, free of
any claim or other action by Lessor or anyone claiming by, through or under Lessor, but subject to
all liens and encumbrances of record as of the date hereof, or the Commencement Date or created
thereafter as permitted hereunder or thereafter consented to by Lessee. No failure by Lessor to
comply with the foregoing covenant shall give Lessee any right to cancel or terminate this Lease or
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 Lessee hereunder. Notwithstanding the
foregoing, Lessee shall have the right, by separate and independent action to pursue any claim it
may have against Lessor as a result of a breach by Lessor of the covenant of quiet enjoyment
contained in this Article.

ARTICLE XXXIII.

     33.1 Notices. Any notice, consent, approval, demand or other communication required or
permitted to be given hereunder (a “notice”) must be in writing and may be served personally or by
U.S. Mail. If served by U.S. Mail, it shall be addressed as follows:

	 	 	 
	If to Lessor:

	 	c/o Health Care Property Investors, Inc.
	 

	 	3760 Kilroy Airport Way, Suite 300
	 

	 	Long Beach, California 90806
	 

	 	Attn: Legal Department
	 

	 	Fax: (562) 733-5200
	 
	 	 
	with a copy to:

	 	Latham & Watkins LLP
	 

	 	650 Town Center Drive, Suite 2000
	 

	 	Costa Mesa, California 92626
	 

	 	Attn: David C. Meckler, Esq.
	 

	 	Fax: (714) 755-8290

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	If to Lessee:

	 	c/o Capital Senior Living Corporation
	 

	 	14160 Dallas Parkway #300
	 

	 	Dallas, Texas 75254
	 

	 	Attn: David R. Brickman, Esq.
	 

	 	Fax: (972) 770-5666
	 
	 	 
	with a copy to:

	 	Fulbright & Jaworski, L.L.P.
	 

	 	2200 Ross Avenue, Suite 2800
	 

	 	Dallas, Texas 75201
	 

	 	Attn: Winston W. Walp II, Esq.
	 

	 	Fax: (214) 855-8200

Any notice which is personally served shall be effective upon the date of service; any notice given
by U.S. Mail shall be deemed effectively given, if deposited in the United States Mail, registered
or certified with return receipt requested, postage prepaid and addressed as provided above, on the
date of receipt, refusal or non-delivery indicated on the return receipt. In lieu of notice by
U.S. Mail, either party may send notices by facsimile or by a nationally recognized overnight
courier service which provides written proof of delivery (such as U.P.S. or Federal Express). Any
notice sent by facsimile shall be effective upon confirmation of receipt in legible form, and any
notice sent by a nationally recognized overnight courier shall be effective on the date of delivery
to the party at its address specified above as set forth in the courier’s delivery receipt. Either
party may, by notice to the other from time to time in the manner herein provided, specify a
different address for notice purposes.

ARTICLE XXXIV.

     34.1 Appraiser. If it becomes necessary to determine the Fair Market Value, Fair Market Rental or Leasehold
FMV of the Facility for any purpose of this Lease, the same shall be determined by an independent
appraisal firm, in which one or more of the members, officers or principals of such firm are
Members of the Appraisal Institute (or any successor organization thereto), as may be reasonably
selected by Lessor (the “Appraiser”). Lessor shall cause such Appraiser to determine the Fair
Market Value, Fair Market Rental or Leasehold FMV of the Facility as of the relevant date (giving
effect to the impact, if any, of inflation from the date of the Appraiser’s decision to the
relevant date) and the determination of such Appraiser shall be final and binding upon the parties.
A written report of such Appraiser shall be delivered and addressed to each of Lessor and Lessee.
To the extent consistent with sound appraisal practice as then existing at the time of any such
appraisal, an appraisal of Fair Market Value for purposes of this Lease shall take into account and
shall give appropriate consideration to all three customary methods of appraisal (i.e., the
cost approach, the sales comparison approach and the income approach), and no one method or
approach shall be deemed conclusive simply by reason of the nature of Lessor’s business or because
such approach may have been used for purposes of determining the fair market value of the Facility
at the time of acquisition thereof by Lessor. This provision for determination by appraisal shall
be specifically enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as otherwise provided by
applicable law. Lessor and Lessee shall each pay one-half of the fees and expenses of the
Appraiser and one-half of all other costs and expenses incurred in connection with such appraisal.

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ARTICLE XXXV.

     35.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor may, from time to time,
directly or indirectly, create or otherwise cause to exist any ground lease, mortgage, trust deed,
lien, encumbrance or title retention agreement (collectively, a “Lessor’s Encumbrance”) upon the
Leased Property and any Capital Additions or any part(s) or portion(s) thereof or interests
therein. This Lease is and at all times shall be subject and subordinate to any such Lessor’s
Encumbrance which may now or hereafter affect the Leased Property and/or any such Capital Additions
and to all renewals, modifications, consolidations, replacements and extensions thereof. This
clause shall be self-operative and no further instrument of subordination shall be required;
provided, however, that in confirmation of such subordination, Lessee shall execute promptly any
certificate or document that Lessor or any ground or underlying lessor, mortgagee or beneficiary
may request for such purposes. If, in connection with obtaining financing or refinancing for the
Leased Property and/or any such Capital Additions, a Facility Mortgagee or prospective Facility
Mortgagee shall request reasonable modifications to this Lease as a condition to such financing or
refinancing, Lessee shall not withhold or delay its consent thereto.

     35.2 Attornment. If Lessor’s interest in the Leased Property and/or any Capital Additions
or any part(s) or portion(s) thereof is sold, conveyed or terminated upon the exercise of any
remedy provided for in any Facility Mortgage, or otherwise by operation of law: (i) at the new
owner’s option, Lessee shall attorn to and recognize the new owner or superior lessor as Lessee’s
“Lessor” under this Lease or enter into a new lease substantially in the form of this Lease
with the new owner, and Lessee shall take such actions to confirm the foregoing within ten (10)
days after request; and (ii) the new owner or superior lessor shall not be (a) liable for any act
or omission of Lessor under this Lease occurring prior to such sale, conveyance or termination, (b)
subject to any offset, abatement or reduction of rent because of any default of Lessor under this
Lease occurring prior to such sale, conveyance or termination, (c) be bound by any previous
modification or amendment of this Lease or any previous prepayment of more than one month’s rent,
unless such modification, amendment or prepayment shall have been approved in writing by such
Facility Mortgagee or, in the case of such prepayment, such prepayment of rent has actually been
delivered to such successor lessor, or (d) liable for any security deposit or other collateral
deposited or delivered to Lessor pursuant to this Lease unless such security deposit or other
collateral has actually been delivered to such successor lessor.

     35.3 Compliance with Facility Mortgage Documents.

          35.3.1 Lessee acknowledges and agrees that Lessor intends to finance a portion of the
acquisition of the Leased Property under the Contract of Acquisition through the assumption of
certain existing Facility Mortgage indebtedness (the “Assumed Facility Mortgages” and each, an
“Assumed Facility Mortgage”) encumbering the Leased Property or portions thereof or interests
therein as of the Commencement Date. With respect to any such Assumed Facility Mortgage, Lessee
acknowledges that it has received copies of, reviewed and is familiar with all of the Facility
Mortgage Loan Documents relating thereto. Lessee acknowledges that any Facility Mortgage Loan
Documents executed by Lessor will impose certain obligations on the “Borrower” thereunder to comply
with or cause the operator and/or lessee of the Facility to comply with all representations,
covenants and warranties contained

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therein relating to the Facility and the operator and/or lessee
of the Facility, including, covenants relating to (a) the maintenance and repair of the Facility,
(b) maintenance and submission of financial records and accounts of the operation of the Facility
and related financial and other information regarding the operator and/or lessee of the Facility
and the Facility itself, (c) the procurement of insurance policies with respect to the Facility and
(d) without limiting the foregoing, compliance with all Legal Requirements relating to the Facility
and the operation thereof for its Primary Intended Use. For so long as any Facility Mortgages
encumber the Leased Property, or any portion thereof, Lessee covenants and agrees, at its sole cost
and expense and for the express benefit of Lessor, to operate the Facility in strict compliance
with the terms and conditions of the Facility Mortgage Loan Documents (other than payment of any
indebtedness evidenced or secured thereby) and to timely perform all of the obligations of Lessor
relating thereto. To the extent that any of such duties and obligations may not properly be
performed by Lessee, Lessee shall cooperate with and assist Lessor in the performance thereof
(other than payment of any indebtedness evidenced or secured thereby), but Lessee shall not incur
any liability to any Facility Mortgagees for such duties and obligations. Lessor shall use good
faith efforts to ensure that the duties and obligations imposed upon Lessee by any Facility
Mortgage Loan Documents relating to any Facility Mortgages which refinance any Assumed Facility
Mortgage are not materially more burdensome to Lessee’s obligations to Lessor under this Lease or
otherwise imposed by any Facility Mortgage Loan Documents under any applicable Assumed Facility
Mortgage.

          35.3.2 Without limiting Lessee’s obligations pursuant to any other provision of this Section
35.3, during the Term of this Lease, Lessee acknowledges and agrees that, except as expressly
provided elsewhere in this Lease, it shall undertake at its own cost and expense the performance of
any and all repairs, replacements, capital improvements, maintenance items and all other
requirements relating to the condition of the Facility which are required by any Facility Mortgage
Loan Documents (subject to the proviso in the last sentence of Section 35.3.1 above), and Lessee
shall be solely responsible and hereby covenants to fund and maintain any and all impound, escrow
or other reserve or similar accounts required under any Facility Mortgage Loan Documents (subject
to the proviso in the last sentence of Section 35.3.1 above) as security for or otherwise relating
to any operating expenses of the Facility, including any capital repair or replacement reserves
and/or impounds or escrow accounts for Impositions or insurance premiums (each a “Facility Mortgage
Reserve Account”); provided, however, that in connection with any refinance of any Assumed Facility
Mortgage, Lessor shall request that any such Facility Mortgage not require the funding or
maintenance of any Facility Mortgage Reserve Account in connection therewith, notwithstanding the
current requirements imposed by any Facility Mortgage Loan Document relating to any such Assumed
Facility Mortgage. During the Term of this Lease and provided that no Event of Default shall have
occurred and be continuing hereunder, Lessee shall, subject to the terms and conditions of such
Facility Mortgage Reserve Account and the requirements of the Facility Mortgagee(s) thereunder,
have access to and the right to apply or use (including for reimbursement) to the same extent of
Lessor all monies held in each such Facility Mortgage Reserve Account for the purposes and subject
to the limitations for which such Facility Mortgage Reserve Account is maintained, and Lessor
agrees to reasonably cooperate with Lessee in connection therewith.

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ARTICLE XXXVI.

     36.1 Hazardous Substances and Mold.

          36.1.1 Lessee shall not allow any Hazardous Substance to be located, stored, disposed of,
released or discharged in, on, under or about the Leased Property and Capital Additions or
incorporated in the Facility; provided, however, that Hazardous Substances may be brought, kept,
used or disposed of in, on or about the Leased Property or any Capital Additions in quantities and
for purposes similar to those brought, kept, used or disposed of in, on or about similar facilities
used for purposes similar to the Primary Intended Use or in connection with the construction of
facilities similar to the Facility during any period of renovation or construction (including
re-construction) thereof and which are brought, kept, used and disposed of in strict compliance
with Legal Requirements. Lessee shall not allow the Leased Property or any Capital Additions to be
used as a waste disposal site or, except as permitted in the immediately preceding sentence, for
the manufacturing, handling, storage, distribution or disposal of any Hazardous Substance.

          36.1.2 Lessee shall also not allow to exist in or about the Leased Property or any Capital
Additions any Mold Condition and Lessee shall, at its sole cost and expense, regularly monitor the
Leased Property or any Capital Additions for the presence of Mold and Mold Conditions.

     36.2 Notices. Lessee shall provide to Lessor promptly (but in any event within five (5)
days of the discovery thereof), and in any event immediately upon Lessee’s receipt thereof, a copy
of any notice, or notification with respect to, (i) any violation of a Legal Requirement relating
to Hazardous Substances located in, on, or under the Leased Property or any Capital Additions or
any adjacent property thereto; (ii) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened with respect to the Leased Property or any
Capital Additions; (iii) any claim made or threatened by any Person against Lessee or the Leased
Property or any Capital Additions relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from or claimed to result from any Hazardous Substance; and (iv) any
reports made to any federal, state or local environmental agency arising out of or in connection
with any Hazardous Substance in, on, under or removed from the Leased Property or any Capital
Additions, including any complaints, notices, warnings or asserted violations in connection
therewith. In the event of suspected or actual Mold or Mold Conditions at the Leased Property,
Lessee shall promptly (but in any event within five (5) days of the discovery thereof) notify
Lessor in writing of the same and the precise location thereof. In addition, in the event of
suspected Mold or Mold Conditions at the Leased Property or any Capital Additions, Lessee, at its
sole cost and expense, shall promptly cause an inspection of the Premises to be conducted to
determine if Mold or Mold Conditions are present at the Leased Property or any Capital Additions,
and shall notify Lessor, in writing, at least three (3) days prior to the inspection, of the date
on which the inspection shall occur, and which portion of the Leased Property or any Capital
Additions shall be subject to the inspection. Lessee shall retain a Mold Inspector to conduct the
inspection and shall cause such Mold Inspector to perform the inspection in a manner that is
strictly confidential and consistent with the duty of care exercised by a Mold Inspector and to
prepare an inspection report, keep the results of the inspection report confidential, and promptly
provide a copy of the same to Lessor.

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     36.3 Remediation. If Lessee becomes aware of a violation of any Legal Requirement relating
to any Hazardous Substance in, on, under or about the Leased Property or any Capital Additions or
any adjacent property thereto, or if Lessee, Lessor or the Leased Property or any Capital Additions
becomes subject to any order of any federal, state or local agency to repair, close, detoxify,
decontaminate or otherwise remediate the Leased Property and any Capital Additions, Lessee shall
immediately notify Lessor of such event and, at its sole cost and expense, cure such violation or
effect such repair, closure, detoxification, decontamination or other remediation. Upon the
discovery of any Mold or Mold Conditions in or about the Leased Property or any Capital Additions,
Lessee shall also immediately notify Lessor of such event and, its sole cost and expense, hire a
trained and experienced Mold remediation contractor(s) to completely clean-up and remove from the
Leased Property and any Capital Additions all Mold or Mold Conditions in strict compliance with all
Mold Remediation Requirements. If Lessee fails to implement and diligently pursue any such cure,
repair, closure, detoxification, decontamination or other remediation, Lessor shall have the right,
but not the obligation, to carry out such action and to recover from Lessee all of Lessor’s costs
and expenses incurred in connection therewith.

     36.4 Indemnity. Lessee shall indemnify, defend, protect, save, hold harmless, and reimburse Lessor for,
from and against any and all costs, losses (including, losses of use or economic benefit or
diminution in value), liabilities, damages, assessments, lawsuits, deficiencies, demands, claims
and expenses (collectively, “Environmental Costs”) (whether or not arising out of third-party
claims and regardless of whether liability without fault is imposed, or sought to be imposed, on
Lessor) incurred in connection with, arising out of, resulting from or incident to, directly or
indirectly, before or during the Term (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 the Leased Property or any Capital Additions (collectively,
“Handling”), including the effects of such Handling of any Hazardous Substances on any Person or
property within or outside the boundaries of the Leased Property or any Capital Additions, (ii) the
presence of any Hazardous Substances, Mold or Mold Condition in, on, under or about the Leased
Property or any Capital Additions, (iii) the violation of any Legal Requirements (including
Environmental Laws), (iv) any illness to or death of persons or damage to or destruction of
property resulting from such Mold or Mold Condition, and (v) any failure to observe the foregoing
covenants of this Article XXXVI. “Environmental Costs” include interest, costs of response,
removal, remedial action, containment, cleanup, investigation, design, engineering and
construction, damages (including actual, consequential and punitive damages) for personal injuries
and for injury to, destruction of or loss of property or natural resources, relocation or
replacement costs, penalties, fines, charges or expenses, attorney’s fees, expert fees,
consultation fees, and court costs, and all amounts paid in investigating, defending or settling
any of the foregoing.

     Without limiting the scope or generality of the foregoing, Lessee expressly agrees to
reimburse Lessor for any and all costs and expenses incurred by Lessor:

          (a) In investigating any and all matters relating to the Handling of any Hazardous Substances
or the presence or remediation of Mold or any Mold Condition in, on, from, under or about the
Leased Property or any Capital Additions;

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          (b) In bringing the Leased Property or any Capital Additions into compliance with all Legal
Requirements, including Mold Remediation Requirements and Environmental Laws; and

          (c) Removing, treating, storing, transporting, cleaning-up and/or disposing of any Hazardous
Substances used, stored, generated, released or disposed of in, on, from, under or about the Leased
Property or any Capital Additions or offsite or in conducting any removal or remediation of Mold or
any Mold Condition from the Leased Property or any Capital Additions.

     If any claim is made hereunder, Lessee agrees to pay such claim promptly, and in any event to
pay such claim within thirty (30) calendar days after receipt by Lessee of notice thereof. If any
such claim is not so paid and Lessor is ultimately found or agrees to be responsible therefore,
Lessee agrees also to pay interest on the amount paid from the date of the first notice of such
claim, at the Overdue Rate.

     36.5 Inspection. Lessor shall have the right, from time to time, in its reasonable discretion and upon not
less than five (5) days’ written notice to Lessee, except in the case of an emergency in which
event no notice shall be required, to conduct an inspection of the Leased Property and all Capital
Additions to determine the existence or presence of Hazardous Substances, Mold or any Mold
Condition on or about the Leased Property or any such Capital Additions. Lessor shall have the
right to enter and inspect the Leased Property and all Capital Additions, conduct any testing,
sampling and analyses it deems necessary and shall have the right to inspect materials brought into
the Leased Property or any such Capital Additions. Lessor may, in its discretion, retain such
experts to conduct the inspection, perform the tests referred to herein, and to prepare a written
report in connection therewith. All costs and expenses incurred by Lessor under this Section shall
be paid on demand as Additional Charges by Lessee to Lessor. Failure to conduct an inspection or
to detect unfavorable conditions if such inspection is conducted shall in no fashion be intended as
a release of any liability for conditions subsequently determined to be associated with or to have
occurred during Lessee’s tenancy. Lessee shall remain liable for any environmental condition, Mold
or Mold Condition related to or having occurred during or prior to its tenancy regardless of when
such conditions are discovered and regardless of whether or not Lessor conducts an inspection at
the termination of this Lease. The obligations set forth in this Article shall survive the
expiration or earlier termination of the Lease.

ARTICLE XXXVII.

     37.1 Memorandum of Lease. Lessor and Lessee shall, promptly upon the request of either,
enter into one or more short form memoranda of this Lease, each in form suitable for recording
under the laws of the applicable State. Lessee shall pay all costs and expenses of recording any
such memoranda and shall fully cooperate with Lessor in removing from record any such memoranda
upon the expiration or earlier termination of the Term.

ARTICLE XXXVIII.

     38.1 Sale of Assets . Notwithstanding any other provision of this Lease, Lessor shall not
be required to (i) sell or transfer the Leased Property, or any portion thereof, which is

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real estate asset as defined in Section 856(c)(5)(B), or functionally equivalent
successor provision, of the Code, to Lessee if Lessor’s counsel advises Lessor that such sale or
transfer may not be a sale of property described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code or (ii) sell or transfer the Leased Property, or any
portion thereof, to Lessee if Lessor’s counsel advises Lessor that such sale or transfer could
result in an unacceptable amount of gross income for purposes of the Ninety-Five percent (95%)
gross income test contained in Section 856(c)(2), or functionally equivalent successor provision,
of the Code. If Lessee has the right or obligation to purchase the Leased Property or any portion
thereof pursuant to the terms herein, and if Lessor determines not to sell such Leased Property or
any portion thereof pursuant to the above sentence, then Lessee shall purchase such Leased Property
or any portion thereof, upon and subject to all applicable terms and conditions set forth in this
Lease, at such time as the transaction, upon the advice of Lessor’s counsel, would be a sale of
property (to the extent the Leased Property is a real estate asset) described in Section
857(b)(6)(C), or functionally equivalent successor provision, of the Code, and would not result in
an unacceptable amount of gross income for purposes of the Ninety-Five Percent (95%) gross income
test contained in Section 856(c)(2), or functionally equivalent successor provision of the Code and
until such time Lessee shall lease the Leased Property and all Capital Additions from Lessor at the
Fair Market Rental.

ARTICLE XXXIX.

     39.1 [Intentionally Omitted].

ARTICLE XL.

     40.1 Authority. If Lessee is a corporation, limited liability company, trust, or
partnership, Lessee, and each individual executing this Lease on behalf of Lessee, represent and
warrant that each is duly authorized to execute and deliver this Lease on behalf of Lessee and
shall concurrently with the execution and delivery of this Lease to Lessor deliver to Lessor
evidence of such authority satisfactory to Lessor.

ARTICLE XLI.

     41.1 Attorneys’ Fees. If Lessor or Lessee brings an action or other proceeding (including
an arbitration pursuant to Article XLIII) against the other to enforce any of the terms, covenants
or conditions hereof or any instrument executed pursuant to this Lease, or by reason of any breach
or default hereunder or thereunder, the party prevailing in any such action or proceeding and any
appeal thereupon shall be paid all of its costs and reasonable attorneys’ fees incurred therein.

     41.2 Administrative Expenses . In addition to the provisions of Section 41.1 above, and any other provisions of this Lease
that specifically require Lessee to reimburse, pay or indemnify against Lessor’s reasonable
attorneys’ fees, Lessee shall pay, as Additional Charges, all out-of-pocket costs and expenses
(including reasonable attorneys’ fees and costs) incurred by Lessor in connection with (a) the
administration of this Lease, including all costs and expenses incurred by Lessor in connection
with responding to requests by Lessee for Transfers (including the review, negotiation or
documentation thereof) or any other matters over which

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Lessor has review or approval rights, the
review of any letters of credit, but excluding ordinary day-to-day costs and expenses such as
generating billing statements and general lease maintenance, (b) any revisions, extensions,
renewals or “workouts” of this Lease, (c) the exercise of any right or enforcement of any
obligation of Lessee to purchase the Leased Property, or any portion thereof, (d) any intercreditor
agreements or similar documentation entered into by Lessor and any institutional credit facility
lender(s) of Lessee pursuant to the terms of Section 16.10 above and (e) the enforcement or
satisfaction by Lessor of any Lessee’s obligations under this Lease, including preparation of
notices of an Event of Default and the collection of past due Rent.

ARTICLE XLII.

     42.1 Brokers. Lessee warrants that it has not had any contact or dealings with any Person
or real estate broker which would give rise to the payment of any fee or brokerage commission in
connection with this Lease, and Lessee shall indemnify, protect, hold harmless and defend Lessor
from and against any liability with respect to any fee or brokerage commission arising out of any
act or omission of Lessee. Lessor warrants that it has not had any contact or dealings with any
Person or real estate broker which would give rise to the payment of any fee or brokerage
commission in connection with this Lease, and Lessor shall indemnify, protect, hold harmless and
defend Lessee from and against any liability with respect to any fee or brokerage commission
arising out of any act or omission of Lessor.

ARTICLE XLIII.

     43.1 ARBITRATION OF DISPUTES.

          43.1.1 EXCEPT AS PROVIDED IN SECTION 43.1.2 BELOW, ANY CONTROVERSY, DISPUTE OR CLAIM OF
WHATSOEVER NATURE ARISING OUT OF, IN CONNECTION WITH, OR IN RELATION TO THE INTERPRETATION,
PERFORMANCE OR BREACH OF THIS LEASE, INCLUDING ANY CLAIM BASED ON CONTRACT, TORT OR STATUTE, SHALL
BE DETERMINED BY FINAL AND BINDING, CONFIDENTIAL ARBITRATION ADMINISTERED BY THE AMERICAN
ARBITRATION ASSOCIATION (“AAA”) IN ACCORDANCE WITH ITS THEN-EXISTING COMMERCIAL ARBITRATION RULES,
AND THE SOLE ARBITRATOR SHALL BE SELECTED IN ACCORDANCE WITH SUCH AAA RULES. ANY ARBITRATION
HEREUNDER SHALL BE GOVERNED BY THE UNITED STATES ARBITRATION ACT, 9 U.S.C. 1-16 (OR ANY SUCCESSOR
LEGISLATION THERETO), AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION
THEREOF. NEITHER LESSOR, LESSEE NOR THE ARBITRATOR SHALL DISCLOSE THE EXISTENCE, CONTENT OR
RESULTS OF ANY ARBITRATION HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF ALL PARTIES; PROVIDED,
HOWEVER, THAT EITHER PARTY MAY DISCLOSE THE EXISTENCE, CONTENT OR RESULTS OF ANY SUCH ARBITRATION
TO ITS PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND ACCOUNTANTS AND TO ANY OTHER
PERSON TO WHOM DISCLOSURE IS REQUIRED BY APPLICABLE GOVERNMENTAL REQUIREMENTS, INCLUDING PURSUANT
TO AN ORDER OF A COURT OF COMPETENT JURISDICTION. UNLESS

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OTHERWISE AGREED BY THE PARTIES, ANY
ARBITRATION HEREUNDER SHALL BE HELD AT A NEUTRAL LOCATION SELECTED BY THE ARBITRATOR IN LOS
ANGELES, CALIFORNIA. THE COST OF THE ARBITRATOR AND THE EXPENSES RELATING TO THE ARBITRATION
(EXCLUSIVE OF LEGAL FEES) SHALL BE BORNE EQUALLY BY LESSOR AND LESSEE UNLESS OTHERWISE SPECIFIED IN
THE AWARD OF THE ARBITRATOR. SUCH FEES AND COSTS PAID OR PAYABLE TO THE ARBITRATOR SHALL BE
INCLUDED IN “COSTS AND REASONABLE ATTORNEYS’ FEES” FOR PURPOSES OF ARTICLE XLI AND THE ARBITRATOR
SHALL SPECIFICALLY HAVE THE POWER TO AWARD TO THE PREVAILING PARTY PURSUANT TO SUCH ARTICLE XLI
SUCH PARTY’S COSTS AND EXPENSES INCURRED IN SUCH ARBITRATION, INCLUDING FEES AND COSTS PAID TO THE
ARBITRATOR.

          43.1.2 THE PROVISIONS OF THIS ARTICLE XLIII SHALL NOT APPLY TO:

               (A) ANY UNLAWFUL DETAINER OR OTHER SIMILAR SUMMARY OR EXPEDITED PROCEEDING FOR EJECTMENT OR
RECOVERY OF POSSESSION OF THE LEASED PROPERTY AND CAPITAL ADDITIONS INSTITUTED BY LESSOR IN
ACCORDANCE WITH APPLICABLE LEGAL REQUIREMENTS AS THE RESULT OF AN EVENT OF DEFAULT OR ALLEGED EVENT
OF DEFAULT BY LESSEE PURSUANT TO THIS LEASE. IN ADDITION, IF PERMITTED BY APPLICABLE LEGAL
REQUIREMENTS, LESSOR SHALL BE ENTITLED IN CONNECTION WITH ANY SUCH PROCEEDING TO SEEK ANY DAMAGES
TO WHICH IT IS ENTITLED AT LAW, INCLUDING THOSE SET FORTH IN ARTICLE XVI.

               (B) ANY SPECIFIC CONTROVERSY, DISPUTE, QUESTION OR ISSUE AS TO WHICH THIS LEASE SPECIFICALLY
PROVIDES ANOTHER METHOD OF DETERMINING SUCH CONTROVERSY, DISPUTE, QUESTION OR ISSUE AND PROVIDES
THAT A DETERMINATION PURSUANT TO SUCH METHOD IS FINAL AND BINDING, UNLESS BOTH LESSOR AND LESSEE
AGREE IN WRITING TO WAIVE SUCH PROCEDURE AND PROCEED INSTEAD PURSUANT TO THIS ARTICLE XLIII.

               (C) ANY REQUEST OR APPLICATION FOR AN ORDER OR DECREE GRANTING ANY PROVISIONAL OR ANCILLARY
REMEDY (SUCH AS A TEMPORARY RESTRAINING ORDER OR INJUNCTION) WITH RESPECT TO ANY
RIGHT OR OBLIGATION OF EITHER PARTY TO THIS LEASE, AND ANY PRELIMINARY DETERMINATION OF THE
UNDERLYING CONTROVERSY, DISPUTE, QUESTION OR ISSUE AS IS REQUIRED TO DETERMINE WHETHER OR NOT TO
GRANT SUCH RELIEF. A FINAL AND BINDING DETERMINATION OF SUCH UNDERLYING CONTROVERSY, DISPUTE,
QUESTION OR ISSUE SHALL BE MADE BY AN ARBITRATION CONDUCTED PURSUANT TO THIS ARTICLE XLIII AFTER AN
APPROPRIATE TRANSFER OR REFERENCE TO THE ARBITRATOR SELECTED PURSUANT TO THIS ARTICLE XLIII UPON
MOTION OR APPLICATION OF EITHER PARTY HERETO. ANY ANCILLARY OR PROVISIONAL RELIEF WHICH IS GRANTED
PURSUANT TO THIS CLAUSE (C) SHALL CONTINUE IN EFFECT PENDING AN

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ARBITRATION DETERMINATION AND ENTRY OF JUDGMENT THEREON PURSUANT TO THIS ARTICLE XLIII.

          43.1.3 NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING
OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA
CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS
INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION TO NEUTRAL ARBITRATION.

          LESSOR’S INITIALS:                     

          LESSEE’S INITIALS:                     

ARTICLE XLIV.

     44.1 Miscellaneous.

          44.1.1 Survival. Anything contained in this Lease to the contrary notwithstanding,
all claims against, and liabilities and indemnities of, Lessee or Lessor arising prior to the
expiration or earlier termination of the Term shall survive such expiration or termination. In
addition, all claims against, and all liabilities and indemnities hereunder of Lessee shall
continue in full force and effect and in favor of the Lessor named herein and its successors and
assigns, notwithstanding any conveyance of the Leased Property to Lessee.

          44.1.2 Severability. If any term or provision of this Lease or any application
thereof shall be held invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby.

          44.1.3 Non-Recourse. Lessee specifically agrees to look solely to the Leased Property
for recovery of any judgment from Lessor. It is specifically agreed that no constituent partner in
Lessor or officer, director or employee of Lessor shall ever be personally liable for any such
judgment or for the payment of any monetary obligation to Lessee. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any right that Lessee might otherwise
have to obtain injunctive relief against Lessor, or any action not involving the personal liability
of Lessor. Furthermore, except as otherwise expressly provided herein, in no event shall Lessor
ever be liable to Lessee for any indirect or consequential damages suffered by Lessee from whatever
cause.

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          44.1.4 Licenses and Operation Transfer Agreements. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts to transfer to Lessor or Lessor’s
nominee a fully operational Facility and shall cooperate with Lessor or Lessor’s designee or
nominee in connection with the processing by Lessor or Lessor’s designee or nominee of any
applications for all licenses, operating permits and other governmental authorization, all
contracts, including contracts with governmental or quasi-governmental entities, business records,
data, patient and resident records, and patient and resident trust accounts, which may be necessary
or useful for the operation of the Facility; provided that the costs and expenses of any such
transfer or the processing of any such application shall be paid by Lessor or Lessor’s designee or
nominee. Lessee shall not commit any act or be remiss in the undertaking of any act that would
jeopardize the licensure or certification of the Facility, and Lessee shall comply with all
requests for an orderly transfer of the same upon the expiration or early termination of the Term
applicable to the Facility. Without limiting the generality of the foregoing, the following shall
apply:

               (a) If requested by Lessor or a proposed replacement operator for the Facility, Lessee hereby
agrees to enter into a reasonable operations transfer agreement with such replacement operator as
is customary in the transfer to a new operator of the operations of a facility similar to the
Facility. Lessee shall not unreasonably withhold, condition or delay its consent to entering into
any interim subleases or management agreements as may be necessary to effectuate an early transfer
of the operations of the Facility prior to the time that such replacement operator holds all
licenses and permits from all applicable governmental authorities with jurisdiction necessary to
operate the Facility for its Primary Intended Use.

               (b) If requested by Lessor, Lessee shall, subject to compliance with all applicable Legal
Requirements, continue to manage the Facility after the termination of this Lease and for so long
thereafter as is necessary for Lessor or Lessor’s designee or nominee to obtain all necessary
licenses, operating permits and other governmental authorizations, on such reasonable terms (which
shall include an agreement to reimburse Lessee for its reasonable out-of-pocket costs and expenses
and reasonable and administrative costs) as Lessor shall request.

In addition, upon request, Lessee shall promptly deliver copies of all books and records relating
to the Leased Property of the Facility and all Capital Additions thereto and operations thereon to
Lessor or Lessor’s designee or nominee. Lessee shall indemnify, defend, protect and hold harmless
Lessor from and against any loss, damage, cost or expense reasonably incurred by Lessor or Lessor’s
designee or nominee in connection with the correction of any and all deficiencies of a physical nature identified by any governmental authority responsible for
licensing the Leased Property of the Facility and all Capital Additions thereon in the course of
any change of ownership inspection and audit.

          44.1.5 Successors and Assigns. This Lease shall be binding upon Lessor and its
successors and assigns and, subject to the provisions of Article XXIV, upon Lessee and its
successors and assigns.

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          44.1.6 Termination Date. If this Lease is terminated by Lessor or Lessee under any
provision hereof, and upon the expiration of the Term (collectively, the “termination date”), the
following shall pertain:

          (a) Lessee shall vacate and surrender the Leased Property, Lessee’s Personal Property and all
Capital Additions to Lessor in the condition required by Section 9.1.4. Prior to such vacation and
surrender, Lessee shall remove any items which Lessee is permitted or required to remove hereunder.
Lessee shall, at Lessee’s cost, repair any damage to such Leased Property and any Capital
Additions caused by such vacation and/or removal of any items which Lessee is required or permitted
hereunder to remove. Any items which Lessee is permitted to remove but fails to remove prior to
the surrender to Lessor of such Leased Property, Lessee’s Personal Property and Capital Additions
shall be deemed abandoned by Lessee, and Lessor may retain or dispose of the same as Lessor sees
fit without claim by Lessee thereto or to any proceeds thereof. If Lessor elects to remove and
dispose of any such items abandoned by Lessee, the cost of such removal and disposal shall be an
Additional Charge payable by Lessee to Lessor upon demand.

          (b) Without limiting the provisions of Section 44.1.1 above, upon any such termination or
expiration of this Lease, the following shall pertain:

          (i) Lessee agrees to defend, protect, indemnify, defend and hold harmless Lessor from
and against any and all claims, costs, losses, expenses, damages, actions, and causes of
action for which Lessee is responsible under this Lease (including Lessee’s indemnification
obligations under Articles XXIII and XXXVI) and which accrue or have accrued on or before
the termination date.

          (ii) Lessee shall remain liable for the cost of all utilities used in or at the Leased
Property and any Capital Additions through the termination date and accrued and unpaid,
whether or not then billed, as of the termination date until full payment thereof by Lessee.
Lessee shall obtain directly from the companies providing such services closing statements
for all services rendered through the termination date and shall promptly pay the same. If
any utility statement with respect to such Leased Property and any Capital Additions
includes charges for a period partially prior to and partially subsequent to the termination
date, such charges shall be prorated as between Lessor and Lessee, with Lessee responsible
for the portion thereof (based upon a fraction the numerator of which is the number of days
of service on such statement through the termination date and the denominator of which is
the total number of days of service on such statement) through the termination date and
Lessor shall be responsible for the balance. The party receiving any such statement which
requires proration hereunder shall promptly pay such statement and the other party shall, within ten (10) days after
receipt of a copy of such statement, remit to the party paying the statement any amount for
which such other party is responsible hereunder.

          (iii) Lessee shall remain responsible for any and all Impositions imposed against the
Leased Property, the Personal Property and any Capital Additions with a lien date prior to
the termination date (irrespective of the date of billing therefor) and for its pro rata
share of any Impositions imposed in respect of the tax-fiscal period

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during which the Term terminates as provided in Section 4.1.7, and Lessee shall indemnify and hold Lessor harmless
with respect to any claims for such Impositions or resulting from nonpayment thereof.

          (iv) Lessee shall (y) execute all documents and take any actions reasonably necessary
to (1) cause the transfer to Lessor of all of Lessee’s Personal Property and any Capital
Additions not owned by Lessor, as provided in Section 6.3, in each case free of any
encumbrance, as provided in Section 6.3 and (2) remove this Lease and/or any memorandum
hereof as a matter affecting title to the Leased Property as provided in Article XXXVII and
(z) comply with its covenants set forth in Section 44.1.4.

          (v) Lessee shall continue to observe the covenants of Lessee set forth in Sections
7.4.1, 7.4.2 and 7.4.3 and any other covenant or agreement of Lessee in this Lease which is
intended to survive the expiration or sooner termination of this Lease.

          44.1.7 Governing Law. THIS LEASE WAS NEGOTIATED IN THE STATE OF CALIFORNIA, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY. ACCORDINGLY, IN ALL RESPECTS THIS LEASE (AND ANY AGREEMENT FORMED PURSUANT TO THE
TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD OF PRINCIPLES OF CONFLICTS OF LAW) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT ALL PROVISIONS HEREOF RELATING TO THE
CREATION OF THE LEASEHOLD ESTATE AND ALL REMEDIES SET FORTH IN ARTICLE XVI RELATING TO RECOVERY OF
POSSESSION OF THE LEASED PROPERTY (SUCH AS AN ACTION FOR UNLAWFUL DETAINER OR OTHER SIMILAR ACTION)
SHALL BE CONSTRUED AND ENFORCED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE IN WHICH THE
LEASED PROPERTY IS LOCATED.

          44.1.8 Waiver of Trial by Jury. EACH OF LESSOR AND LESSEE ACKNOWLEDGES THAT IT HAS HAD THE
ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION
OF THE UNITED STATES, THE STATE OF CALIFORNIA AND THE STATES IN WHICH THE LEASED PROPERTY IS LOCATED. EACH OF LESSOR AND LESSEE
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(i) ARISING UNDER THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY
MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LESSOR AND LESSEE WITH RESPECT TO
THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) 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 LESSOR AND

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LESSEE HEREBY AGREES AND CONSENTS THAT, SUBJECT TO ARTICLE
XLIII, 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 EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

          LESSOR’S INITIALS:                     

          LESSEE’S INITIALS:                     

          44.1.9 Lessee Counterclaim and Equitable Remedies. Lessee hereby waives the right to
interpose counterclaim in any summary proceeding instituted by Lessor against Lessee or in any
action instituted by Lessor for unpaid Rent under this Lease. In the event that Lessee claims or
asserts that Lessor has violated or failed to perform a covenant of Lessor not to unreasonably
withhold or delay Lessor’s consent or approval hereunder, or in any case where Lessor’s
reasonableness in exercising its judgment is in issue, Lessee’s sole remedy shall be an action for
specific performance, declaratory judgment or injunction, and in no event shall Lessee be entitled
to any monetary damages for a breach of such covenant, and in no event shall Lessee claim or assert
any claims for monetary damages in any action or by way of set-off defense or counterclaim, and
Lessee hereby specifically waives the right to any monetary damages or other remedies in connection
with any such claim or assertion.

          44.1.10 Entire Agreement. This Lease, together with the other Transaction Documents,
as defined in the Contract of Acquisition, the Exhibits hereto and thereto and such other documents
as are contemplated hereunder or thereunder, constitutes the entire agreement of the parties with
respect to the subject matter hereof, and may not be changed or modified except by an agreement in
writing signed by the parties. Lessor and Lessee hereby agree that all prior or contemporaneous
oral understandings, agreements or negotiations relative to the leasing of the Leased Property are
merged into and revoked by this Lease.

          44.1.11 Headings. All titles and headings to sections, subsections, paragraphs or
other divisions of this Lease are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other contents of such sections,
subsections, paragraphs or other divisions, such other content being controlling as to the
agreement among the parties hereto.

          44.1.12 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.

          44.1.13 Joint and Several. If more than one Person is the Lessee under this Lease,
the liability of such Persons under this Lease shall be joint and several.

          44.1.14 Interpretation. Both Lessor and Lessee 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.

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

          44.1.16 Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.

          44.1.17 Force Majeure. In the event that either Lessor or Lessee 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:

          (a) 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 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).

          (b) This Section shall not apply to any obligation to pay money or otherwise perform any
financial obligation hereunder.

          (c) In the event of any occurrence which a party believes constitutes a cause beyond the
reasonable control of such party and which 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. Failure to give such notice promptly, shall deem such occurrence or event not to be a cause
beyond the reasonable control of such party.

ARTICLE XLV.

     45.1 [Intentionally Omitted].

     45.2 Treatment of Lease . Lessor and Lessee hereby acknowledge and agree that this Lease shall be treated as an
operating lease for all purposes and not as a synthetic lease, financing lease or loan, and that
Lessor shall be entitled to all the benefits of ownership of the Leased Property, including
depreciation for all federal, state and local tax purposes.

[Signature Page Follows]

75

 

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

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	“LESSOR”	 	 
	 
	 	 	 	 	 	 
	 	 	HCP CROSSWOOD, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	“LESSEE”	 	 
	 
	 	 	 	 	 	 
	 	 	CSL LEASECO, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lawrence A. Cohen	 	 
	 	 	Title: Chief Executive Officer	 	 

76

 

EXHIBIT A

Legal Description of the Land

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF CITRUS HEIGHTS, COUNTY
OF SACRAMENTO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

Parcel One:

Lot C, as said lot is shown and so designated on that certain “Plat of Crosswoods
Unit No. 1”, filed in the office of the Recorder of Sacramento County in Book 88 of
Maps, Map No. 21.

Excepting therefrom a uniform strip of land 10.00 feet in width, the centerline of
said strip being more particularly described as follows:

Beginning at a point which bears North 47° 55’ 14” East 125.43 feet from the most
Westerly corner of said Lot C, said point being located on the Southeasterly line of
a 110.00 foot wide county road as Auburn Blvd.; thence from said point of beginning
South 19° 00’ 00” East 168.00 feet; thence South 82° 00’ 00” East 70.00 feet to the
point of ending.

Parcel Two:

A portion of Lot C, as said lot is shown and so designated on that certain “Plat of
Crosswoods Unit No. 1”, filed in the office of the Recorder of Sacramento County in
Book 88 of Maps, Map No. 21, described as follows:

A uniform strip of land 10.00 feet in width, the centerline of said strip being more
particularly described as follows:

Beginning at a point which bears North 47° 55’ 14” East 125.43 feet from the most
Westerly corner of said Lot C, said point being located on the Southeasterly line of
a 110.00 foot wide county road known as Auburn Blvd.; thence from said point of
beginning South 19° 00’ 00’ East 168.00 feet; thence South 82° 00’ 00” East 70.00
feet to the point of ending.

1

 

EXHIBIT B

List of Lessor’s Personal Property

All machinery, equipment, furniture, furnishings, moveable walls or
partitions, computers or trade fixtures or other tangible personal
property used or useful in Lessee’s business on the Leased Property
and all Capital Additions, excluding (i) all Excluded Property and
(ii) items, if any, included within the definition of Fixtures, but
specifically including those items described in Schedule 1 hereto.

1

 

Schedule 1

Itemization of Lessor’s Personal Property

To be mutually agreed upon by Lessor and Lessee prior to the
Commencement Date. When agreed upon, the same shall be initialed by
each of Lessor and Lessee and attached to Exhibit B as
Schedule 1, and will thereafter form a part of this Lease.
Failure of either Lessor or Lessee to prepare and/or initial such
Schedule 1 shall not affect the definition of or what
personal property constitutes Lessor’s Personal Property in
accordance with Exhibit B.

2

 

EXHIBIT C

Form of Amendment to Lease

FIRST AMENDMENT TO LEASE

     This
First Amendment to Lease (“Amendment”) is dated as of                                         , 200___ by and
between HCP CROSSWOOD, INC., a Delaware corporation (“Lessor”) and CSL LEASECO, INC., a Delaware
corporation (“Lessee”).

     RECITALS

     A. Lessor
and Lessee entered into a Lease dated as of                      ___, 200___ (the “Lease”) for the
                                         facility located in                     
                                        .

     B. Lessor and Lessee desire to memorialize their understanding regarding certain provisions of
the Lease.

AGREEMENT

     Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Lease. Lessor and Lessee hereby agree as follows:

     1. The Commencement Date of the Lease is                     ;

     2. The Term of the Lease shall end on                     ;

     3. The
first Lease Year for the Lease commences on                     , 200___ and ends on
                    , 200___; and

     4. Subject to further upward adjustments as provided in Section 3.1 of the Lease, the initial
monthly Minimum Rent payable under the Lease is: $______.

     Except as amended above, the Lease between Lessor and Lessee shall remain in full force and
effect. This Amendment may be executed in any number of counterparts, all of which together shall
constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day
and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	HCP CROSSWOOD, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

1

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	CSL LEASECO, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

     The undersigned Guarantor hereby consents to this Amendment and reaffirms to Lessor that its
obligations under the Guaranty dated                     , 200_, remain in full force and effect with respect
to the Lease as amended hereby.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	CAPITAL SENIOR LIVING PROPERTIES, INC., a Texas
corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

2

 

EXHIBIT D

Description of Facility and Certain Material Terms

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Annual	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Minimum	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Capital	 	 	 	 	 	 	 	 
	 	 	Initial	 	 	 	 	 	Project	 	Commencement	 	Base Resident	 	 	 	 
	Facility	 	Minimum Rent	 	Initial Investment	 	Amount1	 	Date	 	Revenues	 	Extended Term	 	Primary Intended Use
	6650 Crosswoods

Circle

Citrus Heights, CA

95621

	 	An amount equal to
one-twelfth (1/12)
of (i) the Initial
Investment times
(ii) the Lease
Rate.
	 	$	9,500,000.00	 	 	$	36,300	 	 	The Closing Date
under the Contract
of Acquisition, if
at all
	 	$	2,732,624.00	 	 	Two (2) ten (10)
year renewal term
	 	121-unit
independent living
facility and such
uses necessary or
incidental to such
use.

 

			
	1	 	Lessor and Lessee acknowledge that the
initial Annual Minimum Capital Project Amount for the Facility represents an
amount equal to (A) the number of units located at the Facility times
(B) Three Hundred Dollars ($300.00). In the event that the number of units for
the Facility is increased or decreased in accordance with the terms of this
Lease, the Annual Minimum Capital Project Amount for the Facility shall be
increased, or decreased, as applicable, by an amount equal to (1) the number of
such units increased or decreased at the Facility times (2) Three
Hundred Dollars ($300.00).

1

 

EXHIBIT E

Form Of

Irrevocable Standby Letter Of Credit

HCP Crosswood, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, California 90806

	 	 	 
	Date:                     

	 	Letter of Credit No.:                     
	 

	 	Expiration Date:                                         

GENTLEMEN:

We hereby establish our irrevocable letter of credit in your favor for the account of
                                                             available by your draft(s) on us payable at sight not to exceed a total
of
_____________________________________________
 (                                        ) when accompanied by the following documents.

	1)	 	A certificate purported to be executed by a representative of HCP Crosswood, Inc. (“Lessor”)
stating the amount for which a draw under this letter of credit is made and that: (a)
                                                             (“Lessee”) has committed an Event of Default under the lease
dated                                         , between Lessor and Lessee; or (b) that Lessee or an affiliate of
Lessee has committed an event of default under any other lease or agreement or other
instrument now or hereafter made with or in favor of Lessor or an affiliate of Lessor; or (c)
an event or circumstance has occurred which with notice or passage of time, or both, would
constitute an Event of Default or an event of default under any such other lease or agreement
or instrument, notwithstanding that transmittal of any such notice may be barred by applicable
law; or (d) a certificate purported to be executed by a representative of Lessor stating that
a replacement letter of credit for this instrument has not been supplied prior to thirty (30)
days in advance of the expiration of this instrument for the account of Lessor.
	 
	2)	 	The original letter of credit must accompany all drafts unless a partial draw is presented,
in which case the original must accompany the final draft.

Partial drawings are permitted, with the letter of credit being reduced, without amendment, by the
amount(s) drawn hereunder.

This
letter of credit shall expire at 2:00 p.m. at the office of _____________________________________________ on the expiration date.

This letter of credit may be transferred or assigned by the beneficiary hereof to any successor or
assign of such beneficiary’s interest in any such lease or other agreement or to any lender
obtaining a lien or security interest in the property covered by any such lease. Each draft
hereunder by any assignee or successor shall be accompanied by a copy of the fully executed
documents or judicial orders evidencing such encumbrance, assignment or transfer.

1

 

Any draft drawn hereunder must bear the legend “Drawn under                                          Letter of
Credit Number                      dated                                         . Except so far as otherwise expressly stated,
this letter of credit is subject to the “Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Brochure No. 500.” We hereby agree with you and all
persons negotiating such drafts that all drafts drawn and negotiated in compliance with the terms
of this letter of credit will be duly honored upon presentment and delivery of the documents
specified above by certified or registered mail to                                          located at                    
                                                                                 if negotiated not later that 2:00 p.m. on
or before the expiration date shown above.

Very truly yours,

By                                         

Its                                         

2

 

EXHIBIT F

Permitted Competing Facility(ies)

None.

1

 

Schedule A

Related Leases

1. That certain Master Lease dated as of May 31, 2006 by and between Texas HCP AL, L.P., a Delaware
limited partnership, as “Lessor” and CSL LeaseCo, Inc., a Delaware corporation, as “Lessee,”
relating to the lease of certain assisted living and independent living facilities located in
Abilene, Texas, Burleson, Texas, Cedar Hill, Texas, North Richland Hills, Texas and Waxahachie,
Texas more particularly described therein.

2. That certain Lease dated as of the date hereof by and between HCP Tesson, LLC, a Delaware
limited liability company, as “Lessor” and CSL LeaseCo, Inc., a Delaware corporation, as “Lessee,”
relating to the lease of that certain assisted living and independent living facility located in
St. Louis, Missouri more particularly described therein.

3. That certain Lease dated as of the date hereof by and between HCP Veranda, LLC, a Delaware
limited liability company, as “Lessor” and CSL LeaseCo, Inc., a Delaware corporation, as “Lessee,”
relating to the lease of that certain independent living facility located in Boca Raton, Florida
more particularly described therein.

1

 

Schedule 9.4

Required Repair Work

	 	 	 
	Required Repair Work	 	Completion Date
	Lessee shall install fire sprinklers
throughout the Facility.

	 	Three Hundred Sixty-Five (365) days
following the Commencement Date.

1exv10w3

 

Exhibit 10.3

SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREEMENTS TO EXHIBIT 10.2

Lease, dated May 31, 2006, by and between CSL LeaseCo, Inc. and HCP Tesson, LLC.

This lease relates to the Tesson Heights facility in St. Louis, Missouri and has a different
landlord and different rent amounts than Exhibit 10.2.

Lease, dated May 31, 2006, by and between CSL LeaseCo, Inc. and HCP Veranda, LLC.

This lease relates to the Veranda Club facility in Boca Raton, Florida and has a different
landlord and different rent amounts than Exhibit 10.2.

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