Document:

ex10_1.htm

     

     

    

      
        

      

      

      

      

      

      SECOND
AMENDED AND RESTATED MASTER LEASE

      (with
Options to Purchase)

      

      SINGLE
LESSEE

      MULTIPLE
FACILITIES

      

      

      

      OHI
ASSET (PA) TRUST

      

      AND

      

      GUARDIAN
LTC MANAGEMENT, INC.

      

      DATED:
SEPTEMBER 24, 2008

      

      EFFECTIVE
DATE: SEPTEMBER 30, 2008

      

       

      Facilities:                Mulberry
Square Elder Care and Rehabilitation Center

      Curwensville
Nursing Home

      Meadow
View Senior Living Center

      Ivy Woods
Manor / Rolling Acres Care Center

      Lakeview
Senior Care and Living Center

      Beaver
Elder Care / Guardian Elder Care at Aliquippa

      Scenery
Hill Manor / North American Medical Centers

      Milford
Valley Convalescent Home

      Bradyview
Manor

      Jefferson
Hills Manor

      Scottdale
Manor Rehabilitation Center

      Minerva
Convalescent Center

      Carleton
Senior Care and Rehabilitation Center

      Highlands
Care Center

      Guardian
Elder Care at Nanticoke

      Peterson
Rehabilitation Hospital and Geriatric Center

      Darway
Elder Care Rehabilitation Center

      Highland
View Healthcare

      Rolling
Hills Manor

      Forest
Park Health Center

      Brookline
Village

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      
        
          	
                  TABLE
      OF CONTENTS

                	 
      
	 
      	 
      	
                  Page

                
	
                  ARTICLE
      I - LEASE

                	
                  1

                
	
                  1.1

                	
                  LEASE.

                	
                  1

                
	
                  1.2

                	
                  TERM

                	
                  2

                
	
                  1.3

                	
                  OPTION
      TO RENEW

                	
                  2

                
	
                  ARTICLE
      II - DEFINITIONS

                	
                  3

                
	
                  2.1

                	
                  DEFINITIONS

                	
                  3

                
	
                  ARTICLE
      III - RENT

                	
                  23

                
	
                  3.1

                	
                  BASE
      RENT; MONTHLY INSTALLMENTS

                	
                  23

                
	
                  3.2

                	
                  ADDITIONAL
      CHARGES

                	
                  23

                
	
                  3.3

                	
                  LATE
      CHARGE; INTEREST

                	
                  23

                
	
                  3.4

                	
                  NET
      LEASE.

                	
                  24

                
	
                  3.5

                	
                  PAYMENTS
      IN THE EVENT OF A RENT ADJUSTMENT

                	
                  24

                
	
                  ARTICLE
      IV - IMPOSITIONS

                	
                  24

                
	
                  4.1

                	
                  PAYMENT
      OF IMPOSITIONS

                	
                  24

                
	
                  4.2

                	
                  ADJUSTMENT
      OF IMPOSITIONS

                	
                  25

                
	
                  4.3

                	
                  UTILITY
      CHARGES

                	
                  25

                
	
                  4.4

                	
                  INSURANCE
      PREMIUMS

                	
                  25

                
	
                  ARTICLE
      V – NO TERMINATION

                	
                  25

                
	
                  5.1

                	
                  NO
      TERMINATION, ABATEMENT, ETC

                	
                  25

                
	
                  ARTICLE
      VI – LEASED PROPERTIES

                	
                  26

                
	
                  6.1

                	
                  OWNERSHIP
      OF THE LEASED PROPERTIES

                	
                  26

                
	
                  6.2

                	
                  LESSOR’S
      PERSONAL PROPERTY

                	
                  26

                
	
                  6.3

                	
                  LESSEE’S
      PERSONAL PROPERTY

                	
                  26

                
	
                  6.4

                	
                  GRANT
      OF SECURITY INTEREST IN LESSEE’S PERSONAL PROPERTY AND
      ACCOUNTS

                	
                  27

                
	
                  ARTICLE
      VII – CONDITION OF LEASED PROPERTIES

                	
                  27

                
	
                  7.1

                	
                  CONDITION
      OF THE LEASED PROPERTIES

                	
                  27

                
	
                  7.2

                	
                  USE
      OF THE LEASED PROPERTIES

                	
                  27

                
	
                  7.3

                	
                  CERTAIN
      ENVIRONMENTAL MATTERS

                	
                  27

                
	
                  ARTICLE
      VIII - COVENANTS

                	
                  32

                
	
                  8.1

                	
                  COMPLIANCE
      WITH LEGAL AND INSURANCE REQUIREMENTS

                	
                  32

                
	
                  8.2

                	
                  LICENSES

                	
                  32

                
	
                  8.3

                	
                  CERTAIN
      COVENANTS

                	
                  32

                
	
                  8.4

                	
                  MINIMUM
      QUALIFIED CAPITAL EXPENDITURES

                	
                  35

                
	
                  8.5

                	
                  MANAGEMENT
      AGREEMENTS

                	
                  35

                
	
                  8.6

                	
                  NO
      OTHER BUSINESS; NO INVESTMENTS

                	
                  35

                
	
                  8.7

                	
                  TAX
      RETURNS

                	
                  35

                
	
                  8.8

                	
                  BANK
      ACCOUNTS

                	
                  35

                
	
                  ARTICLE
      IX – MAINTENANCE AND REPAIR

                	
                  36

                
	
                  9.1

                	
                  MAINTENANCE
      AND REPAIR

                	
                  36

                
	
                  9.2

                	
                  ENCROACHMENTS,
      RESTRICTIONS, ETC

                	
                  37

                
	
                  ARTICLE
      X – ALTERATIONS AND ADDITIONS

                	
                  38

                
	
                  10.1

                	
                  CONSTRUCTION
      OF ALTERATIONS AND ADDITIONS TO THE LEASED PROPERTIES

                	
                  38

                
	
                  ARTICLE
      XI - LIENS

                	
                  39

                
	
                  11.1

                	
                  LIENS

                	
                  39

                
	
                  ARTICLE
      XII – PERMITTED CONTESTS AND DEPOSITS

                	
                  39

                
	
                  12.1

                	
                  PERMITTED
      CONTESTS

                	
                  39

                
	
                  12.2

                	
                  LESSOR’S
      REQUIREMENT FOR DEPOSITS

                	
                  40

                
	
                  ARTICLE
      XIII - INSURANCE

                	
                  40

                
	
                  13.1

                	
                  GENERAL
      INSURANCE REQUIREMENTS

                	
                  40

                
	
                  13.2

                	
                  RISKS
      TO BE INSURED

                	
                  41

                
	
                  13.3

                	
                  PAYMENT
      OF PREMIUMS; COPIES OF POLICIES; CERTIFICATES

                	
                  42

                
	
                  13.4

                	
                  UMBRELLA
      POLICIES

                	
                  42

                
	
                  13.5

                	
                  ADDITIONAL
      INSURANCE

                	
                  42

                
	
                  13.6

                	
                  NO
      LIABILITY; WAIVER OF SUBROGATION

                	
                  42

                
	
                  13.7

                	
                  INCREASE
      IN LIMITS

                	
                  43

                
	
                  13.8

                	
                  BLANKET
      POLICY

                	
                  43

                
	
                  13.9

                	
                  NO
      SEPARATE INSURANCE

                	
                  43

                
	
                  13.10

                	
                  MINE
      SUBSIDENCE INSURANCE

                	
                  43

                
	
                  ARTICLE
      XIV - CASUALTY

                	
                  44

                
	
                  14.1

                	
                  INSURANCE
      PROCEEDS

                	
                  44

                
	
                  14.2

                	
                  RESTORATION
      IN THE EVENT OF DAMAGE OR DESTRUCTION

                	
                  44

                
	
                  14.3

                	
                  RESTORATION
      OF LESSEE’S PROPERTY

                	
                  44

                
	
                  14.4

                	
                  NO
      ABATEMENT OF RENT

                	
                  44

                
	
                  14.5

                	
                  WAIVER

                	
                  44

                
	
                  14.6

                	
                  DISBURSEMENT
      OF INSURANCE PROCEEDS EQUAL TO OR GREATER THAN THE APPROVAL
      THRESHOLD

                	
                  44

                
	
                  14.7

                	
                  NET
      PROCEEDS PAID TO FACILITY MORTGAGEE

                	
                  46

                
	
                  ARTICLE
      XV - TAKINGS

                	
                  46

                
	
                  15.1

                	
                  TOTAL
      TAKING OR OTHER TAKING WITH LEASED PROPERTY RENDERED UNSUITABLE FOR ITS
      PRIMARY INTENDED USE

                	
                  46

                
	
                  15.2

                	
                  ALLOCATION
      OF AWARD

                	
                  47

                
	
                  15.3

                	
                  PARTIAL
      TAKING

                	
                  47

                
	
                  15.4

                	
                  TEMPORARY
      TAKING

                	
                  47

                
	
                  15.5

                	
                  AWARDS
      PAID TO FACILITY MORTGAGEE

                	
                  48

                
	
                  ARTICLE
      XVI – RIGHTS UPON AN EVENT OF DEFAULT

                	
                  49

                
	
                  16.1

                	
                  LESSOR’S
      RIGHTS UPON AN EVENT OF DEFAULT

                	
                  49

                
	
                  16.2

                	
                  CERTAIN
      REMEDIES

                	
                  49

                
	
                  16.3

                	
                  DAMAGES

                	
                  49

                
	
                  16.4

                	
                  WAIVER

                	
                  50

                
	
                  16.5

                	
                  APPLICATION
      OF FUNDS

                	
                  50

                
	
                  16.6

                	
                  BANKRUPTCY

                	
                  50

                
	
                  ARTICLE
      XVII – CURE BY LESSOR

                	
                  51

                
	
                  17.1

                	
                  LESSOR’S
      RIGHT TO CURE LESSEE’S DEFAULT

                	
                  51

                
	
                  ARTICLE
      XVIII – HOLDING OVER

                	
                  51

                
	
                  18.1

                	
                  HOLDING
      OVER

                	
                  51

                
	
                  18.2

                	
                  INDEMNITY

                	
                  52

                
	
                  ARTICLE
      XIX - SUBORDINATION

                	
                  52

                
	
                  19.1

                	
                  SUBORDINATION

                	
                  52

                
	
                  19.2

                	
                  ATTORNMENT

                	
                  52

                
	
                  19.3

                	
                  LESSEE’S
      CERTIFICATE

                	
                  53

                
	
                  19.4

                	
                  NOTICE
      AND CURE

                	
                  53

                
	
                  ARTICLE
      XX – RISK OF LOSS

                	
                  53

                
	
                  20.1

                	
                  RISK
      OF LOSS

                	
                  53

                
	
                  ARTICLE
      XXI - INDEMNIFICATION

                	
                  53

                
	
                  21.1

                	
                  INDEMNIFICATION

                	
                  53

                
	
                  21.2

                	
                  SURVIVAL
      OF INDEMNIFICATION

                	
                  54

                
	
                  ARTICLE
      XXII – PROHIBITION AGAINST TRANSFERS

                	
                  54

                
	
                  22.1

                	
                  GENERAL
      PROHIBITION AGAINST TRANSFERS

                	
                  54

                
	
                  22.2

                	
                  SUBORDINATION
      AND ATTORNMENT

                	
                  55

                
	
                  22.3

                	
                  SUBLEASE
      LIMITATION

                	
                  56

                
	
                  ARTICLE
      XXIII – REPORTING REQUIREMENTS

                	
                  56

                
	
                  23.1

                	
                  FINANCIAL
      STATEMENTS AND OTHER REPORTS AND MATERIALS REQUIRED BY
    LESSOR

                	
                  56

                
	
                  23.2

                	
                  PUBLIC
      OFFERING INFORMATION

                	
                  58

                
	
                  ARTICLE
      XXIV – QUIET ENJOYMENT

                	
                  58

                
	
                  24.1

                	
                  QUIET
      ENJOYMENT

                	
                  58

                
	
                  ARTICLE
      XXV - NOTICES

                	
                  59

                
	
                  25.1

                	
                  NOTICES

                	
                  59

                
	
                  ARTICLE
      XXVI - APPRAISAL

                	
                  60

                
	
                  26.1

                	
                  APPRAISERS

                	
                  60

                
	
                  ARTICLE
      XXVII – TRANSFER OF FACILITIES

                	
                  61

                
	
                  27.1

                	
                  FACILITY
      TRADE NAMES

                	
                  61

                
	
                  27.2

                	
                  TRANSFER
      OF OPERATIONAL CONTROL OF THE FACILITIES

                	
                  61

                
	
                  27.3

                	
                  INTANGIBLES
      AND PERSONAL PROPERTY

                	
                  61

                
	
                  ARTICLE
      XXVIII - ARBITRATION

                	
                  62

                
	
                  28.1

                	
                  ARBITRATION

                	
                  62

                
	
                  ARTICLE
      XXIX – OPTION TO PURCHASE ALL FACILITIES

                	
                  62

                
	
                  29.1

                	
                  OPTION
      TO PURCHASE ALL FACILITIES

                	
                  62

                
	
                  29.2

                	
                  OPTION
      PROPERTY

                	
                  62

                
	
                  29.3

                	
                  EXERCISE
      OF OPTION

                	
                  63

                
	
                  29.4

                	
                  OPTION
      PRICE

                	
                  63

                
	
                  29.5

                	
                  CLOSING

                	
                  63

                
	
                  29.7

                	
                  LESSEE
      ACKNOWLEDGMENT

                	
                  64

                
	
                  29.8

                	
                  DEFAULT;
      REMEDIES

                	
                  66

                
	
                  29.9

                	
                  ASSIGNMENTS

                	
                  66

                
	
                  ARTICLE
      XXX – TERMINATION OF OPTION TO PURCHASE PETERSON FACILITY

                	
                  66

                
	
                  30.1

                	
                  TERMINATION
      OF OPTION TO PURCHASE PETERSON FACILITY

                	
                  66

                
	
                  ARTICLE
      XXXI – SECURITY DEPOSIT

                	
                  66

                
	
                  31.1

                	
                  SECURITY
      DEPOSIT

                	
                  66

                
	
                  31.2

                	
                  APPLICATION
      OF SECURITY DEPOSIT

                	
                  67

                
	
                  31.3

                	
                  TRANSFER
      OF SECURITY DEPOSIT

                	
                  67

                
	
                  ARTICLE
      XXXII - MISCELLANEOUS

                	
                  67

                
	
                  32.1

                	
                  SURVIVAL,
      CHOICE OF LAW

                	
                  67

                
	
                  32.2

                	
                  MUTUAL
      WAIVER OF RIGHT TO JURY TRIAL

                	
                  68

                
	
                  32.3

                	
                  MEMORANDUM
      OR SHORT FORM OF LEASE

                	
                  68

                
	
                  32.4

                	
                  LIMITATION
      ON RECOVERY

                	
                  68

                
	
                  32.5

                	
                  COMMISSIONS

                	
                  69

                
	
                  32.6

                	
                  WAIVERS

                	
                  69

                
	
                  32.7

                	
                  CONSENTS

                	
                  69

                
	
                  32.8

                	
                  LESSEE
      TO PAY REASONABLE EXPENSES

                	
                  69

                
	
                  32.9

                	
                  COUNTERPARTS

                	
                  69

                
	
                  32.10

                	
                  OPTIONS
      PERSONAL

                	
                  69

                
	
                  32.11

                	
                  LESSOR’S
      RIGHT TO INSPECT

                	
                  70

                
	
                  32.12

                	
                  NO
      WAIVER

                	
                  70

                
	
                  32.13

                	
                  REMEDIES
      CUMULATIVE

                	
                  70

                
	
                  32.14

                	
                  ACCEPTANCE
      OF SURRENDER

                	
                  70

                
	
                  32.15

                	
                  NO
      MERGER OF TITLE

                	
                  70

                
	
                  32.16

                	
                  NO
      PARTNERSHIP

                	
                  70

                
	
                  32.17

                	
                  CONVEYANCE
      BY LESSOR

                	
                  70

                
	
                  32.18

                	
                  RIGHTS
      CUMULATIVE

                	
                  70

                
	
                  32.19

                	
                  ENTIRE
      AGREEMENT

                	
                  70

                
	
                  32.20

                	
                  AMENDMENTS
      IN WRITING

                	
                  71

                
	
                  32.21

                	
                  SEVERABILITY

                	
                  71

                
	
                  32.22

                	
                  TIME
      OF THE ESSENCE

                	
                  71

                

        

        

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      SECOND
AMENDED AND RESTATED MASTER LEASE

      Multiple
Facilities

      

      THIS
SECOND AMENDED AND RESTATED MASTER LEASE (“Lease”) is executed
and delivered as of this 24th day of
September, 2008 to be effective as of September 30, 2008, and is entered into by
OHI ASSET (PA) TRUST, a Maryland business trust (“Lessor”), the address
of which is 9690 Deereco Road, Suite 100, Timonium, MD 21093, and GUARDIAN LTC
MANAGEMENT, INC., a Pennsylvania corporation (“Lessee”), the address
of which is Rte. 219, Brockway-DuBois Road, P.O. Box 219, Brockway, PA
15824.

       

      RECITALS

       

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

       

      A. Capitalized
terms used and not otherwise defined in this Lease have the respective meanings
given them in Article II below.

       

      B. Pursuant
to that certain Amended and Restated Master Lease dated as of August 24, 2006,
and effective as of September 1, 2006 between Lessor and Lessee, Lessee is
leasing from Lessor seventeen licensed nursing facilities located in
Pennsylvania, Ohio and West Virginia (the “Existing
Lease”).

       

      C. Lessor
has acquired the Leased Properties, including the acquisition of the 2008
Facilities concurrently with the execution of this Lease, from Lessee and the
Sublessees pursuant to the Purchase Agreements and other Purchase
Documents.

       

      D. Lessor
has agreed to lease the Leased Properties to Lessee, and Lessee has agreed to
lease the Leased Properties from Lessor, on the terms and conditions set forth
in this Lease.

       

      E. In
addition, Lessee has requested that Lessor consent to the Approved
Reorganization, and Lessor desires to so consent on the terms and conditions of
this Agreement.

       

      F. Lessor
and Lessee desire to amend and restate the Existing Lease as set forth in this
Lease.

       

      NOW,
THEREFORE, Lessor and Lessee agree to amend and restate the Existing Lease in
its entirety as follows:

       

      ARTICLE
I  -
LEASE

       

      1.1 Lease.  Upon
and subject to the terms and conditions set forth in this Lease, Lessor leases
to Lessee, and Lessee leases from Lessor, the Leased Properties. The Leased
Properties are leased subject to all covenants, conditions, restrictions,
easements and other matters affecting the Leased Property, whether or not of
record, including the Permitted Encumbrances and other matters which would be
disclosed by an inspection or accurate survey of the Leased
Properties.

       

      1.1.1 Subleases.  On
the Commencement Date, with the approval of Lessor, the Leased Properties are
subleased to the Sublessees pursuant to the Subleases.  Lessee hereby
assigns the Subleases to Lessor and each Sublessee has jointly and severally
with the other Sublessee guaranteed the obligations of Lessee under this Lease,
and to secure its guaranty each Sublessee has granted Lessor a security interest
in the Collateral owned by it.  Lessee shall not amend or modify the
terms of any Sublease without the prior written consent of Lessor, which Lessor
may in its sole discretion grant, withhold or condition.  Any Notice
given by Lessor to Lessee shall be deemed a Notice given to each Sublessee of a
Leased Property.

       

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

       

      1.2 Term.  The
initial term of this Lease (“Initial Term”) shall
be commence on Commencement Date and extend until September 30,
2018.  The Initial Term shall commence on the Commencement Date with
respect to all Facilities other than the Peterson Facility, the Darway Facility
and the 2008 Facilities.  The Initial Term shall commence as to the
Peterson Facility on the Peterson Commencement Date, as to the Darway Facility
on the Darway Commencement Date, and as to the 2008 Facilities on the 2008
Commencement Date; provided, however, that the Initial Term shall expire as to
all Facilities on the same date.

       

      1.3 Option to
Renew.  Lessee is hereby granted three (3) successive options
to renew this Lease for a period of five (5) Lease Years each, and one (1)
successive option to renew for four (4) Lease Years and eleven (11) months for a
maximum Term if such options are exercised of twenty nine years (29) Lease Years
and eleven (11) months.  Lessee’s options to renew this Lease are
subject to the following terms and conditions (which conditions may be waived by
Lessor in its sole discretion):

       

      (a) An option
to renew is exercisable only by Notice to Lessor at least two hundred seventy
(270) days prior to the expiration of the Initial Term (or prior to the
expiration of the preceding Renewal Term, as the case may be);

       

      (b) No Event
of Default or Unmatured Event of Default shall have occurred and be continuing
either at the time a renewal option is exercised or at the commencement of a
Renewal Term;

       

      (c) During a
Renewal Term, all of the terms and conditions of this Lease shall remain in full
force and effect; and

       

      (d) Lessee
may exercise its options to renew with respect to all (and no fewer than all) of
the Leased Properties.

       

      1.4 Consent.  Lessor
hereby consents to the Approved Reorganization; provided, however that the
Approved Reorganization is completed within twelve (12) months of the date of
this Lease.   If for any reason the Approved Reorganization is
not consummated within twelve (12)  months of the date of this Lease,
this consent shall be null and void.  This consent does not and shall
not be deemed to constitute, or be construed as, consent to any future or
further or other Transfer.  Concurrently with the execution of this
Lease, Guardian Holdings shall execute and deliver to Lessor a Lease Guaranty
and a Pledge Agreement in form and substance acceptable to both Lessor and
Guardian Holdings.  If (a) the Approved Reorganization is not
consummated in whole or in part, (b) the Plan of Reorganization is terminated,
and (c) the individual equity owners of Lessee remain the same as they are as of
the date of this Lease as described in the Transaction Documents, then effective
as of the receipt by Lessor of written certification from Lessee of such facts,
then Sections 8.3.2, 8.9, and 8.10 hereof shall have no further force or effect
and the obligations of, and restrictions applicable to, Guardian Holdings and
its Subsidiaries (which, because the Approved Reorganization was not
consummated, would not include Lessee and the Sublessees) under this Lease and
the other Transaction Documents (including, but not limited to, the obligations
and restrictions related to Guardian Holdings and its Subsidairies under
Sections 8.3.5, 8.3.6,
8.3.7, 8.3.8, 8.10, and 8.6) shall be automatically terminated and
of no further force or effect.  Notwithstanding anything to the
contrary contained herein or in any other Transaction Documents, Lessor agrees
for the benefit of Lessee, Guardian Holdings, and its Subsidiaries that no Event
of Default shall arise hereunder or under any Transaction Document if Guardian
Holdings or any of its Subsidiaries are unable to comply with any obligation or
covenant applicable to them hereunder or under any other Transaction Document
because the Plan of Reorganization has not been completed.

       

      ARTICLE II  -
DEFINITIONS

       

      2.1 Definitions.  For
all purposes of this Lease, except as otherwise expressly provided or unless the
context otherwise requires, (a) the terms defined in this Article have the
meanings assigned to them in this Article and include the plural as well as the
singular; (b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP as at the time applicable; (c)
all references in this Lease to designated “Articles,” “Sections” and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease; and (d) the words “herein,” “hereof” and “hereunder” and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision.

       

      2008 Commencement
Date: The effective date of this Lease.

       

      2008
Facilities:  means the Facilities commonly known
as:

       

      Highland
View Healthcare, 90 Main Street, Brockway, PA 15824,

      Rolling
Hills Manor, 17350 Old Turnpike Road, Millmont PA 17845

      Forest
Park Health Center, 700 Walnut Bottom Road, Carlisle PA 17013

      Brookline
Village, RD #1, Box 463, Mifflintown PA 17059

       

      2008 Sublessees:
means Guardian Elder Care at Carlisle, LLC, a Pennsylvania limited liability
company, Guardian Elder Care at Millmont, LLC, a Pennsylvania limited liability
company, Guardian Elder Care at Brockway, LLC, a Pennsylvania limited liability
company, and Brookline at Mifflintown, Inc., a Pennsylvania
corporation.

       

      Additional
Charges:  All Impositions and other amounts, liabilities and
obligations that Lessee assumes or agrees to pay under this Lease.

       

      Affiliate:  Any
Person who, directly or indirectly, Controls or is Controlled by or is under
common Control with another Person.

       

      Approval Threshold:
Twenty Five Thousand Dollars ($25,000).

       

      Approved
Reorganization:  means the conveyance to Guardian Holdings of
100% of the outstanding equity interests in Lessee as contemplated by the Plan
of Reorganization.

       

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

       

      Award:  All
compensation, sums or anything of value awarded, paid or received in connection
with a Taking or Partial Taking.

       

      Base Amount: means
One Hundred Forty Five million Dollars ($145,000,000).

       

      Base
Rent:  During the Term, the Base Rent shall be:

       

      (i) During
the period from November 1, 2004 thru the 2008 Commencement Date, the Base Rent
set forth for such period in the Existing Lease;

       

      (ii) During
the Lease Year commencing on September 1, 2008, Fifteen Million Seven Hundred
Eleven Thousand Six Hundred Eighty Six and 82/100 Dollars
($15,711,686.82);

       

      (iii) For each
succeeding Lease Year in the Term, the Base Rent for the previous Lease Year,
increased by the product of (a) the Base Rent during the preceding lease year
and (b) the lesser of 2 times the increase, if any, in the CPI or two and one
half percent (2.5%).  If the CPI does not increase (or if it
decreases) from one Lease Year to the next, the Base Rent will not increase
during such next Lease Year.

       

      Brockway LTC: means
BROCKWAY LTC MANAGEMENT, INC., a Pennsylvania corporation.

       

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

       

      Capitalization
Rate:  Ten and one quarter percent (10.25%).

       

      Capitalized Leases:
Leases that in accordance with GAAP are required to be capitalized for financial
reporting purposes.

       

      Cash Acquisition:
means the acquisition of some or all of assets of another Person, including, but
not limited to, real property, improvements, personal property or intangible
assets, by a Subsidiary of Guardian Holdings other than Lessee or a Sublessee
with respect to which all of the following conditions apply:

       

      (1)           Any
Debt is incurred in connection with such acquisition is unsecured;
and

       

      (2)           None
of Guardian Holdings, Lessee, or any Sublessee guaranties or otherwise is or
could be liable for any obligations (including any Debt) in connection with such
acquisition or the financing of such acquisition.

       

      Cash
Flow:  For any period, an amount equal to (a) Net Income of
Lessee arising solely from the operation of the Facilities for the applicable
period; plus (b) the
amounts deducted in computing Lessee’s Net Income for the period for (i)
depreciation, (ii) amortization, (iii) Base Rent, (iv) interest expense, (v)
income taxes (or, if greater, income tax actually paid during the period) and
(vi) actual management fees paid; less (c) an imputed
management fee equal to 5% of net revenues.

       

      Cash Flow to Rent
Ratio: For any fiscal period, the ratio of Cash Flow to Base
Rent.

       

      Citation: Any
operational or physical plant deficiency set forth in writing with respect to a
Facility by any governmental body or agency, or Medicare intermediary, having
regulatory oversight over a Facility, Lessee, any Sublessee or Manager, with
respect to which the scope and severity of the potential penalty for such
deficiency is one or more of the following: loss of licensure, decertification
of a Facility from participation in the Medicare and/or Medicaid programs,
appointment of a temporary manager or the continuation for more than forty five
(45) consecutive days of either a denial of payment for, or a ban on, new
admissions.

       

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

       

      Closing: is defined
in Section 29.5.

       

      Closing Date: is
defined in Section 29.5.

       

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

       

      Collateral: means the
“Collateral” as defined in the Security Agreements.

       

      Commencement
Date:  November 1, 2004.

       

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

       

      Construction
Funds:  The Net Proceeds and such additional funds as may be
deposited with Lessor by Lessee pursuant to Section 14.6 for restoration or
repair work pursuant to this Lease.

       

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

       

      Control (and its
corollaries “Controlled by” and “under common Control
with”):  Possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, through the
ownership of voting securities, partnership interests or other equity
interests.

       

      CPI:  The
United States Department of Labor, Bureau of Labor Statistics Revised Consumer
Price Index for All Urban Consumers (1982-84=100), U.S. City Average, All Items,
or, if that index is not available at the time in question, the index designated
by such Department as the successor to such index, and if there is no index so
designated, an index for an area in the United States that most closely
corresponds to the entire United States, published by such Department, or if
none, by any other instrumentality of the United States.

       

      Current
Assets:  At any date, all assets of a Person that in conformity
with GAAP should be classified as current assets on the balance sheet of such
Person at such date.

       

      Current
Liabilities:  At any date, all liabilities of a Person on a
consolidated basis that in conformity with GAAP should be carried as current
liabilities on the balance sheet of such Person at such date.

       

      Current
Ratio:  At any date, the ratio of Current Assets to Current
Liabilities.

       

      Darway Commencement
Date: September 1, 2006.

       

      Darway
Facility:  means the Facility commonly known as Darway Elder
Care Rehabilitation Center, RR #1, Box 1116, Forksville Pennsylvania
18616.

       

      Darway Sublessee:
means Guardian Elder Care at Forksville, LLC, a Pennsylvania limited liability
company.

       

      Date of
Taking:  The date on which the Condemnor has the right to
possession of the Leased Property that is the subject of the Taking or Partial
Taking.

       

      Debt: As of any date,
all (a) obligations of a Person, whether current or long-term, that in
accordance with GAAP should be included as liabilities on such Person’s balance
sheet; (b) obligations for borrowed money or installment obligations; (c)
obligations of such person under leases that in accordance with GAAP are
required to be capitalized for financial reporting purposes; (c) obligations of
others for which that Person is liable directly or indirectly, by way of
guaranty (whether by direct guaranty, suretyship, discount, endorsement,
take-or-pay agreement, agreement to purchase or advance or keep in funds or
other agreement having the effect of a guaranty) or otherwise; (d) liabilities
and obligations secured by liens of any assets of that Person, whether or not
those liabilities or obligations are recourse to that Person; (e) liabilities of
that Person, direct or contingent, with respect to letters of credit issued for
the account of that Person or others or with respect to bankers acceptances
created for that Person; (f) obligations which are evidenced by notes,
acceptances, or other instruments; and (f) obligations of such Person to
purchase securities or other property arising out of or in connection with the
sale of the same or substantially similar securities or property.  For
purposes of this definition, the sale of any accounts receivable shall be deemed
the incurring of debt for borrowed money.

       

      Distribution: Any
payment or distribution of cash or any assets of Lessee to one or more equity
owners of Lessee or to any Affiliate of Lessee, whether in the form of a
dividend or other return of or on capital, a fee for management in excess of the
fee required by the terms of a Management Agreement (but in any event not to
exceed five percent (5%) of net revenues of the Facilities), a payment for
services rendered or goods delivered, a reimbursement for expenditures or
overhead incurred on behalf of Lessee or a payment on any debt required by this
Lease to be subordinated to the rights of Lessor.

       

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

       

      Environmental Audit:
A written certificate that (a) is in form and substance reasonably satisfactory
to Lessor, (b) is from an environmental consulting or engineering firm
reasonably acceptable to Lessor and (c) states whether there is Contamination on
the Leased Properties and whether the Leased Properties are otherwise in
compliance with Environmental Laws.

       

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

       

      Environmental Laws:
All federal, state and local laws (including, without limitation, common law),
statutes, codes, ordinances, regulations, rules, orders, permits or decrees now
or at any time in effect and relating to (a) the introduction, emission,
discharge or release of Hazardous Substances into the indoor or outdoor
environment (including without limitation, air, surface water, groundwater, land
or soil), (b) the manufacture, processing, distribution, use, treatment,
storage, transportation or disposal of Hazardous Substances or (c) the Clean-Up
of Contamination.

       

      Event of
Default:  The occurrence of any of the following:

       

      (a) Lessee
fails to pay or cause to be paid the Base Rent when due and payable, or to
restore the Security Deposit if and as required by Section 31.2 of this Lease, and such failure is not cured
within a period of three (3) days after such obligation first came due and
payable;

       

      (b) Lessee
fails to make or cause to be made payment of any Rent (other than Base Rent or
the restoration of the Security Deposit) within a period of five (5) Business
Days after Notice of such failure;

       

      (c) Lessee,
any Sublessee or any Guarantor, on a petition in bankruptcy filed against it, is
adjudicated a bankrupt or has an order for relief thereunder entered against it,
or a court of competent jurisdiction enters an order or decree appointing a
receiver of Lessee, a Sublessee or any Guarantor or of the whole or
substantially all of its property, or approving a petition filed against Lessee,
a Sublessee or any Guarantor seeking reorganization or arrangement of Lessee, a
Sublessee or such Guarantor under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state thereof,
and such judgment, order or decree is not vacated or set aside or stayed within
forty-five (45) days from the date of the entry thereof, subject to the
applicable provisions of the Bankruptcy Code (11 USC § 101 et. seq.) and to the
provisions of Section 16.6 below;

       

      (d) Lessee, a
Sublessee or any Guarantor:  (i) admits in writing its inability to
pay its debts generally as they become due; (ii) files a petition in bankruptcy
or a petition to take advantage of any insolvency law; (iii) makes a general
assignment for the benefit of its creditors; (iv) consents to the appointment of
a receiver of itself or of the whole or any substantial part of its property; or
(v) files a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof, subject to the applicable provisions of
the Bankruptcy Code (11 USC § 101 et. seq.) and to the provisions of Section 16.6 below;

       

      (e) Lessee, a
Sublessee or any Guarantor is liquidated or dissolved, or begins proceedings
toward liquidation or dissolution, or has filed against it a petition or other
proceeding to cause it to be liquidated or dissolved and the proceeding is not
dismissed within forty-five (45) days thereafter, or Lessee, a Sublessee or any
Guarantor in any manner permits the sale or divestiture of all or substantially
all of its assets;

       

      (f) The
estate or interest of Lessee or any Sublessee in the Leased Properties or any
part thereof is levied upon or attached in any proceeding and the same is not
vacated or discharged of the earlier of (i) within thirty (30) days of the date
Lessee has actual notice of such levy or attachment (unless Lessee is in the
process of contesting such lien or attachment in good faith in accordance with
ARTICLE XII of this Lease) or (ii) the date such
levy or attachment is no longer subject to being vacated or
discharged;

       

      (g) Lessee
ceases operation of any Facility for a period in excess of five (5) Business
Days except upon prior Notice to, and with the express prior written consent of,
Lessor (which consent Lessor may withhold in its reasonable discretion), or as
the unavoidable consequence of damage or destruction as a result of a casualty,
or a Partial or total Taking or Force Majeure;

       

      (h) Any
representation or warranty made by Lessee, a Sublessee, a Guarantor or any
Affiliate of Lessee in the Lease, any Transaction Document or in any
certificates delivered in connection with this Lease or the Transaction
Documents proves to be untrue when made in any material respect and causes a
Material Adverse Effect and Lessee, a Sublessee, a Guarantor or any Affiliate,
as the case may be, fails within twenty (20) days after Notice from Lessor or
Omega, as the case may be, to cure such condition by terminating such adverse
effect and making Lessor or Omega, as the case may be, whole for any damage
suffered therefrom; provided, however, if the untrue statement is contained in a
certificate signed or delivered by a Person other than Lessee, Guarantors,
Sublessees or their Affiliates, then it shall only constitute an Event of
Default if any of Lessee, Guarantors or their Affiliates had knowledge of such
untrue statement and did not inform in writing Lessor of same within ten (10)
days of first acquiring such knowledge;

       

      (i) Lessee
(or, if applicable, any Sublessee or Manager):

       

      (i) has any
license, permit, approval, certificate of need, certificate of reimbursement or
other authorization necessary to operate any Facility as a provider of health
care services in accordance with its Primary Intended Use suspended or revoked,
or its right to so operate a Facility or to accept patients suspended, and
Lessee fails to remedy any condition causing such revocation or suspension
within any cure period allowed therefor by the applicable agency or authority
or, if no such cure period is allowed or specified by the applicable agency or
authority, Lessee fails to remedy the condition promptly and diligently
following Lessee’s receipt of notice of such condition and, in any event, prior
to the denial of any application for, or the revocation or suspension of, any
such license, permit, approval, certificate of need, certificate of
reimbursement, other authorization or right to operate the Facility in question
or to accept patients at the Facility in question; or

       

      (ii) receives
a Citation with respect to a Facility and fails to cure the condition that is
the subject of the Citation within the period of time required for such cure by
the issuer of the Citation or, but in any event prior to the denial of any
application for, or the revocation or suspension of, any license, permit,
approval, certificate of need, certificate of reimbursement or other
authorization necessary to operate a Facility as a provider of health care
services in accordance with its Primary Intended Use or to receive Medicare or
Medicaid payments with respect to residents of any Facility, or prior to the
appointment of a temporary manager, as the case may be; or

       

      (iii) fails to
give Lessor Notice that any event set forth in clauses (i) and (ii) above has
occurred, as required pursuant to Section 23.1(h)
below.

       

      (j) A
Transfer requiring the consent of Lessor under this Lease occurs without the
prior written consent of Lessor;

       

      (k) A default
occurs under any Transaction Document and such default is not cured within any
applicable cure period provided in such Transaction Document;

       

      (l) A default
occurs under any other material contract with aggregate obligations in excess of
Five Hundred Thousand Dollars ($500,000) affecting any Facility, Lessee, or any
Affiliate of Lessee involved in the operation of the Facilities and such default
is not cured within any applicable cure period provided in such
contract;

       

      (m) Lessee
breaches any of the financial covenants set forth in Section 8.3 of this Lease;

       

      (n) An “Event
of Default” under the terms of any other lease or other agreement between Lessee
or Affiliate of Lessee and Lessor or any Affiliate of Lessor; or

       

      (o) Reserved;
or

       

      (p) Lessee
fails to observe or perform any other term, covenant or condition of this Lease
or any other Transaction Document and the failure is not cured by Lessee within
a period of thirty (30) days after Notice thereof from Lessor, unless the
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed an Event of Default if and for so
long as Lessee proceeds promptly and with due diligence to cure the failure and
completes the cure prior to the time that the same causes a Material Adverse
Effect and prior to the time that the same results in civil or criminal
penalties to Lessor, Lessee, any Affiliates of either or to the Leased
Properties; or

       

      (q) A default
occurs under the Line of Credit Documents and such default continues beyond any
applicable grace or cure period provided for in the Line of Credit
Documents.

       

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

       

      Expiration Date:
means September 30, 2018 if the first Renewal Option has not been exercised, or
September 30, 2023, if the first Renewal Option has been exercised, but not the
second Renewal Option, or September 30, 2028, if the first and second Renewal
Options have been exercised, but not the third Renewal Option, or September 30,
2033, if the first, second and third Renewal Options have been exercised, but
not the fourth Renewal Option, or August 31, 2038, if the all of the Renewal
Options have been exercised.

       

      Facilit(y)(ies): Each
health care facility on the Land, including the Leased Property associated with
such Facility, and together, all such facilities on the Leased
Properties.

       

      Facility Mortgage:
Any mortgage, deed of trust or other security agreement that with the express,
prior, written consent of Lessor is a lien upon any or all of the Leased
Properties, whether such lien secures an obligation or obligations of Lessor or
its Affiliates.

       

      Facility Mortgagee:
The secured party to a Facility Mortgage, its successors and assigns, any
servicer acting on behalf of a Facility Mortgagee with respect to a Facility
Mortgage and, if any Facility Mortgage is deposited with a trust, then the
trustee acting on behalf of the certificate holders of such trust.

       

      Facility Trade Names:
The name(s) under which the Facilities do business during the Term. The Facility
Trade Names in use by the Facilities on the Commencement Date are set forth on
attached Exhibit
A.

       

      Fair Market Rent: The
rent that, at the relevant time, a Facility would most probably command in the
open market, under a lease on substantially the same terms and conditions as are
set forth in this Lease with a lessee unrelated to Lessor having experience and
a reputation in the health care industry and a credit standing reasonably
equivalent to that of Lessee, and, if this Lease is guaranteed, with such lease
being guaranteed by guarantors having a net worth at least equal to that of
Guarantors, with evidence of such rent being the rent that is being asked and
agreed to at such time under any leases of facilities comparable to such
Facility being entered into at such time in which the lessees and lease
guarantors meet the qualifications set forth in this sentence. Fair Market Rent
shall be determined in accordance with the appraisal procedure set forth in ARTICLE XXVI or in such other manner as may be mutually
acceptable to Lessor and Lessee.

       

      Fair Market
Value:  The value that, at the relevant time, the Option
Property would most probably command in the open market, in a sale transaction
between a willing buyer and a willing seller. Fair Market Value shall be
determined in accordance with the appraisal procedure set forth in ARTICLE XXVI or in such other manner as may be mutually
acceptable to Lessor and Lessee.

       

      Financial
Statement:

       

      (r) For each
quarter during Lessee’s fiscal year, on a consolidated basis for Lessee and the
Sublessees, (i) a statement of earnings for the current period and fiscal year
to the end of such period, with a comparison to the corresponding figures for
the corresponding period in the preceding fiscal year from the beginning of the
fiscal year to the end of such period, and (ii) a balance sheet as of the end of
the period, with a comparison to the corresponding figures for the corresponding
period in the preceding fiscal year from the beginning of the fiscal year to the
end of such period; and

       

      (s) For
Lessee’s fiscal year, an audited financial report for Lessee on a consolidated
basis for Lessee and the Sublessees, prepared by a “big four” accounting firm or
any other firm of independent certified public accountants reasonably acceptable
to Lessor, containing Lessee’s balance sheet as of the end of that year, its
related profit and loss, a statement of owner’s equity for that year, a
statement of cash flows for that year, any management letter prepared by the
certified public accountants, such comments and financial details as customarily
are included in reports of like character and the unqualified opinion of the
certified public accountants as to the fairness of the statements
therein.

       

      Fixtures:
Collectively, all permanently affixed equipment, machinery, fixtures, and other
items of real and/or personal property (excluding Lessor’s Personal Property),
including all components thereof, now and hereafter located in, on or used in
connection with, and permanently affixed to or incorporated into the Leased
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus (other than individual units), sprinkler
systems and fire and theft protection equipment, built-in oxygen and vacuum
systems, towers and other devices for the transmission of radio, television and
other signals, all of which, to the greatest extent permitted by law, are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto.

       

      Force Majeure: The
occurrence of any of the following events or conditions: a flood, earthquake, or
other Act of God; a fire or other casualty resulting in a complete or partial
destruction of the Facility in question; a war, revolution, riot, civil
insurrection or commotion, terrorism, or vandalism; a contractor or supplier
delay or failure in performance (not arising from a failure to pay any
undisputed amount due), or a delay in the delivery of essential equipment or
materials; bankruptcy or other insolvency of a contractor, subcontractor or
construction manager (not an Affiliate of the party claiming Force Majeure); a
strike, slowdown or other similar labor action; provided that in any such event,
the party claiming the existence of Force Majeure shall have given the other
party Notice of such claim within fifteen (15) days after becoming aware
thereof, and if the party claiming Force Majeure shall fail to give such Notice,
then the event or condition shall not be considered Force Majeure for any period
preceding the date such Notice shall be given.  No lack of funds on
the part of Lessee and its Affiliates shall be construed as Force
Majeure.

       

      GAAP:  Generally
accepted accounting principles in effect at the time in question.

       

      Guarantor: means any
Person which guaranties the obligations of Lessee under this Lease.

       

      Guaranties: means (1)
the Lease Guaranty dated as of October 28, 2004, and effective as of November 1,
2004 from the Sublessees, (2) the Limited Recourse Guaranty dated as of October
28, 2004, and effective as of November 1, 2004 from Guardian Elder Care, (3) the
Lease Guaranty dated as of February 24, 2006 from Brockway LTC, and (4) the
Lease Guaranty from Guardian Holdings dated as of the date of this
Lease.

       

      Guardian Elder Care:
means Guardian Elder Care, LLC, a Pennsylvania limited liability
company.

       

      Guardian Holdings:
means Guardian Elder Care Holdings, Inc., a Pennsylvania
corporation.

       

      Hazardous
Substance:  Dangerous, toxic or hazardous material, substance,
pollutant, contaminant, chemical, waste (including medical waste), including
petroleum products, asbestos and PCBs defined, listed or described as such under
any Environmental Law.

       

      Impositions:  Collectively,
all taxes (including, without limitation, all ad valorem, sales and use, single
business, gross receipts, business privilege, transaction privilege, rent or
similar taxes to the extent the same are assessed against Lessor in whole or in
part on the basis of, the value of the Leased Properties), assessments
(including Assessments), ground rents, water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character that at any time prior to, during or in
respect of the Term are assessed or imposed on or in respect of, or constitute a
lien upon (a) Lessor or Lessor’s interest in the Leased Properties; (b) the
Leased Properties or any part thereof or any rent therefrom or any estate,
right, title or interest therein; (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on or in connection with the
Leased Properties or the leasing or use of the Leased Properties or any part
thereof; or (d) Rent, but excluding any transfer or other tax imposed with
respect to the sale, exchange or other disposition by Lessor of the Leased
Properties or any part thereof or the proceeds thereof; provided, however, that
Impositions do not include any taxes payable on the net income of Lessor or any
capital stock or franchise taxes of Lessor.

       

      Initial
Term:  is defined in Section 1.2.

       

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

       

      Intangible Assets:
The amount of unamortized debt discounts and expenses, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
organizational and developmental expenses, unamortized operating rights,
unamortized licenses, unamortized leasehold rights, computer software
development costs, start-up costs, pre-opening costs, prepaid pension costs and
other intangible assets, including (a) any write-up resulting from a reversal of
a reserve for bad debts or depreciation and any write-up resulting from a change
in methods of accounting or inventory and (b) the amount of any Investment in
any Affiliate.

       

      Investigation: Soil
and chemical tests or any other environmental investigations, examinations or
analyses.

       

      Investments: of a
Person means any loan, advance (other than commission, travel and similar
advances to officers and employees made in the ordinary course of business),
extension of credit (other than accounts receivable arising in the ordinary
course of business on terms customary in the trade) or contribution of capital
by such Person; stocks, bonds, mutual funds, partnership interests, notes,
debentures or other securities owned by such Person; and structured notes,
derivative financial instruments and other similar instruments or contracts
owned by such Person.

       

      Joinder Agreements:
means (1) the Joinder Agreement and Amendment to
Transaction Documents among Lessor, Lessee, and Darway Sublessee dated as
of August 24, 2006, and (2) the Joinder Agreement and Amendment to Transaction Documents among
Lessor, Lessee and the 2008 Sublessees dated as of the date of this
Lease.

       

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

       

      Land:                      The
real property described in attached Exhibits B -1 through
B-
17.

       

      Lease:  As
defined in the Preamble.

       

      Lease
Year:  Each period from and including September 1 through
August 31 during the Term of this Lease.  If this Lease is terminated
before the end of any Lease Year, the final Lease Year shall be September 1
through the date of termination.

       

      Leased Improvements:
Collectively, all buildings, structures, Fixtures and other improvements of
every kind on the Land, including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking areas and roadways appurtenant to such buildings and
structures.

       

      Leased
Property:  The parcel or parcels of the Land on which a
Facility is located, the Leased Improvements on such parcel of the Land, the
Related Rights with respect to such parcel of the Land, and Lessor’s Personal
Property with respect to such Facility.

       

      Leased
Properties:  All of the Land, Leased Improvements, Related
Rights and Lessor’s Personal Property.

       

      Legal
Requirements:  All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, waivers, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Properties or any
portion thereof, Lessee’s Personal Property or the construction, use or
alteration of the Leased Properties (including but not limited to the Americans
with Disabilities Act), whether enacted and in force before, after or on the
Commencement Date, and including any that may (a) require repairs,
modifications, alterations or additions in or to any portion or all of the
Facilities, or (b) in any way adversely affect the use and enjoyment thereof,
and all permits, licenses and authorizations and regulations relating thereto,
including, but not limited to, (i) those relating to existing health care
licenses, (ii) those authorizing the current number of licensed beds and the
level of services delivered from the Leased Properties and (iii) all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances created by Lessor without
the consent of Lessee) and in force at any time during the Term.

       

      Lessee’s
Certificate:  A statement in writing in substantially the form
of Exhibit C
attached hereto (with such changes thereto as may reasonably be requested by the
person relying on such certificate).

       

      Lessee’s Personal
Property:  Personal Property owned or leased by Lessee that is
not included within the definition of the term “Lessor’s Personal Property” but
is used by Lessee in the operation of the Facilities, including Personal
Property provided by Lessee in compliance with Section 6.3 of this Lease.

       

      Lessor’s Future Rent
Loss:  An amount equal to the Rent that would have been payable
by Lessee from and after the Judgment Date through the Expiration Date had the
Lease not been terminated, plus such additional amount as may be necessary in
order to compensate Lessor for all other damages that are proximately caused by,
and in the ordinary course of things would be likely to result from, Lessee’s
failure to perform its obligations under this Lease.

       

      Lessor’s Interim Rent
Loss:  An amount equal to the Rent that would have been payable
by Lessee from the Termination Date through the Judgment Date had the Lease not
been terminated (including interest and late charges determined on the basis of
the date or dates on which Lessor’s Interim Rent Loss is actually paid by
Lessee), plus such additional amount as may be necessary in order to compensate
Lessor for all other damages that are proximately caused by, and in the ordinary
course of things would be likely to result from, Lessee’s failure to perform its
obligations under this Lease.

       

      Lessor’s Monthly Rent
Loss:  For any month, an amount equal to the installment of
Rent that would have been due in such month under the Lease if it had not been
terminated, plus, if such amount is not paid on or before the day of the month
on which such installment of Rent would have been due, the amount of interest
and late charges thereon that also would have been due under the Lease, plus
such additional amount as may be necessary in order to compensate Lessor for all
other damages that are proximately caused by, and in the ordinary course of
things would be likely to result from, Lessee’s failure to perform its
obligations under this Lease.

       

      Lessor’s Personal
Property:  All Personal Property and intangibles, if any, owned
by Lessor and leased to Lessee on the Commencement Date, together with any and
all replacements thereof, and all Personal Property that pursuant to the terms
of the Lease becomes the property of Lessor during the
Term.  Notwithstanding any other provision of this Lease, Lessor’s
Personal Property shall not include goodwill nor shall it include any other
intangible personal property that is severable from Lessor’s “interests in real
property” within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.

       

      Letter of Credit
Agreement:  An agreement between Lessor and Lessee providing
for a letter of credit to be delivered to Lessor as the Security
Deposit.

       

      Line of Credit: A
working capital line of credit from Public Credit, LLC, a Pennsylvania limited
liability company, or such other lender as Lessor may approve in
writing.

       

      Line of Credit
Documents: The documents which evidence the Line of Credit.

       

      Management
Agreement:  Any agreement pursuant to which management of a
Facility is delegated by Lessee to any Person not an employee of Lessee or to
any other related or unrelated party.

       

      Manager:  The
Person to whom management of the operation of a Facility is delegated pursuant
to a Management Agreement.

       

      Material Adverse
Effect: means any material adverse effect whatsoever upon (a) the
validity, performance or enforceability of any Transaction Document, (b) the
properties, contracts, business operations, profits or condition (financial or
otherwise) of Lessee, a Sublessee or any Guarantor, or (c) the ability of
Lessee, a Sublessee, any Guarantor or any of their Affiliates to fulfill its
obligations under the Transaction Documents.

       

      Maximum Principal
Amount: means for the first Lease Year, Five Million Dollars
($5,000,000), and for each succeeding Lease Year in the Term, the Maximum
Principal Amount for the previous Lease Year, increased by the product of (a)
the Maximum Principal Amount during the preceding lease year and (b) the
increase, if any, in the CPI.  If the CPI does not increase (or if it
decreases) from one Lease Year to the next, the Maximum Principal Amount will
not increase during such next Lease Year.

       

      Net
Income:  For any period, Lessee’s net income (or loss) for such
period attributable to the operation of the Facilities, determined in accordance
with GAAP; provided, however, that Lessee’s Net Income shall not include any
extraordinary gains (or losses) or nonrecurring gains (or losses).

       

      Net
Proceeds:  All proceeds, net of any costs incurred by Lessor in
obtaining such proceeds, payable under any policy of insurance required by ARTICLE XIII of this Lease (including any proceeds with
respect to Lessee’s Personal Property that Lessee is required or elects to
restore or replace pursuant to Section 14.3) or paid
by a Condemnor for a Taking or Partial Taking of a Leased Property.

       

      Net Reletting
Proceeds: Proceeds of the reletting of any portion of the Leased Property
received by Lessor, net of Reletting Costs.

       

      Notice:  A
notice given in accordance with Section 25.1 of this
Lease.

       

      Notice of
Termination:  A Notice from Lessor that it is terminating this
Lease by reason of an Event of Default.

       

      Objections: is
defined in Section 29.6.

       

      Off-Balance Sheet
Liability: of a Person means (i) any repurchase obligation or liability
of such Person with respect to accounts or notes receivable sold by such Person,
(ii) any liability under any Sale and Leaseback Transaction which is not a
Capitalized Lease, (iii) any liability under any so-called “synthetic lease”
transaction entered into by such Person, or (iv) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the balance
sheets of such Person.

       

      Officer’s
Certificate: A certificate signed by an Executive Officer.

       

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

       

      Option: is defined in
Section 29.1.

       

      Option Deposit: is
defined in Section 29.3.

       

      Option Period: is
defined in Section 29.3.

       

      Option Property: is
defined in Section 29.2.

       

      Overdue
Rate:  On any date, the interest rate that is equal to three
percent (3%)  (three hundred (300) basis points) above the Prime Rate,
but in no event greater than the maximum rate then permitted under applicable
law.

       

      Partial
Taking:  A taking of less than the entire fee of a Leased
Property that either (a) does not render the Leased Property Unsuitable for its
Primary Use, or (b) renders a Leased Property Unsuitable for its Primary
Intended Use, but neither Lessor nor Lessee elects pursuant to Section 15.1 hereof to terminate this Lease.

       

      Payment
Date:  Any due date for the payment of the installments of Base
Rent or for the payment of Additional Charges or any other amount required to be
paid by Lessee hereunder.

       

      Permitted
Encumbrances: Encumbrances listed on attached Exhibit
D.

       

      Permitted
Investments: The following Investments are permitted:

       

      (a)           The
ownership of 100% of the outstanding equity securities by Guardian Holdings in
the following entities:

       

      
        	
                 
      

              	
                (1)

              	
                Guardian
      Elder Care;

              

      

       

      
        	
                 
      

              	
                (2)

              	
                Guardian
      Rehabilitation Services, Inc., a Pennsylvania
  corporation;

              

      

       

      
        	
                 
      

              	
                (3)

              	
                Guardian
      LTC Pharmacy, Inc., a Pennsylvania
corporation;

              

      

       

      
        	
                 
      

              	
                (4)

              	
                Guardian
      Home & Community Services, Inc., a Pennsylvania
      corporation;

              

      

       

      
        	
                 
      

              	
                (5)

              	
                Guardian
      Elder Care Management, Inc., a Pennsylvania
  corporation;

              

      

       

      
        	
                 
      

              	
                (7)

              	
                Lessee;
      and

              

      

       

      (b)           The
ownership of 99% or more of the outstanding equity securities by Lessee in the
Sublessees; and

       

      (c)           The
ownership of 1% of the outstanding equity securities by Brockway LTC in certain
of the Sublessees;

       

      (d)           A
Cash Acquisition;

       

      (e)           Investments
by Guardian Holdings in any Subsidiary of Guardian Holdings and Investments by
Subsidiaries of Guardian Holdings (other than Lessee and the Sublessees) in
other Subsidiaries of Guardian Holdings, provided that if such Investment is in
Lessee, Brockway LTC, or any Sublessee, any rights to repayment or any return on
such Investment are subordinated to the rights of Lessor pursuant to a written
subordination agreement in form and substance acceptable to Lessor in its
commercially reasonable discretion;

       

      (f)           Investments
among Lessee and the Sublessees; and

       

      (f)           Such
other Investments as may be consented to in writing by Lessor, which consent
will not unreasonably withheld by Lessor.

       

      Person:  Any
natural person, trust, partnership, corporation, joint venture, limited
liability company or other legal entity.

       

      Personal
Property:  All machinery, equipment, furniture, furnishings,
movable walls or partitions, computers (and all associated software), trade
fixtures and other tangible personal property (but excluding consumable
inventory and supplies owned by Lessee) used in connection with the Leased
Properties, together with all replacements  and alterations thereof
and additions thereto, except items, if any, included within the definition of
Fixtures or Leased Improvements.

       

      Peterson Option:
means the option to purchase the Peterson Facility granted by Lessor to Lessee
which was being terminated pursuant to the Existing Lease.

       

      Plan of
Reorganization: The Plan of Reorganization of Guardian Elder Care dated
as of the date of this Lease.

       

      Pledge
Agreements: means (i) the Pledge Agreement
dated as of October 28, 2004 and effective as of November 1, 2004, between
Lessor, as creditor, and the Lessee, as debtor, (ii) the Pledge Agreement dated
as of February 24, 2004 between Lessor, as creditor, and Brockway LTC, as
debtor, each as amended by the Joinder Agreements, and (iii) the Pledge
Agreement dated as of the date of this Lease between Lessor, as creditor, and
Guardian Holdings, as debtor.

       

      Present Value: The
value of future payments, determined by discounting each such payment at a rate
equal to the yield on the specified date on securities issued by the United
States Treasury (bills, notes and bonds) maturing on the date closest to
December 31 in the year in which such future payment would have been
due.

       

      Primary Intended Use:
Licensed skilled nursing facilities, assisted living facilities and independent
living facilities.

       

      Prime
Rate:  On any date, an interest rate equal to the prime rate
published by the Wall Street Journal, but in no event greater than the maximum
rate then permitted under applicable law. If the Wall Street Journal ceases to
be in existence, or for any reason no longer publishes such prime rate, the
Prime Rate shall be the rate announced as its prime rate by the financial
institution that is the agent for the banks under Omega’s senior credit
agreement, and if such bank no longer exists or does not announce a prime rate
at such time, the Prime Rate shall be the rate of interest announced as its
prime rate by a national bank selected by Lessor.

       

      Principals: Raymond
L. Calhoun, Peter C. Varischetti, Frank A. Varischetti, Steven R. Varischetti
and Nicholas D. Varischetti.

       

      Proceeding: Any
action, proposal or investigation by any agency or entity, or any complaint to
such agency or entity.

       

      Purchase Agreements:
means (i) the Purchase Agreement dated as of October 28, 2004, and effective as
of November 1, 2004 among Lessor, as purchaser, and Lessee and the Sublessees
(other than the Darway Sublessee and the 2008 Sublessees), as sellers, (ii) the
Purchase Agreement dated as of August 24, 2006, and effective as of September 1,
2006, among Lessor, as purchaser, and Lessee, the Darway Sublessee and GUARDIAN
ELDER CARE AT FORKSVILLE, LP, a Pennsylvania limited partnership, as sellers,
and (iii) the Purchase Agreement dated as of the date of this Lease, among
Lessor, as purchaser, and Lessee, the 2008 Sublessees and certain of their
Affiliates, as sellers.

       

      Purchase Documents:
As defined in the Purchase Agreements.

       

      Purchase Money
Financing:   Any financing provided by a Person to Lessee
or a Sublessee in connection with the acquisition of Personal Property used in
connection with the operation of a Facility, whether by way of installment sale,
equipment lease or otherwise.

       

      Purchase Price: is
defined in Section 29.4.

       

      Qualified Capital
Expenditures:  Expenditures capitalized on the books of Lessee
for alterations, renovations, repairs and replacements to the Facilities,
including without limitation any of the following:   Replacement
of furniture, fixtures and equipment, including refrigerators, ranges, major
appliances, bathroom fixtures, doors (exterior and interior), central air
conditioning and heating systems (including cooling towers, water chilling
units, furnaces, boilers and fuel storage tanks) and major replacement of
siding; major roof replacements, including major replacements of gutters,
downspouts, eaves and soffits; major repairs and replacements of plumbing and
sanitary systems; overhaul of elevator systems; major repaving, resurfacing and
sealcoating of sidewalks, parking lots and driveways; repainting of entire
building exterior; but excluding major alterations, renovations, additions
(consisting of expansions of any Facility, including construction of a new wing
or a new story on any Facility), normal maintenance and repairs.

       

      Reasonable Expenses:
is defined in Section 32.8.

       

      Regulatory
Actions:  Any claim, demand, notice, action or proceeding
brought, threatened or initiated by any governmental authority in connection
with any Environmental Law, including, without limitation, civil, criminal and
administrative proceedings, whether or not the remedy sought is costs, damages,
equitable remedies, penalties or expenses.

       

      Related
Rights:  All easements, rights and appurtenances relating to
the Land and the Leased Improvements.

       

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

       

      Reletting Costs:
Expenses incurred by Lessor in connection with the reletting of the Leased
Properties in whole or in part after an Event of Default, including without
limitation reasonable attorneys’ fees and expenses, brokerage fees and expenses,
marketing expenses and the cost of repairs and renovations reasonably required
for such reletting.

       

      Renewal Term: A
period for which the Term is renewed in accordance with Section 1.3.

       

      Rent:  Collectively,
Base Rent and Additional Charges.

       

      Replacement
Cost:  The actual replacement cost of the Leased Properties,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy.  In all events
Replacement Cost shall be an amount sufficient that neither Lessor nor Lessee is
deemed to be a co-insurer of the Leased Property in question.

       

      Sale and Leaseback
Transaction: means any sale or other transfer of real or personal
property by any Person with the intent to lease such property as
lessee.

       

      SEC:  Securities
and Exchange Commission.

       

      Security Agreements:
means (1) the Security Agreement dated as of October 28, 2004, and effective as
of November 1, 2004 between Lessor, as secured party, and Lessee and the
Sublessees, as debtors, and (2) the Security Agreement dated as of October 28,
2004, and effective as of November 1, 2004between Lessor, as secured party, and
Guardian Elder Care, as debtor, in each case as amended by the Joinder
Agreements.

       

      Security Deposit: As
defined in Section 31.1 of this Lease.

       

      Special Risk
Insurance:  The insurance that Lessee is required to maintain
pursuant to Section 13.2.1 of this
Lease.

       

      State: The State or
States in which the Leased Properties are located.

       

      Subleases:  The
Subleases dated the same date as this Agreement with the Sublessees listed on
attached Exhibit
E for the corresponding Facility listed on Exhibit E, and such
other Subleases expressly approved in writing by Lessor prior to execution of
any sublease by Lessee.

       

      Sublessees:  The
sublessees under the Subleases.

       

      Subordination
Agreement: The Subordination Agreement
dated as of October 28, 2004, and effective as of November 1, 2004 from Lessee,
the Sublessees, and Guarantors in favor of Lessor, as amended by the Joinder
Agreements.

       

      Subsidiary: of a
Person means (i) any corporation with respect to which any of the outstanding
securities having ordinary voting power shall at the time be owned or
controlled, directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any
partnership, limited liability company, association, joint venture or similar
business organization with respect to which any of the ownership interests
having ordinary voting power shall at the time be so owned or
controlled.  Unless otherwise expressly provided, all references
herein to a “Subsidiary” shall mean a Subsidiary of Lessee or any
Sublessee.

       

      Taken: Conveyed
pursuant to a Taking or Partial Taking.

       

      Taking:  A
taking or voluntary conveyance during the Term of all of a Leased Property, or
any interest therein or right accruing thereto or use thereof, as the result of,
or in settlement of any condemnation or other eminent domain proceeding
affecting the Leased Property, whether or not the proceeding actually has been
commenced.

       

      Tangible Net Worth:
At any date, the net worth of a Person as determined in conformity with GAAP,
less Intangible Assets, as determined as of such date.

       

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

       

      Termination
Date:  The date on which a Notice of Termination is
given.

       

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

       

      Title Commitments: is
defined in Section 29.6.

       

      Title Policies: is
defined in Section 29.6.

       

      Transaction
Documents: means the following documents: this Lease, the Purchase
Agreements, the Purchase Documents, the Guaranties, the Letter of Credit
Agreement, the Security Agreements, the Pledge Agreements, the Subordination
Agreements, the Joinder Agreements, and any security agreements, pledge
agreements, letter of credit agreements, guarantees, notes or other documents
which evidence, secure or otherwise relate to this Lease or the Purchase
Agreements, or the transactions contemplated by this Lease and the Purchase
Agreements and to which Lessee, a Sublessee, a Guarantor or another Affiliate of
Lessee is a party; and any and all amendments, modifications, extensions and
renewals of any of the foregoing documents.

       

      Transfer:  The
(a) assignment, mortgaging or other encumbering of all or any part of Lessee’s
interest in this Lease or in the Leased Properties; (b) subletting of the whole
or any part of any Leased Property (except to Sublessees pursuant to the
Subleases); (c) entering into of any Management Agreement or other arrangement
under which any Facility is operated by or licensed to be operated by an entity
other than Lessee or a Sublessee; (d) merger, consolidation or reorganization of
a corporate Lessee, corporate Sublessee, corporate Manager, or Guardian
Holdings, or the sale, issuance, transfer and/or redemption, cumulatively or in
one transaction, of any voting stock by Lessee, any Sublessee or Manager, or
Guardian Holdings or by Persons who are stockholders of record or beneficially
of Lessee, any Sublessee or Manager, or Guardian Holdings, if such event or
events result(s) in a change of Control of Lessee, any Sublessee or Manager, or
Guardian Holdings; or (e) sale, issuance, transfer or redemption, cumulatively
or in one transaction, of any interest, or the termination of any interest,
whether held directly or indirectly, in Lessee, any Sublessee or Manager, or
Guardian Holdings if Lessee, such Sublessee, such Manager or Guardian Holdings
is a joint venture, partnership, limited liability company or other association
and such sale, issuance, transfer, redemption or termination of interest results
in a change of Control of such joint venture, partnership, limited liability
company or other association.

       

      Transferee: An
assignee, subtenant or other occupant of a Leased Property pursuant to a
Transfer.

       

      Unmatured Event of
Default: means the occurrence of an event which upon its occurrence, or
with the giving of notice, the passage of time, or both, would constitute an
Event of Default.

       

      Unsuitable for Its Primary
Intended Use:  A state or condition of a Facility such that by
reason of a Partial Taking, the Facility cannot be operated on a commercially
practicable basis for its Primary Intended Use, taking into account, among other
relevant factors, the number of usable beds permitted by applicable law and
regulation in the Facility after the Partial Taking, the square footage Taken
and the estimated revenue impact of such Partial Taking.

       

      ARTICLE
III  - RENT

       

      3.1 Base Rent; Monthly
Installments. In addition to all other payments to be made by Lessee
under this Lease, Lessee shall pay Lessor the Base Rent in lawful money of the
United States of America which is legal tender for the payment of public and
private debts, Lessee shall pay the Base Rent in advance, (i) during the first
Lease Year, in monthly installments in an amount equal to the amount set forth
in the definition of Base Rent and (ii) each year thereafter, in equal,
consecutive monthly installments, each of which shall be in an amount equal to
one-twelfth (1/12) of the Base Rent payable for the Lease Year in which such
installment is payable. The first installment of Base Rent shall be payable on
the Commencement Date, together with a prorated amount of Base Rent for the
period from the Commencement Date until the last day of the first full calendar
month of the Term.  Thereafter, installments of Base Rent shall be
payable on the first (1st) day of
each calendar month.  Base Rent shall be paid to Lessor, or to such
other Person as Lessor from time to time may designate by Notice to Lessee, by
wire transfer of immediately available federal funds to the bank account
designated in writing by Lessor. If Lessor directs Lessee to pay any Base Rent
or Additional Charges to any Person other than Lessor, Lessee shall send to
Lessor, simultaneously with payment of the Base Rent or Additional Charges, a
copy of the transmittal letter or invoice and check evidencing such, or such
other evidence of payment as Lessor requires.

       

      3.2 Additional
Charges.   In addition to the Base Rent, Lessee also will
pay as and when due all Additional Charges.

       

      3.3 Late Charge;
Interest.  If any Rent payable to Lessor is not paid when due,
Lessee shall pay Lessor on demand, as an Additional Charge, a late charge equal
to five percent (5%) of the amount not paid when due, and, in addition, if such
Rent (including the late charge) is not paid within thirty (30) days of the date
on which such Rent was due, interest thereon at the Overdue Rate from the date
when due until such Rent (including the late charge and interest) is paid in
full.

       

      3.4 Net
Lease.

       

      3.4.1 The Rent
shall be paid absolutely net to Lessor, so that this Lease shall yield to Lessor
the full amount of the Rent payable to Lessor under this Lease throughout the
Term.

       

      3.4.2 If Lessor
commences any proceedings for non-payment of Rent, Lessee will not interpose any
counterclaim or cross complaint or similar pleading of any nature or description
in such proceedings unless Lessee would lose or waive such claim by the failure
to assert it, but Lessee does not waive any rights to assert such claim in a
separate action brought by Lessee.  The covenants to pay Rent are
independent covenants, and Lessee shall have no right to hold back, offset or
fail to pay any Rent because of any alleged default by Lessor or for any other
reason.

       

      3.5 Payments In The Event of a
Rent Adjustment.

       

      3.5.1 Upon the
adjustment, pursuant to the definition of the term “Base Rent,” in the Base Rent
payable pursuant to this Lease with respect to any Lease Year, the adjustment
shall be effective as of the first payment of Base Rent due in the Lease Year as
to which such adjustment pertains.  Because it may not be possible to
determine the adjusted Base Rent prior to the effective date of such adjustment,
Lessee shall continue to pay the Base Rent at the rate in effect prior to the
adjustment until Lessor gives Lessee Notice of its determination of the adjusted
Base Rent. Upon such determination, the Base Rent shall be adjusted
retroactively as of the effective date of such adjustment.  On or
before the second (2nd)
payment date for Base Rent following receipt by Lessee of Lessor’s Notice of the
adjustment, Lessee shall make an additional payment of Base Rent in such amount
as will bring the Base Rent, as adjusted, current on or before such second
(2nd)
payment date, and thereafter Lessee shall pay the adjusted Base Rent in
correspondingly adjusted monthly installments until the Base Rent is next
adjusted or reset as required under this Lease.

       

      3.5.2 This
Section 3.5 shall survive the expiration or earlier termination of this Lease
with respect to any adjustment or reset that is not known or fully paid as of
the date of expiration or earlier termination of this Lease.

       

      ARTICLE IV -
IMPOSITIONS

       

      4.1 Payment of
Impositions.  Subject to Sections 12.1 and 12.2, Lessee will
pay all Impositions before any fine, penalty, interest or cost is added for
non-payment, and will promptly, upon request, furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such
payments.  Subject to Section 12.2, if at
the option of the taxpayer any Imposition may be paid in installments, Lessee
may pay the same in the required installments provided it also pays any and all
interest due thereon as and when due.  Lessee shall prepare and file
as and when required all tax returns and reports required by governmental
authorities with respect to all Impositions.  Lessor and Lessee shall
each, upon request, provide the other with such data, including without
limitation cost and depreciation records, as is maintained by the party to whom
the request is made as is necessary to prepare any required returns and
reports.  Lessee shall be entitled to receive and retain any refund
from a taxing authority in respect of an Imposition paid by Lessee if at the
time of the refund no Event of Default has occurred, but if an Event of Default
has occurred at the time of the refund, Lessee shall not be entitled to receive
or retain such refund, and if and when received by Lessor such refund shall be
applied as provided in ARTICLE
XVI.  Lessee may, upon Notice to and with the consent of Lessor
(which consent shall not be withheld unreasonably), at Lessee’s sole cost and
expense, protest, appeal or institute such other proceedings as Lessee deems
appropriate to effect a reduction of real estate or personal property
assessments and Lessor, at Lessee’s expense as aforesaid, shall cooperate with
Lessee in such protest, appeal or other action.  Lessee shall
reimburse Lessor for Lessor’s direct costs of cooperating with Lessee for such
protest, appeal or other action.

       

      4.2 Adjustment of
Impositions.  Impositions imposed in respect of the tax fiscal
period during which the Term ends shall be adjusted and prorated between Lessor
and Lessee, whether or not imposed before or after the expiration or earlier
termination of the Term, and Lessee’s obligation to pay its prorated share
thereof shall survive the expiration or earlier termination of the
Term.

       

      4.3 Utility
Charges.  Lessee will pay or cause to be paid when due all
charges for electricity, power, gas, oil, water and other utilities imposed upon
the Leased Properties or upon Lessor or Lessee with respect to the Leased
Properties.

       

      4.4 Insurance Premiums.
Lessee shall pay or cause to be paid when due all premiums for the insurance
coverage required to be maintained pursuant to ARTICLE
XIII during the Term.  Lessee shall deposit with Lessor the
premiums for such insurance in accordance with the provisions of Section 12.2 of this Lease.

       

      ARTICLE V  –
NO TERMINATION

       

      5.1 No Termination, Abatement,
etc.  Lessee shall not take any action without the consent of
Lessor to modify, surrender or terminate this Lease (other than as expressly
permitted under this Lease), and shall not seek or be entitled to any abatement,
deduction, deferment or reduction of Rent, or setoff against
Rent.  The respective obligations of Lessor and Lessee shall not be
affected by reason of (a) any damage to, or destruction of, the Leased
Properties or any portion thereof from whatever cause or any Taking or Partial
Taking of the Leased Properties, except as expressly set forth herein; (b) the
lawful or unlawful prohibition of, or restriction upon, Lessee’s use of the
Leased Properties, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim that
Lessee has or might have against Lessor or by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee, or to which Lessor and Lessee are parties; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor; or (e) 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, that now or hereafter may be conferred upon it
by law to (a) modify, surrender or terminate this Lease or quit or surrender the
Leased Properties or any portion thereof, or (b) entitle Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Lessee hereunder.

       

      ARTICLE VI  –
LEASED PROPERTIES

       

      6.1 Ownership of the Leased
Properties.  Lessee acknowledges that the Leased Properties are
the property of Lessor and that Lessee has only the right to the possession and
use of the Leased Properties upon the terms and conditions of this
Lease.  Lessee will not (a) file any income tax return or other
associated documents, (b) file any other document with or submit any document to
any governmental body or authority, (c) enter into any written contractual
arrangement with any Person or (d) release any financial statements of Lessee,
in any case that take any position other than that throughout the Term Lessor is
the owner of the Leased Properties for federal, state and local income tax
purposes and this Lease is a “true lease,” and an “operating lease” and not a
“capital lease.”

       

      6.2 Lessor’s Personal
Property.  Lessee shall, during the entire Term, maintain all
of Lessor’s Personal Property in good order, condition and repair as shall be
necessary in order to operate the Facilities for the Primary Intended Use in
compliance with all applicable licensure and certification requirements, all
applicable Legal Requirements and Insurance Requirements, and customary industry
practice for the Primary Intended Use.  If any of Lessor’s Personal
Property requires replacement in order to comply with the foregoing, Lessee
shall replace it with similar property of the same or better quality at Lessee’s
sole cost and expense, and when such replacement property is placed in service
with respect to the Leased Property it shall become Lessor’s Personal
Property.  Lessee shall not permit or suffer Lessor’s Personal
Property to be subject to any lien, charge, encumbrance, financing statement,
contract of sale, equipment lessor’s interest or the like, except for any
purchase money security interest or equipment lessor’s interest expressly
securing Debt permitted pursuant to Section 8.3.9 or
otherwise approved in advance, in writing, by Lessor.  At the
expiration or earlier termination of this Lease (except if the Closing occurs
after the exercise of the Option as provided for below), all of Lessor’s
Personal Property shall be surrendered to Lessor with the Leased Properties at
or before the time of the surrender of the Leased Property in at least as good a
condition as at the Commencement Date (or, as to replacements, in at least as
good a condition as when placed in service at the Facilities) except for
ordinary wear and tear.

       

      6.3 Lessee’s Personal
Property.  Lessee shall provide and maintain during the Term
such Personal Property, in addition to Lessor’s Personal Property, as shall be
necessary and appropriate in order to operate the Facilities for the Primary
Intended Use in compliance with all licensure and certification requirements, in
compliance with all applicable Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the Primary
Intended Use. Upon the expiration of the Term or the earlier termination of this
Lease (except if the Closing occurs after the exercise of the Option as provided
for below), without the payment of any additional consideration by Lessor,
Lessee shall be deemed to have sold, assigned, transferred and conveyed to
Lessor all of Lessee’s right, title and interest in and to any and all of
Lessee’s Personal Property whether or not integral to the Primary Intended Use
of the Facilities and wherever located; provided, however, that Lessee shall not
be obligated to transfer its computers and proprietary
software.  Lessee shall not remove any of Lessee’s Personal Property
that is in use at the expiration or earlier termination of the Lease from the
Leased Properties.

       

      6.4 Grant of Security Interest
in Lessee’s Personal Property and Accounts.  Lessee and the
Sublessees have concurrently granted to Lessor a security interest in the
Collateral, which includes, without limitation, the Personal Property as defined
herein and Lessee’s and Sublessees’ Accounts as defined in the Security
Agreement.

       

      ARTICLE VII –
CONDITION OF LEASED PROPERTIES

       

      7.1 Condition of the Leased
Properties.  Lessee acknowledges that it has inspected and
otherwise has knowledge of the condition of the Leased Properties prior to the
execution and delivery of this Lease and has found the same to be in good order
and repair and satisfactory for its purposes hereunder.  Lessee is
leasing the Leased Properties “as is” in their condition on the Commencement
Date.  Lessee waives any claim or action against Lessor in respect of
the condition of the Leased Properties.  LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF ANY LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE
TO BE BORNE BY LESSEE.  Lessee further acknowledges that throughout
the Term Lessee is solely responsible for the condition of the Leased
Properties.

       

      7.2 Use of the Leased
Properties.  Throughout the Term Lessee shall use the Leased
Properties continuously for the Primary Intended Use and uses incidental
thereto. Lessee shall not use the Leased Properties or any portion thereof for
any other use without the prior written consent of Lessor.  No use
shall be made or permitted to be made of, or allowed in, the Leased Properties,
and no acts shall be done, which will cause the cancellation of, or be
prohibited by, any insurance policy covering the Leased Properties or any part
thereof, nor shall the Leased Properties or Lessee’s Personal Property be used
for any unlawful purpose. Lessee shall not commit or suffer to be committed any
waste on the Leased Properties, or cause or permit any nuisance thereon, or
suffer or permit the Leased Properties or any portion thereof, or Lessee’s
Personal Property, to be used in such a manner as (a) might reasonably tend to
impair Lessor’s (or Lessee’s, as the case may be) title thereto or to any
portion thereof, or (b) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of the Leased Properties or any portion thereof.

       

      7.3 Certain Environmental
Matters.

       

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

       

      (b) Notice of Environmental
Claims, Actions or Contaminations.  Lessee shall notify Lessor,
in writing, timely (based upon the circumstances) upon learning of any existing,
pending or threatened: (i) investigation, inquiry, claim or action by any
governmental authority in connection with any Environmental Laws, (ii) Third
Party Claims, (iii) Regulatory Actions, and/or (iv) Contamination of any portion
of the Leased Properties

       

      (c) Costs of Remedial Actions
with Respect to Environmental Matters.  If any investigation
and/or Clean-Up of any Hazardous Substance or other environmental condition on,
under, about or with respect to a Leased Property is required by any
Environmental Law, Lessee shall complete, at its own expense, such investigation
and/or Clean-Up or cause any other Person who may be legally responsible to
complete such investigation and/or Clean-Up.

       

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

       

      (e) Environmental
Audit.  At Lessee’s expense, Lessee shall, upon and within
forty-five (45) days of a written request therefor from Lessor (or within such
shorter timeframe as is reasonable in the event of an emergency), deliver an
Environmental Audit to Lessor.  All tests and samplings shall be
conducted using generally accepted and scientifically valid technology and
methodologies.  Lessee shall give the engineer or environmental
consultant conducting the Environmental Audit reasonable and complete access to
the Leased Properties and to all records in the possession of Lessee that may
indicate the presence (whether current or past) of a Release or threatened
Release of any Hazardous Substances on, in, under, about and adjacent to any
Leased Property.  Lessee also shall provide the engineer or
environmental consultant full access to and the opportunity to interview such
persons as may be employed in connection with the Leased Properties as the
engineer or consultant deems appropriate.  However, Lessor shall not
be entitled to request an Environmental Audit from Lessee unless (i) after the
Commencement Date there have been material changes, modifications or additions
to Environmental Laws as applied to or affecting any of the Leased Properties;
(ii) a significant change in the condition of any of the Leased Properties has
occurred; (iii) there are fewer than six (6) months remaining in the Term; or
(iv)  Lessor has another good reason for requesting such certificate
or certificates.  If the Environmental Audit discloses the presence of
Contamination or any noncompliance with Environmental Laws, Lessee shall
immediately perform all of Lessee’s obligations under this Lease with respect to
such Hazardous Substances or noncompliance.

       

      (f) Entry onto Leased Properties
for Environmental Matters.  If Lessee fails to provide an
Environmental Audit as and when required by Subparagraph (e) above, in addition to Lessor’s other remedies
Lessee shall permit Lessor from time to time, and upon prior written notice to
Lessee at least five (5) days in advance (except in the case of emergency
circumstances when no prior notice is required), by its employees, agents,
contractors or representatives, to enter upon the Leased Properties for the
purpose of conducting such Investigations as Lessor may desire, the reasonable
expense of which shall be paid or reimbursed promptly by Lessee as an Additional
Charge.  Lessor and its employees, agents, contractors, consultants
and/or representatives, shall conduct any such Investigation in a manner that
does not unreasonably interfere with Lessee’s use of and operations on the
Leased Properties (however, reasonable temporary interference with such use and
operations is permissible if the investigation cannot otherwise be reasonably
and inexpensively conducted).  Other than in an emergency, Lessor
shall provide Lessee with prior written notice before entering any of the Leased
Properties to conduct such Investigation, and shall provide copies of any
reports or results to Lessee, and Lessee shall cooperate fully in such
Investigation.

       

      (g) Environmental Matters Upon
Termination of the Lease or Expiration of Term.  Upon the
expiration or earlier termination of the Term, Lessee shall cause the Leased
Properties to be delivered free of any and all Regulatory Actions and Third
Party Claims and otherwise in compliance with all Environmental Laws with
respect thereto, and in a manner and condition that is reasonably required to
ensure that the then present use, operation, leasing, development, construction,
alteration, refinancing or sale of the Leased Property shall not be restricted
by any environmental condition existing as of the date of such expiration or
earlier termination of the Term.

       

      (h) Compliance with
Environmental Laws.  Lessee shall comply with, and cause its
agents, servants and employees to comply with, and shall use reasonable efforts
to cause each occupant and user of any of the Leased Properties, and the agents,
servants and employees of such occupants and users to comply with, each and
every Environmental Law applicable to Lessee, the Leased Properties and each
such occupant or user with respect to the Leased
Properties.  Specifically, but without limitation:

       

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

       

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

       

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

       

      (iv) Discharge of
Lien.  Within twenty (20) days of the date any lien is imposed
against the Leased Properties or any part thereof under any Environmental Law,
Lessee shall cause such lien to be discharged (by payment, by bond or otherwise
to Lessor’s absolute satisfaction);

       

      (v) Notification of
Lessor.  Within three (3) Business Days after receipt by Lessee
of Notice or discovery by Lessee of any fact or circumstance that might result
in a breach or violation of any covenant or agreement, Lessee shall give Lessor
Notice of such fact or circumstance; and

       

      (vi) Requests, Orders and
Notices.  Within three (3) Business Days after receipt of any
request, order or other notice relating to the Leased Properties under any
Environmental Law, Lessee shall forward a copy thereof to Lessor.

       

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

       

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

       

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

       

      (iii) Payments to Discharge
Liens.  On behalf of Lessee, make any payment or perform any
other act or cause any act to be performed that will prevent a lien in favor of
any federal, state or local governmental authority from attaching to the Leased
Properties or that will cause the discharge of any lien then attached to the
Leased Properties; or

       

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

       

      (v) Demand of
Payment.  Demand that Lessee make immediate payment of all of
the costs of such Clean-Up and/or exercise of the remedies set forth in this
Section 7.3 incurred by Lessor and not paid by
Lessee as of the date of such demand.

       

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

       

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

       

      (ii) Injuries.  All
injuries to persons (including wrongful death) by reason of environmental
matters relating to the condition of or activities past or present on, at, in or
under a Leased Property;

       

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

       

      (iv) Misrepresentation.  All
material misrepresentations relating to environmental matters made by Lessee or
its Affiliates;

       

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

       

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

       

      (vii) Presence of
Liens.  All liens imposed upon any of the Leased Properties in
favor of any governmental entity or any person as a result of the presence,
disposal, release or threat of release of Hazardous Substances at, on, in, from
or under a Leased Property.

       

      Notwithstanding
the foregoing, nothing in this Section shall be construed as indemnifying Lessor
against its own grossly negligent acts or omissions or willful
misconduct.

       

      (k) Rights Cumulative and
Survival.  The rights granted Lessor under this Section are in
addition to and not in limitation of any other rights or remedies available to
Lessor under this Lease or allowed at law or in equity or rights of
indemnification provided to Lessor in any agreement pursuant to which Lessor
purchased any of the Leased Property.  The payment and indemnification
obligations set forth in this Section 7.3 shall survive the expiration or
earlier termination of the Term with respect to all indemnification, Clean-Up
obligations under this Section 7.3 arising out of acts, omissions or conditions
occurring or existing on or before the later of (i) the expiration
of the Term (without taking into account any early termination) and (ii) the
date Lessee delivers possession to Lessor or Lessor’s designee.

       

      ARTICLE
VIII  -
COVENANTS

       

      8.1 Compliance with Legal and
Insurance Requirements.  In its use, maintenance, operation and
any alteration of the Leased Properties, Lessee, at its expense, promptly will
(a) comply with all Legal Requirements and Insurance Requirements, whether or
not compliance with them requires structural changes in any of the Leased
Improvements (which structural changes shall be subject to Lessor’s prior
written approval, which Lessor shall not unreasonably withhold or delay) or
interferes with or prevents the use and enjoyment of the Leased Properties, and
(b) procure, maintain and comply with all licenses, certificates of need,
provider agreements and other authorizations required for the use of the Leased
Properties and Lessee’s Personal Property for the Primary Intended Use, and for
the proper erection, installation, operation and maintenance of the Leased
Properties or any part thereof. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether or not Lessor is a party thereto, that Lessee has violated any
such Legal Requirements or Insurance Requirements shall be conclusive of that
fact as between Lessor and Lessee.

       

      8.2 Licenses.  Lessee
represents and warrants that Lessee and the Sublessees have received and
presently hold all necessary certificates of need approvals/exemptions and
license and certification approvals with respect to the operation of the
Facilities for their Primary Intended Use.  Lessee and the Sublessees
shall acquire and maintain, or cause to be acquired and maintained, all
licenses, certificates, permits, provider agreements and other authorizations
and approvals needed to operate the Facilities or any of them in their customary
manner for the Primary Intended Use and any other use conducted on the
Facilities as may be permitted from time to time under this
Lease.  Without limiting the generality of the foregoing, the Lessee
and the Sublessees will maintain in effect all licenses, permits, certificates
of need, Section 1122 approvals, facility certifications, provider agreements,
consents and other authorizations from all federal, state, municipal and other
governmental agencies or authorities as are necessary to lawfully operate all
beds contained in the Facilities as nursing home beds, that are duly certified
to provide licensed nursing services, and to receive payment therefor under the
Medicare and applicable state Medicaid programs.

       

      8.3 Certain
Covenants.

       

      8.3.1 Lessee Tangible Net
Worth.  During the Term, Lessee and the Sublessees shall
maintain on a consolidated basis a minimum Tangible Net Worth of Three Million
Dollars ($3,000,000), and if at any time Lessee’s and the Sublessees’ Tangible
Net Worth is less than the requirement set forth in the preceding clause, within
thirty (30) days Lessee shall cause its equity owners to contribute to Lessee
sufficient equity capital in the form of cash to cause Lessee’s Tangible Net
Worth to equal or exceed such requirement.  For purposes of this
Section, Tangible Net Worth includes the amount of any cash Security
Deposit.

       

      8.3.2 Guardian Holdings Tangible
Net Worth.  During the Term, Lessee and the Sublessees shall
maintain a positive Tangible Net Worth, and if at any time Guardian Holdings’
Tangible Net Worth is not positive, within thirty (30) days Guardian Holdings
shall cause its equity owners to contribute to Guardian Holdings sufficient
equity capital in the form of cash to cause Guardian Holdings’ Tangible Net
Worth to be positive.

       

      8.3.3 Cash Flow to Rent
Ratio. During the Term, Lessee and the Sublessees on a consolidated basis
shall maintain a Cash Flow to Rent Ratio of 1.3 or more.  The Cash
Flow to Rent Ratio is tested quarterly on a trailing twelve months
basis.  During the Lease Year commencing on September 1, 2008, a pro
forma Base Rent of Fifteen Million Seven Hundred Eleven Thousand Six Hundred
Eighty Six and 82/100 Dollars ($15,711,686.82) shall be used.

       

      8.3.4 Current Ratio. During
the Term, Lessee and the Sublessees on a consolidated basis shall maintain a
Current Ratio of 1.0 or more.  The Current Ratio is tested as of the
last day of each calendar quarter.

       

      8.3.5 Debt.  During
the Term, none of the Lessee nor any Sublessee will, or will they permit any
Subsidiary to, create, incur or suffer to exist any Debt, except equipment
financing permitted pursuant to Section 8.3.9 and
the Line of Credit permitted pursuant to Section 8.3.11.  During the Term, without the prior
written consent of Lessor, neither Brockway LTC or Guardian Holdings will
create, incur or suffer to exist any Debt; provided, however, that Lessor shall
not unreasonably withhold consent to the incurrence of any Debt by Guardian
Holdings.

       

      8.3.6 Off-Balance Sheet
Liabilities.  Other than transactions with Lessor, during the
Term, without the prior written consent of Lessor, none of the Lessee, Brockway
LTC, Guardian Holdings or any Sublessee will, or will it permit any Subsidiary
to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or (ii)
any other transaction pursuant to which it incurs or has incurred Off-Balance
Sheet Liabilities; provided, however, that Lessor shall not unreasonably
withhold its consent to such transactions if they do not involve Brockway LTC,
Lessee or any Sublessee in any manner.

       

      8.3.7 Limitation of
Distributions.  During the Term, none of Brockway LTC, Guardian
Holdings, Lessee nor any Sublessee shall make any Distributions to the holders
of its equity securities (other than Lessee in the case of the Sublessees) or
any Affiliate if, as of the date of such Distribution or upon giving effect to
such Distribution, (a) an Event of Default has occurred and is continuing or (b)
an Unmatured Event of Default has occurred and is continuing.  During the Term, none of
Guardian Holdings, Lessee or the Sublessees shall enter into any contracts or
agreements with any Affiliates of Guardian Holdings, Lessee or a Sublessee to
provide goods or services to the Facilities unless such contracts or agreements
are on commercially reasonable terms competitive in the marketplace and no more
favorable to the provider of goods or services as is available to nursing home
operators of comparable size in the States in which the Facilities are
located.  Notwithstanding the provisions of this Section 8.3.7, after the occurrence of an Event of Default or
an Unmatured Event of Default and while it continues, Guardian Holdings, Lessee
and the Sublessees may make payments in the ordinary course of business required
by contracts or agreements entered into prior to the date of such Event of
Default or Unmatured Event of Default with their Affiliates for goods and
services which are reasonably necessary to the continued operation of the
Facilities; provided, however, that Guardian Holdings, Lessee and the Sublessees
may not make any such payments with respect to amounts which are more than forty
five (45) days past due and Lessee must provide Lessor copies of the contracts
or agreements and Notice of such payments on or before the date
made.

       

      8.3.8 Guarantees
Prohibited. During the Term, without the prior written consent of Lessor,
none of Brockway LTC, Guardian Holdings, Lessee, any Sublessee nor any
Subsidiary of Guardian Holdings shall guarantee any indebtedness of any
Affiliate or other third party; provided however, that Lessor shall not
unreasonably withhold its consent to a guaranty by Guardian Holdings or any
Subsidiary of Guardian Holdings other than Lessee or any Sublessee.

       

      8.3.9 Equipment
Financing.                                                        During
the Term, the aggregate amount of principal, interest and lease payments due
from Lessee and the Sublessees on any equipment financing shall not exceed
Twenty Five Thousand Dollars ($25,000) annually per Facility. 

       

      8.3.10 Loans from
Affiliates. None of Brockway LTC, Guardian Holdings, Lessee nor any
Sublessee shall borrow money from any Affiliate unless the obligations of
Brockway LTC, Guardian Holdings, Lessee or such Sublessee and the rights of its
Affiliates with respect to any such loan are subordinated to the rights of
Lessor pursuant to a written subordination agreement in form and substance
acceptable to Lessor in its commercially reasonable discretion.

       

      8.3.11 Line of
Credit.  During the Term, Lessee and the Sublessees may obtain
a Line of Credit provided that:

       

      (a) The
working capital lender executes and delivers to Lender an subordination
agreement in form and substance satisfactory to Lender in its sole discretion,
providing that, among other things, (i) the Line of Credit is subordinated in
right of payment to the payment and performance of all obligations owed to
Lessor by Lessee, the Sublessees and Guarantors, (ii) the working capital lender
would not pursue any remedies with regard to the Line of Credit until such time
as all obligations owed to Lessor by Lessee, the Sublessees and Guarantors have
been paid and performed in full, and (iii) the maximum principal amount
advanced, or available for advance, under the Line of Credit does not exceed the
Maximum Principal Amount;

       

      (b) Lessee
and the Sublessees shall use the Line of Credit for the sole purpose of
financing the working capital at the Facilities;

       

      (c) The Line
of Credit is unsecured; and

       

      (d) The
aggregate amount of interest, points, fees and other amounts payable on the Line
of Credit does not exceed an effective annual interest rate equal to the Prime
Rate plus two percent (2%).

       

      8.4 Minimum Qualified Capital
Expenditures.  Each Lease Year Lessee shall expend with respect
to each Facility at least Four Hundred Dollars ($400) per-licensed-bed for
Qualified Capital Expenditures to improve the Facilities, which amount shall be
increased each Lease Year, beginning with the second Lease Year, in proportion
to increases in the CPI.  At least annually, at the request of Lessor,
Lessor and Lessee shall review capital expenditures budgets and agree on
modifications, if any, required by changed circumstances and the changed
conditions of the Leased Properties.

       

      8.5 Management
Agreements.  Neither Lessee nor any Sublessee shall enter into
or terminate any Management Agreement without the prior written consent of
Lessor as to the identity of the Manager and the terms of such agreement, and
shall not amend, modify, or otherwise change the terms of any Management
Agreement without the prior written consent of Lessor and, in addition, as to
any amendment, modification or other change that directly or indirectly
increases the compensation of the Manager or allows a change in the identity of
the Manager, without the consent of Lessor, which consent Lessor may withhold in
its reasonable discretion, and in no event without the execution by Lessee,
Manager and Lessor of an agreement, in form and substance satisfactory to
Lessor, pursuant to which Manager’s right to receive its management fee is
subordinated to the obligation of Lessee to pay the Rent as and when required
under this Lease.

       

      8.6 No Other Business; No
Investments.  None of Lessee or any Sublessee shall engage in
any business other than the operation of the Facilities.  Except for
the Permitted Investments, none of Guardian Holdings, Brockway LTC, Lessee or
any Sublessee will, or will they permit any Subsidiary to, make or suffer to
exist any Investments by such entities (including without limitation, loans and
advances to, and other Investments in, Subsidiaries), or commitments therefor,
nor, except in connection with Permitted Investments, shall they create any
Subsidiary or become or remain a partner in any partnership or joint venture, or
to make any acquisition of any Person.

       

      8.7 Tax
Returns.  During the Term, the Lessee, Guarantor and the
Sublessees shall timely file, or cause to be timely filed, all required tax
returns for the operation of their business and shall pay all taxes required to
be paid in connection such returns, including but not limited to, employee
withholding taxes, before any penalty or interest for failure to file
arises.

       

      8.8 Bank
Accounts.  During the Term, the Lessee and the Sublessees shall
maintain separate bank accounts from any other Person other than Lessee or a
Sublessee.  None of the Lessee nor any Sublessee shall permit its or
their assets, including cash, cash equivalents, and the cash proceeds arising
out of the operation of the Facilities, to be commingled with the assets of any
Person (other than other than Lessee or a Sublessee).

       

      8.9 Existence; No Fundamental
Change. Lessee, the
Sublessees, Brockway LTC and Guardian Holdings shall preserve and maintain their
legal existence and such of their rights, licenses and privileges as are
material to their business and operations; and qualify and remain qualified to
do business in each jurisdiction in which such qualification is material to
their business and operations or the ownership of their
properties.  Except for the Approved Reorganization, or with the prior
written approval of Lessor, which may be withheld in Lessor’s sole and absolute
discretion, none of Lessee, the Sublessees, Brockway LTC and Guardian Holdings
will fundamentally change the nature of its business, enter into any
amalgamation, merger, consolidation, reorganization or recapitalization, or
reclassify its capital stock or liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution), or convey, sell, assign, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
substantially all of its business, property or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
the business, property or assets, of any Person or any shares of stock or other
equity securities of any Person.

       

      8.10 Liens.  Subject
to the provisions of Section 12.1 relating to
permitted contests, none of Lessee, the Sublessees, Brockway LTC, Guardian
Holdings, and any Subsidiary of Guardian Holdings shall directly or indirectly
create or allow to remain, and shall promptly discharge at their expense, any
lien, encumbrance, attachment, title retention agreement or claim upon any
assets of such entity, excluding, however, (a) the liens and security interests
in favor of Lessor and its Affiliates, (b) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the same are
not yet payable, or (ii) such liens are in the process of being contested as
permitted by Section 12.1, (c) liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either disputed or not yet
due, provided that any such liens are in the process of being contested as
permitted by Section 12.1, (d) liens consented to by
Lessor in connection with (i) Debt consented to by Lessor pursuant to Section
8.3.5 hereof, (ii) a Sale and Leaseback Transaction or Off Balance Sheet
Liability consented to by Lessor pursuant to Section 8.3.6 hereof, or (iii)
guaranties consented to by Lessor pursuant to Section 8.3.8 hereof (in each case
of (i), (ii) and (iii), such consent not to be unreasonably withheld), and (e)
other liens granted by a Subsidiary of Guardian Holdings (other than Lessee or
any Sublessee) and consented to by Lessor, which consent shall not be
unreasonably withheld.

       

      ARTICLE IX  –
MAINTENANCE AND REPAIR

       

      9.1 Maintenance and
Repair.

       

      9.1.1 Lessee,
at its expense, will keep the Leased Properties, and all appurtenant
landscaping, private roadways, sidewalks and curbs that are under Lessee’s
control and Lessee’s Personal Property in good order and repair, whether or not
the need for such repairs arises out of Lessee’s use, any prior use, the
elements or the age of the Leased Property or any portion thereof, or any cause
whatsoever except the act or negligence of Lessor, and with reasonable
promptness shall make all necessary and appropriate repairs thereto of every
kind and nature, whether interior or exterior, structural or non-structural,
ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a
condition existing prior to the Commencement Date (concealed or otherwise).
Lessee shall maintain, operate and otherwise manage the Leased Properties at all
times on a basis and in a manner consistent with the standards of the highest
quality comparable facilities in the market areas served by the Leased
Properties.  All repairs shall, to the extent reasonably achievable,
be at least equivalent in quality to the original work or the property to be
repaired shall be replaced.  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 Properties or any parts thereof for the Primary
Intended Use.

       

      9.1.2 Lessor
shall not under any circumstances be required to maintain, build or rebuild any
improvements on the Leased Properties (or any private roadways, sidewalks or
curbs appurtenant thereto), or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Properties,
whether ordinary or extraordinary, structural or non-structural, foreseen or
unforeseen, or upon any adjoining property, whether to provide lateral or other
support or abate a nuisance, or otherwise, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease; provided however, that
Lessor shall cooperate with Lessee at Lessee’s sole cost and expense to the
extent reasonably necessary with respect to the foregoing
actions.  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 shall be construed as (a) constituting the consent or
request of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialmen or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to any Leased
Property or any part thereof, or (b) 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 Properties or any portion thereof.  Lessor shall have the right
to give, record and post, as appropriate, notices of non-responsibility under
any mechanics’ and construction lien laws now or hereafter
existing.

       

      9.1.4 Lessee
promptly shall replace any of the Leased Improvements or Lessor’s Personal
Property that becomes worn out, obsolete or unusable or unavailable for the
purpose for which intended. All replacements shall have a value and utility at
least equal to that of the items replaced and shall become part of the Leased
Properties immediately upon their acquisition by Lessee. Upon Lessor’s request,
Lessee promptly shall execute and deliver to Lessor a bill of sale or other
instrument establishing Lessor’s lien-free ownership of such replacements.
Lessee promptly shall repair all damage to a Leased Property incurred in the
course of such replacement.

       

      9.1.5 Lessee
will, upon the expiration or earlier termination of the Term, vacate and
surrender the Leased Properties to Lessor in the condition in which they were
originally received from Lessor, in good operating condition, ordinary wear and
tear excepted, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease.

       

      9.2 Encroachments, Restrictions,
etc. If, at any time, any of the Leased Improvements are alleged to
encroach upon any property, street or right of way adjacent to a Leased
Property, or to violate any restrictive covenant, or to impair the rights of
others under any easement or right of way, Lessee promptly shall settle such
allegations or take such other lawful action as may be necessary in order to be
able to continue the use of a Leased Property for the Primary Intended Use
substantially in the manner and to the extent such Leased Property was being
used at the time of the assertion of such violation, impairment or encroachment;
provided, however, that no such action shall violate any other provision of this
Lease, and any alteration of a Leased Property must be made in conformity with
the applicable requirements of ARTICLE
X.  Lessee shall not have any claim against Lessor or offset
against any of Lessee’s obligations under this Lease with respect to any such
violation, impairment or encroachment.

       

      ARTICLE X  –
ALTERATIONS AND ADDITIONS

       

      10.1 Construction of Alterations
and Additions to the Leased Properties.

       

      10.1.1 Lessee
shall not (a) make or permit to be made any structural alterations, improvements
or additions of or to the Leased Properties or any part thereof, or (b)
materially alter the plumbing, HVAC or electrical systems thereon or (c) make
any other alterations, improvements or additions the cost of which exceeds (i)
Fifty Thousand ($50,000.00) Dollars per alteration, improvement or addition, or
(ii) One Hundred Fifty Thousand ($150,000.00) Dollars in any Lease Year, unless
and until Lessee has (x) caused complete plans and specifications therefor to
have been prepared by a licensed architect and submitted to Lessor at least
sixty (60) Business Days before the planned start of construction thereof, (y)
obtained Lessor’s written approval thereof and (z), if required to do so by
Lessor, provided Lessor with reasonable assurance of the payment of the cost of
any such alterations, improvements or additions, in the form of a bond, letter
of credit or cash deposit. If Lessor requires a deposit, Lessor shall retain and
disburse the amount deposited in the same manner as is provided for insurance
proceeds in Section 14.6.  If the deposit
is reasonably determined by Lessor at any time to be insufficient for the
completion of the alteration, improvement or addition, Lessee immediately shall
increase the deposit to the amount reasonably required by Lessor. Lessee shall
be responsible for the completion of such improvements in accordance with the
plans and specifications approved by Lessor, and promptly shall correct any
failure with respect thereto.

       

      10.1.2 Alterations
and improvements not falling within the categories described in the first
sentence of Section 10.1.1 may be made by Lessee
without the prior approval of Lessor, but Lessee shall give Lessor at least
thirty (30) days prior written Notice of any such alterations and improvements;
provided, however, that no prior Notice shall be required with respect to
alterations and improvements (other than Section 10.1.1 alterations or improvements) reasonably required
for the routine maintenance and repair of the Leased Properties.

       

      10.1.3 All
alterations, improvements and additions shall (a) be constructed in a first
class, workmanlike, manner, in compliance with all Insurance Requirements and
Legal Requirements, (b) be in keeping with the character of the Leased
Properties and the area in which the Leased Property in question is located and
(c) be designed and constructed so that the value of the Leased Properties will
not be diminished and the Primary Intended Use of the Leased Properties will not
be changed.  All improvements, alterations and additions immediately
shall become a part of the Leased Properties.

       

      10.1.4 Lessee
shall have no claim against Lessor at any time in respect of the cost or value
of any improvement, alteration or addition.  There shall be no
adjustment in the Rent by reason of any such improvement, alteration or
addition.  With Lessor’s consent, expenditures made by Lessee pursuant
to this ARTICLE X may be included as capital
expenditures for purposes of inclusion in the capital expenditures budget for
the Facilities and for measuring compliance with the obligations of Lessee set
forth in Section 8.4 of this Lease.

       

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

       

      ARTICLE
XI  -
LIENS

       

      11.1 Liens.  Without
the consent of Lessor or as expressly permitted elsewhere herein, 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 Properties, and any attachment, levy, claim or encumbrance
in respect of the Rent, except for (a) Permitted Encumbrances, (b) liens of
mechanics, laborers, materialmen, suppliers or vendors for sums not yet due, (c)
liens created by the malfeasance or negligence of Lessor, and (d) inchoate liens
for amounts not yet due and payable.

       

      ARTICLE XII  –
PERMITTED CONTESTS AND DEPOSITS

       

      12.1 Permitted
Contests.  Lessee, on its own or on Lessor’s behalf (or in
Lessor’s name), but at Lessee’s sole cost and expense, shall have the right to
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the amount or validity of any real or personal property assessment,
Imposition, Legal Requirement or Insurance Requirement, or any lien, attachment,
levy, encumbrance, charge or claim or any encroachment or restriction burdening
the Leased Property, provided: (a) prior Notice of such contest is given to
Lessor; (b) the Leased Properties would not be in any danger of being sold,
forfeited or attached as a result of such contest, and there is no risk to
Lessor of a loss of or interruption in the payment of Rent; (c) in the case of
an unpaid Imposition or other lien, attachment, levy, encumbrance, charge or
claim, collection thereof is suspended during the pendency of such contest; (d)
in the case of a contest of a Legal Requirement, compliance may legally be
delayed pending such contest and pending such contest no license, permit,
approval, certificate of need, certificate of reimbursement or other
authorization necessary to operate any Facility as a provider of health care
services in accordance with its Primary Intended Use may be irrevocably
suspended or revoked, or its right to so operate a Facility or to accept
patients irrevocably suspended. Upon the reasonable request of Lessor, Lessee
shall deposit funds or assure Lessor in some other manner reasonably
satisfactory to Lessor that the amount to be paid by Lessee that is the subject
of a contested Imposition, Legal Requirement, Insurance Requirement or Claim,
together with interest and penalties, if any, thereon, and any and all costs for
which Lessee is responsible will be paid if and when required upon the
conclusion of such contest.  Lessee shall defend, indemnify and save
harmless Lessor from all costs or expenses arising out of or in connection with
any such contest, including but not limited to reasonable attorneys’
fees.  If at any time Lessor reasonably determines that payment of any
Imposition or other lien, attachment, levy, encumbrance, charge or claim, or
compliance with any Legal or Insurance Requirement being contested by Lessee is
necessary in order to prevent loss of any of the Leased Properties or Rent or
civil or criminal penalties or other damage (including revocation or suspension
of any license, permit, approval, certificate of need, certificate of
reimbursement or other authorization necessary to operate any Facility as a
provider of health care services in accordance with its Primary Intended Use or
suspension of any right to accept patients), upon such prior Notice to Lessee as
is reasonable in the circumstances Lessor may pay such amount, require Lessee to
comply with such Legal or Insurance Requirement or take such other action as it
may deem necessary to prevent such loss or damage. If reasonably necessary, upon
Lessee’s written request, Lessor, at Lessee’s expense, shall cooperate with
Lessee in a permitted contest, provided Lessee upon demand makes arrangements
satisfactory to Lessor to assure the reimbursement of any and all Lessor’s costs
incurred in cooperating with Lessee in such contest.

       

      12.2 Lessor’s Requirement for
Deposits.  After the occurrence of an Event of Default and
while it continues, upon the request of Lessor, Lessee shall deposit with Lessor
monthly, at the time of its payments of Base Rent, a pro rata portion of the
amounts required to comply with Insurance Requirements, Impositions, Legal
Requirements and Lessee’s obligations under Section 8.4 of this Lease, and when such obligations become
due, Lessor shall pay them (to the extent of the deposit) upon Notice from
Lessee requesting such payment.  If sufficient funds have not been
deposited to cover the amount of the obligations due at least thirty (30) days
in advance of the due date, Lessee immediately shall deposit the same with
Lessor upon Notice from Lessor. Lessor shall not be obligated to segregate such
deposited funds from its other funds or to pay Lessee any interest on any
deposit held by Lessor.  Upon an Event of Default, any of the funds
remaining on deposit may be applied under this Lease in any manner and in such
priority as Lessor may determine in its sole discretion.

       

      ARTICLE
XIII -
INSURANCE

       

      13.1 General Insurance
Requirements.  Lessee shall keep the Leased Properties, and all
property located in or on the Leased Properties, including Lessor’s Personal
Property and Lessee’s Personal Property, insured with insurance meeting the
following requirements: (a) all insurance shall be written by companies
authorized to do insurance business in the applicable States and having a rating
classification of not less than A- and a financial size category of “Class X”,
according to the then most recent issue of Best’s Key Rating Guide; (b) all
policies must name Lessor as an additional insured, and name as an additional
insured any Facility Mortgagee by way of a standard form of mortgagee’s loss
payable endorsement in use in the applicable States.  However, if
requested by Lessor and available on a commercially reasonable basis, all public
liability and property damage insurance shall contain a provision that Lessor,
although named as an insured, nevertheless shall be entitled to recovery for
loss, damage or injury to Lessor, its servants, agents and employees by reason
of the negligence of Lessee or Lessor; (c) losses must be payable to Lessor or
Lessee as provided in Article XIV, and loss adjustments shall require the
written consent of Lessor, any Facility Mortgagee and, provided it is not then
in default, Lessee, which consent shall not be unreasonably withheld by either
Lessor or Lessee; (d) each insurer must agree that it will give Lessor and any
Facility Mortgagee at least sixty (60) days’ written Notice before its policy
shall be altered, allowed to expire or canceled; (e) the amount of any
deductible or retention must be approved by Lessor prior to the issuance of any
policy; and (f) the form of all policies shall be approved by Lessor, whose
approval shall not unreasonably be withheld.   Notwithstanding
anything in this ARTICLE XIII to the contrary,
Lessor consents to Lessee insuring the coverages required by Sections 13.2.4 and 13.2.5 through a
pure captive owned by the Lessee and the Sublessees, which insurance capitve may
not meet the AmBest rating requirement set forth in this Section, provided that
the insurance coverages otherwise comply with this ARTICLE XIII.

       

      13.2 Risks to be
Insured.  The policies covering the Leased Properties and
Lessee’s Personal Property shall insure against the following
risks:

       

      13.2.1 Loss or
damage by fire, vandalism and malicious mischief, extended coverage perils
commonly known as “Special Risk,” and all physical loss perils normally included
in such Special Risk insurance, including but not limited to sprinkler leakage,
in an amount not less than one hundred percent (100%) of Replacement Cost
(provided that Lessor shall have the right from time to time, but no more
frequently than once in any period of three (3) consecutive Lease Years, to have
Replacement Cost reasonably redetermined by the fire insurance company then
carrying the largest amount of fire insurance on the Leased Properties (Lessee
hereby agreeing to pay the fee, if any, for such insurer), which determination
shall be final and binding on the parties hereto, and upon such determination
Lessee immediately shall increase, but not decrease, the amount of the insurance
carried pursuant to this Section 13.2.1 to the
amount so determined;

       

      13.2.2 Broad
form comprehensive boiler and machinery insurance on a blanket repair and
replace basis, with limits for each accident in an amount not less than one
hundred percent (100%) of Replacement Cost;

       

      13.2.3 Loss of
rental under a rental value insurance policy covering risk of loss during
reconstruction necessitated by the occurrence of any of the hazards described in
Sections 13.2.1 or 13.2.2 (but in no event for a period less than twelve
(12) months) in an amount sufficient to prevent Lessor and Lessee from becoming
a co-insurer;

       

      13.2.4 Claims
for bodily injury (including resulting death), personal injury or property
damage under a policy of commercial general public liability insurance with a
combined single limit per occurrence in respect of bodily injury and death and
property damage of One Million Dollars ($1,000,000.00), and an aggregate
limitation of Three Million Dollars ($3,000,000.00), which insurance shall
insure Lessee’s contractual liability to Lessor under the indemnity provisions
of this Lease and may be written on a ‘claims made’ basis, and, if written on a
“claims-made” basis, Lessee also shall provide continuous liability coverage for
claims arising during the Term by obtaining “tail” insurance coverage converting
the policies to “occurrence” basis policies providing coverage for a period of
at least three (3) years beyond the expiration of the Term;

       

      13.2.5 Claims
arising out of malpractice with a combined single limit per occurrence of One
Million Dollars ($1,000,000.00), and an aggregate limitation of Three Million
Dollars ($3,000,000.00) and, if written on a “claims-made” basis, Lessee also
shall provide continuous liability coverage for claims arising during the Term
by obtaining “tail” insurance coverage converting the policies to “occurrence”
basis policies providing coverage for a period of at least three (3) years
beyond the expiration of the Term;

       

      13.2.6 Flood
(with respect to any portions of the Leased Properties located in whole or in
part within a designated flood plain area) and such other hazards and in such
amounts as may be customary for comparable properties in the area;

       

      13.2.7 During
such time as Lessee is constructing any improvements, (a) worker’s compensation
insurance and employers’ liability insurance covering all persons employed in
connection with the improvements in statutory limits, (b) a completed operations
endorsement to the commercial general liability and property damage insurance
policies referred to above, (c) builder’s risk insurance, completed value form,
covering all physical loss, in an amount satisfactory to Lessor, and (d) such
other insurance, in such amounts, as Lessor deems necessary to protect Lessor’s
interest in the Leased Properties from any act or omission of Lessee’s
contractors or subcontractors, and certificates of insurance evidencing such
coverage, in form satisfactory to Lessor, shall be presented to Lessor prior to
the commencement of construction of such improvements;

       

      13.2.8 Primary
automobile liability insurance with limits of One Million Dollars
($1,000,000.00) per occurrence each for owned and non-owned and hired
vehicles;

       

      13.2.9 Loss or
damage commonly covered by blanket crime insurance including dishonesty, loss of
money orders or paper currency and depositor’s forgery, with a limit of not less
than One Million Dollars ($1,000,000.00).

       

      13.3 Payment of Premiums; Copies
of Policies; Certificates. Subject to Section 12.2 of this Lease, Lessee shall pay when due all of
the premiums for the insurance required by this Lease, and shall deliver to
Lessor and to any Facility Mortgagee requesting such evidence, certificates of
insurance in form satisfactory to Lessor and such Facility Mortgagee. Copies of
the policies of insurance required by this Lease and certificates thereof shall
be delivered to Lessor not less than thirty (30) days prior to their effective
date (and, with respect to any renewal policy, not less than twenty (20) days
prior to the expiration of the existing policy), and in the event of the failure
of Lessee either to carry the required insurance or pay the premiums therefor,
or to deliver copies of policies or certificates to Lessor as required, Lessor
shall be entitled, but shall have no obligation, to obtain such insurance and
pay the premiums therefor when due, in which event Lessee shall repay to Lessor
the premiums upon written demand therefor as Additional Charges.

       

      13.4 Umbrella Policies. If
Lessee chooses to carry umbrella liability coverage to obtain the limits of
liability required under this Lease, the umbrella policies must provide coverage
in the same manner as the primary commercial general liability policy and must
contain no exclusions in addition to, or limitations materially different than,
those of the primary policy.

       

      13.5 Additional
Insurance.  In addition to the insurance described above,
Lessee shall at all times comply with all Legal Requirements with respect to
worker’s compensation insurance coverage.

       

      13.6 No Liability; Waiver of
Subrogation.  Lessor shall have no liability to Lessee, and,
provided Lessee provides the insurance required of it by this Lease, Lessee
shall have no liability to Lessor, regardless of the cause, for any loss or
expense resulting from or in connection with damage to or the destruction or
other loss of any Leased Property or Lessee’s Personal Property, and neither
party will have any right or claim against the other for any such loss or
expense by way of subrogation. Each insurance policy carried by either party
covering any of the Leased Properties and Lessee’s Personal Property, including
without limitation, contents, fire and casualty insurance, shall contain an
express waiver of any right of subrogation on the part of the insurer against
the other party.  Lessee shall pay any additional costs or charges for
obtaining such waiver.

       

      13.7 Increase in
Limits.  If from time to time Lessor determines, in the
exercise of its reasonable business judgment, that the limits of the personal
injury or property damage - public liability insurance then being carried are
insufficient, upon Notice from Lessor Lessee shall cause such limits to be
increased to the level specified in such Notice until further increase pursuant
to the provisions of this Section.

       

      13.8 Blanket
Policy.  Any insurance required by this Lease may be provided
by so-called blanket policies of insurance carried by Lessee; provided, however,
that the coverage afforded Lessor thereby may not be less than or materially
different from that which would be provided by separate policies meeting the
requirements of this Lease.

       

      13.9 No Separate
Insurance.

       

      13.9.1 Lessee
shall not, on its own initiative or pursuant to the request or requirement of
any third party, take out separate insurance concurrent in form or contributing
in the event of loss with that required by this Lease, to be furnished by, or
that may reasonably be required to be furnished by, Lessee, or increase the
amount 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 named therein as additional insureds, and losses are payable
thereunder in the same manner as losses are payable under this
Lease.

       

      13.9.2 Nothing
herein shall prohibit Lessee, upon Notice to Lessor, from (a) securing insurance
required to be carried hereby with higher limits of liability than required in
this Lease, or (b) securing insurance against risks not required to be insured
pursuant to this Lease, and as to such insurance, Lessor and any Facility
Mortgagee need not be included therein as additional insureds, nor must losses
thereunder be payable in the same manner as losses are payable under this
Lease.

       

      13.10 Mine Subsidence
Insurance.  If mine subsidence insurance is available with
respect to one or more of the Facilities from the Pennsylvania Department of
Environmental Protection, or any other state or federal program, then Lessee
shall acquire such insurance with respect to such Facility or Facilities and, to
the extent available, will have Lessor named as an insured or additional
insured.  Lessee has informed Lessor that the Facility commonly known
as Jefferson Hills Manor in Allegeheny County, Pennsylvania is eligible for such
insurance and that Lessee has acquired such coverage.

       

      ARTICLE
XIV -
CASUALTY

       

      14.1 Insurance
Proceeds.  Net Proceeds shall be paid to Lessor and held,
disbursed or retained by Lessor as provided herein. If the Net Proceeds are less
than the Approval Threshold, and no Event of Default has occurred and is
continuing, Lessor shall pay the Net Proceeds to Lessee promptly upon Lessee’s
commencement of the restoration of the damaged or destroyed Leased
Property.  If the Net Proceeds equal or exceed the Approval Threshold,
and no Event of Default has occurred and is continuing, the Net Proceeds shall
be made available for restoration or repair as provided in Section 14.6. Within fifteen (15) days of the receipt of the
Net Proceeds of Special Risk Insurance, Lessor and Lessee shall agree as to the
portion thereof, if any, attributable to the Lessee’s Personal Property that
Lessee is not required and does not elect to restore or replace, and if they
cannot agree they shall submit the matter to arbitration pursuant to ARTICLE XXVIII hereof, and the portion of the proceeds
of such Special Risk Insurance agreed or determined by arbitration to be
attributable to the Lessee’s Personal Property that Lessee is not required and
does not elect to restore or replace shall be paid to Lessee.

       

      14.2 Restoration in the Event of
Damage or Destruction.   If all or any portion of a Leased
Property is damaged by fire or other casualty, Lessee shall: (a) give Lessor
Notice of such damage or destruction within five (5) Business Days of the
occurrence thereof; (b) within thirty (30) Business Days of the occurrence
commence the restoration of such Leased Property; and (c) thereafter proceed
diligently to complete such restoration as quickly as reasonably possible, but
in any event within one hundred eighty (180) days of the occurrence, to the end
that the Leased Property is in substantially the same (or better) condition as
the Leased Property was in immediately prior to the damage or destruction.
Regardless of the anticipated cost thereof, if the restoration of a Leased
Property requires any modification of structural elements, prior to commencing
such modification Lessee shall obtain Lessor’s written approval of the plans and
specifications therefor.

       

      14.3 Restoration of Lessee’s
Property.  If Lessee is required to restore a Leased Property,
Lessee also concurrently shall restore any of Lessee’s Personal Property that is
integral to the Primary Intended Use of such Leased Property at the time of the
damage or destruction.

       

      14.4 No Abatement of
Rent.  There shall be no abatement of Rent by reason of any
damage to or the partial or total destruction of any Leased
Property.

       

      14.5 Waiver.  Except
as provided elsewhere in this Lease, Lessee hereby waives any statutory or
common law rights of termination that may arise by reason of any damage to or
destruction of a Leased Property.

       

      14.6 Disbursement of Insurance
Proceeds Equal to or Greater Than The Approval Threshold.  If
Lessee restores or repairs a Leased Property pursuant to this ARTICLE XIV, and if the Net Proceeds equal or exceed
the Approval Threshold, the restoration or repair and disbursement of funds to
Lessee shall be in accordance with the following procedures:

       

      (a) The
restoration or repair work shall be done pursuant to plans and specifications
approved by Lessor and a certified construction cost statement, to be obtained
by Lessee from a contractor reasonably acceptable to Lessor, showing the total
cost of the restoration or repair; to the extent the cost exceeds the Net
Proceeds, Lessee shall deposit with Lessor the amount of the excess cost, and
Lessor shall disburse the funds so deposited in payment of the costs of
restoration or repair before any disbursement of Net Proceeds.

       

      (b) Construction
Funds shall be made available, subject to a ten percent (10%) holdback, to
Lessee upon request, but no more frequently than monthly, as the restoration and
repair work progresses pursuant to certificates, in form and substance
reasonably acceptable to Lessor, of an architect selected by Lessee and
reasonably acceptable to Lessor (such architect to be, in the reasonable
judgment of Lessor, highly qualified in the design and construction of the type
of facility being repaired).

       

      (c) After the
first disbursement to Lessee, sworn statements and lien waivers in an amount at
least equal to the amount of Construction Funds previously paid to Lessee shall
be delivered to Lessor from all contractors, subcontractors and material
suppliers covering all labor and materials furnished through the date of the
previous disbursement.

       

      (d) Lessee
shall deliver to Lessor such other evidence as Lessor reasonably may request,
from time to time during the course of the restoration and repair, as to the
progress of the work, compliance with the approved plans and specifications, the
cost of restoration and repair and the total amount needed to complete the
restoration and repair, and showing that there are no liens against the Leased
Property arising in connection with the restoration and repair and that the cost
of the restoration and repair at least equals the total amount of Construction
Funds then disbursed to Lessee hereunder.

       

      (e) If the
Construction Funds are at any time determined by Lessor to be inadequate for
payment in full of all labor and materials for the restoration and repair,
Lessee immediately shall pay the amount of the deficiency to Lessor to be held
and disbursed as Construction Funds prior to the disbursement of any other
Construction Funds then held by Lessor.

       

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

       

      (g) If Lessee
at any time fails to perform promptly and fully the conditions and covenants set
forth in subparagraphs (a) through (f) above, and the failure is not corrected
within ten (10) days of written Notice thereof, or if during the restoration or
repair an Event of Default occurs, Lessor may, at its option, immediately cease
making any further payments to Lessee for the restoration and
repair.

       

      (h) Lessor
may reimburse itself out of the Construction Funds for its reasonable expenses
incurred in administering the Construction Funds and inspecting the restoration
and repair work, including without limitation reasonable attorneys’ and other
professional fees and escrow fees and expenses.

       

      14.7 Net Proceeds Paid to
Facility Mortgagee.  Notwithstanding anything in this Lease to
the contrary, if any Facility Mortgagee is entitled to any Net Proceeds or any
portion thereof under the terms of any Facility Mortgage, the Net Proceeds shall
be applied, held and/or disbursed in accordance with the terms of the Facility
Mortgage. Lessor shall make commercially reasonable efforts to cause the Net
Proceeds to be applied to the restoration of the Leased
Property.   If the Facility Mortgagee elects to apply the Net
Proceeds to the indebtedness secured by the Facility Mortgage and the Net
Proceeds would otherwise be available pursuant to this Article XIV for
restoration of the affected Facility, Lessee may elect to (a) restore the
affected Facility as nearly as possible under the circumstances to a complete
architectural unit of the same general character and condition as that of the
Facility existing immediately prior to such damage or destruction or (b) if no
Event of Default or Unmatured Event of Default has occurred and is continuing,
terminate this Lease as to such Facility by delivery of written notice to Lessor
within thirty (30) days of the date the Facility Mortgagee elects to apply the
Net Proceeds to the indebtedness secured by the Facility Mortgage.  In
any such circumstance where Lessee elects to terminate the Lease as to the
affected Facility pursuant to this Section, Lessor may, at its option, within
thirty (30) days of Lessee’s election to so terminate make available to Lessee
pursuant to the same terms as set forth in this ARTICLE
XIV funds equal to the lesser of (x) the amount of
funds Lessor would be obligated to make available to Lessee for such restoration
pursuant to this ARTICLE XIV if the Facility
Mortgagee had not so applied such funds and (y) the amount of such funds so
applied by the Facility Mortgagee.  If Lessor does make such funds
available to Lessee as provided for in this Section, the Lease shall not
terminate with respect to the affected Facility.  If the Lessor does
not elect to make such funds available to Lessee within such thirty (30) day
period, the Lease shall terminate with respect to the affected Facility on the
thirtieth (30th) day
following the last day of such thirty (30) day period.  If this Lease
is so terminated as to a Facility pursuant to this Section, (a) Lessee may
purchase the Facility at its Fair Market Value as of the termination date (i.e.,
after the casualty) within sixty (60) days of the termination date (with
delivery of documents consistent with the documents which would be delivered in
connection the option set forth in Section 30.1) and
(b) the annual Base Rent shall be reduced as of the termination date for such
Facility by an amount equal to (i) the sum of (x) the purchase price paid by
Lessee to Lessor for the Facility and (y) amount of Net Proceeds applied to the
indebtedness secured by the Facility Mortgage, multiplied by (ii) the
Capitalization Rate (for example, if (i) the Lease is terminated pursuant to
this Section as to a Facility, (ii) the Net Proceeds applied by the Facility
Mortgagee equal Two Million Dollars ($2,000,000), and (iii) the purchase price
paid to Lessor by Lessee equals One Hundred Thousand Dollars ($100,000), then
the annual Base Rent would be reduced by Two Hundred Fifteen Thousand Two
Hundred Fifty Dollars (($2,000,000 + $100,000) x 10.25% =
$215,250).)

       

      ARTICLE
XV -
TAKINGS

       

      15.1 Total Taking or Other Taking
with Leased Property Rendered Unsuitable for Its Primary Intended
Use.  If title to the fee of the whole of a Leased Property is
Taken, this Lease shall cease and terminate as to the Leased Property Taken as
of the Date of Taking by the Condemnor, and Rent shall be apportioned as of the
termination date. If title to the fee of less than the whole of a Leased
Property is Taken, but such Leased Property is rendered Unsuitable for Its
Primary Intended Use as a result of the Partial Taking, each of Lessee and
Lessor shall have the option, which shall be exercisable by written Notice to
the other at any time prior to the first to occur of the taking of possession
by, or the date of vesting of title in, the Condemnor, to terminate this Lease
with respect to such Leased Property as of the date so determined, in which
event this Lease shall so cease and terminate with respect to that Leased
Property as of the earlier of the date specified in the Notice or the date on
which possession is taken by the Condemnor.  If this Lease is so
terminated as to a Leased Property, Rent shall be apportioned as of the
termination date.

       

      15.2 Allocation of
Award.  The total Award made with respect to all or any portion
of a Leased Property or for loss of Rent, or for loss of business, shall be
solely the property of and payable to Lessor or, if so provided in a Facility
Mortgage, to the Facility Mortgagee.  Nothing contained in this lease
will be deemed to create any additional interest in Lessee, or entitle Lessee to
any payment based on the value of the unexpired term or so-called “bonus value”
to Lessee of this Lease.  Any Award made for the taking of Lessee’s
Personal Property that is not integral to the Primary Intended Use of the
Facilities, or for removal and relocation expenses of Lessee in any such
proceedings, shall be payable to Lessee. Any Award made for the taking of
Lessee’s Personal Property that is integral to the Primary Intended Use of the
Facilities shall payable to Lessor or, if so provided in a Facility Mortgage, to
the Facility Mortgagee. In any proceedings with respect to an Award, each of
Lessor and Lessee shall seek its own Award in conformity herewith, at its own
expense.  Notwithstanding the foregoing, Lessee may pursue a claim for
loss of its business, provided that under the laws of the State, such claim will
not diminish the Award to Lessor.

       

      15.3 Partial
Taking.  In the event of a Partial Taking, Lessee, at its own
cost and expense, shall, within sixty (60) days of the first to occur of the
taking of possession by, or the date of vesting of title in, the Condemnor,
commence the restoration of the affected Leased Property to a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as existed immediately prior to the Partial
Taking, and complete such restoration with all reasonable dispatch, but in any
event within one hundred eighty (180) days of the date on which such Notice is
given.  Lessor shall contribute to the cost of restoration only such
portion of the Award as is made therefor.  As long as no Event of
Default has occurred and is continuing, if such portion of the Award is in an
amount less than the Approval Threshold, Lessor shall pay the same to Lessee
upon completion of such restoration.  As long as no Event of Default
has occurred and is continuing, if such portion of the Award is in an amount
equal to or greater than the Approval Threshold, Lessor shall make such portion
of the Award available to Lessee in the manner provided in Section 14.6 with
respect to Net Proceeds in excess of the Approval
Threshold.  Notwithstanding anything to the contrary in this Lease, if
the Fair Market Rent of the affected Leased Property is reduced by reason of the
Partial Taking, from and after the date on which possession is taken by the
Condemnor the annualized Base Rent shall be reduced by an amount determined by
dividing the portion of the Award made to Lessor expressly for such reduction in
Fair Market Rent by the Capitalization Rate.

       

      15.4 Temporary
Taking.  If there is a Partial Taking of possession or the use
of all or part of a Leased Property, but the fee of such Leased Property is not
Taken in whole or in part, until such Partial Taking of possession or use
continues for more than six (6) months, all the provisions of this Lease shall
remain in full force and effect and the entire amount of any Award made for such
Partial Taking shall be paid to Lessee provided there is then no Event of
Default. Upon the termination of any such period of temporary use or occupancy,
Lessee at its sole cost and expense shall restore the affected Leased Property,
as nearly as may be reasonably possible, to the condition existing immediately
prior to such Partial Taking.  If any such Partial Taking continues
for longer than six (6) months, and fifty percent (50%) or more of the patient
capacity of the affected Facility is thereby rendered Unsuitable for Its Primary
Use, this Lease shall cease and terminate as to the affected Leased Property
only as of the last day of the sixth (6th) month,
but if less than fifty percent (50%) of the patient capacity of such Facility is
thereby rendered Unsuitable for Its Primary Use, each of Lessee and Lessor shall
have the option, which shall be exercisable by giving written Notice to the
other at least sixty (60) days prior written Notice to the other, at any time
prior to the end of the temporary Partial Taking, to terminate this Lease as to
the affected Leased Property of the date set forth in such Notice, and Lessee
shall be entitled to any Award made for the period of such temporary Partial
Taking prior to the date of termination of the Lease. Rent shall not abate
during the period of any temporary Partial Taking.

       

      15.5 Awards Paid to Facility
Mortgagee.  Notwithstanding anything herein to the contrary, if
any Facility Mortgagee is entitled to any Award or any portion thereof under the
terms of any Facility Mortgage, such Award shall be applied, held and/or
disbursed in accordance with the terms of the Facility Mortgage.  If
the Facility Mortgagee elects to apply the Net Proceeds to the indebtedness
secured by the Facility Mortgage and the Award represents an Award for Partial
Taking as described in Section 15.3 above, Lessee
may elect to (a) restore the affected Facility as nearly as possible under the
circumstances to a complete architectural unit of the same general character and
condition as that of the Facility existing immediately prior to such Partial
Taking or (b) if no Event of Default or Unmatured Event of Default has occurred
and is continuing, terminate this Lease as to such Facility by delivery of
written notice to Lessor within thirty (30) days of the date the Facility
Mortgagee elects to apply the Award to the indebtedness secured by the Facility
Mortgage.  In any such circumstance where Lessee elects to terminate
the Lease as to the affected Facility pursuant to this Section, Lessor may, at
its option, within thirty (30) days of Lessee’s election to so terminate make
available to Lessee pursuant to the same terms as set forth in this ARTICLE XV funds equal to the lesser of (x) the amount of
funds Lessor would be obligated to make available to Lessee for such restoration
pursuant to this ARTICLE XV if the Facility
Mortgagee had not so applied such funds and (y) the amount of the Award so
applied by the Facility Mortgagee.  If Lessor does make such funds
available to Lessee as provided for in this Section, the Lease shall not
terminate with respect to the affected Facility.  If the Lessor does
not elect to make such funds available to Lessee within such thirty (30) day
period, the Lease shall terminate with respect to the affected Facility on the
thirtieth (30th) day
following the last day of such thirty (30) day period.  If this Lease
is so terminated as to a Facility pursuant to this Section, (a) Lessee may
purchase the Facility at its Fair Market Value as of the termination date (i.e.,
after the Partial Taking) within sixty (60) days of the termination date (with
delivery of documents consist with the documents which would be delivered in
connection with the option set forth in Section 30.1) and (b) the annual Base Rent shall be reduced as
of the termination date for such Facility by an amount equal to (i) the sum of
(x) the purchase price paid by Lessee to Lessor for the Facility and (y) amount
of the Award applied to the indebtedness secured by the Facility Mortgage,
multiplied by (ii) the Capitalization Rate (for example, if (i) the Lease is
terminated pursuant to this Section as to a Facility, (ii) the Award applied by
the Facility Mortgagee equals Two Million Dollars ($2,000,000), and (iii) the
purchase price paid to Lessor by Lessee equals One Hundred Thousand Dollars
($100,000), then the annual Base Rent would be reduced by Two Hundred Fifteen
Thousand Two Hundred Fifty Dollars (($2,000,000 + $100,000) x 10.25% =
$215,250).)

       

      ARTICLE XVI  –
RIGHTS UPON AN EVENT OF DEFAULT

       

      16.1 Lessor’s Rights Upon an
Event of Default. If an Event of Default occurs and is continuing, Lessor
may terminate this Lease by giving Lessee a Notice of Termination, and in such
event the Term shall end and all rights of Lessee under this Lease shall cease
on the Termination Date.  The Notice of Termination shall be in lieu
of and not in addition to any notice required by the laws of any State as a
condition to bringing an action for possession of the Leased Premises or to
recover damages under this Lease.  In addition to Lessor’s right to
terminate this Lease, Lessor shall have all other rights set forth in this Lease
and all remedies available at law and in equity.  Lessee shall, to the
extent permitted by law, pay as Additional Charges all costs and expenses
incurred by or on behalf of Lessor, including, without limitation, reasonable
attorneys’ fees and expenses (whether or not litigation is commenced, and if
litigation is commenced, including fees and expenses incurred in appeals and
post-judgment proceedings) as a result of any default of Lessee under this
Lease.  No Event of Default (other than a failure to make payment of
Rent as and when due) shall be deemed to exist if and for so long as Lessee is
unable to prevent such Event of Default because of Force Majeure, provided that,
upon the cessation of the Force Majeure, Lessee immediately shall proceed to
remedy the action or condition giving rise to the Event of Default within the
applicable cure period as extended by the Force Majeure.

       

      16.2 Certain
Remedies.  If an Event of Default occurs and while it
continues, whether or not this Lease has been terminated pursuant to Section 16.1 or otherwise, if required to do so by Lessor
Lessee immediately shall surrender the Leased Properties to Lessor in the
condition required by Section   9.1.5
and quit the same, and Lessor may enter upon and repossess the Leased Properties
by reasonable force, summary proceedings, ejectment or otherwise, and may remove
Lessee and all other persons and any and all personal properties from the Leased
Properties, subject to rights of any residents or patients and to any Legal
Requirements. In addition to all other remedies set forth or referred to in this
ARTICLE XVI, Lessor shall have the right to suspend
any Management Agreement as to one or more or all Facilities and to retain a
manager of the affected Facility or all Facilities at the expense of Lessee,
such manager to serve for such term and at such compensation as Lessor
reasonably determines is necessary under the circumstances.

       

      16.3 Damages.  None
of (a) the termination of this Lease after the occurrence of an Event of Default
pursuant to Section 16.1 or otherwise, (b) the
repossession of the Leased Properties, (c) the failure of Lessor to relet the
Leased Properties, (d) the reletting of all or any portion thereof, or (v) the
failure of Lessor to collect or receive any rentals due upon such any reletting,
shall relieve Lessee of its liability and obligations under this Lease, all of
which shall survive any such termination, repossession or
reletting.  If this Lease is terminated by Lessor, Lessee immediately
shall pay to Lessor all Rent due and payable with respect to the Leased
Properties to and including the Termination Date, including without limitation
all interest and late charges payable under Section 3.3 of this Lease with respect to any late payment of
such Rent.  Lessee also shall pay to Lessor, as liquidated damages, at
Lessor’s option, either:

       

      (A)           The
sum of:

       

      (i) Lessor’s
Interim Rent Loss, minus Net Reletting Proceeds for the period from the
Termination Date through the Judgment Date, and minus the portion of Lessor’s
Interim Rent Loss, if any, that Lessee proves reasonably could have been
mitigated by Lessor, plus

       

      (ii) the
Present Value on the Judgment Date of Lessor’s Future Rent Loss, assuming the
Cost of Living Index were to increase one and one quarter (1.25) percentage
points per Lease Year from the Judgment Date through the Expiration Date, minus
the Present Value on the Termination Date of the portion of Lessor’s Future Rent
Loss that Lessee proves reasonably could be mitigated by Lessor;

       

      or

       

      (B)           Each
month between the Termination Date and the Expiration Date, Lessor’s Monthly
Rent Loss, minus the Net Reletting Proceeds for such month, and minus the
portion, if any, of Lessor’s Monthly Rent Loss that Lessee proves reasonably
could have been avoided. Any suit brought to recover liquidated damages payable
under this subsection (B) shall not prejudice Lessor’s right to collect
liquidated damages for subsequent months in a similar proceeding.

       

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

       

      16.5 Application of
Funds.  Any payments received by Lessor under any of the
provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee’s obligations in the order that Lessor
determines in its sole discretion or as may be prescribed by law.

       

      16.6 Bankruptcy.

       

      (a) None of
Lessee’s interest in this Lease, any estate hereby created in Lessee’s interest
or any interest herein or therein shall pass to any trustee or receiver or
assignee for the benefit of creditors or otherwise by operation of law, except
as specifically may be provided pursuant to the Bankruptcy Code (11 USC § 101
et. seq.), as the same may be amended from time to time.

       

      (b) Rights and Obligations Under
the Bankruptcy Code.

       

      (i) Upon
filing of a petition by or against Lessee under the Bankruptcy Code, Lessee, as
debtor and as debtor-in-possession, and any trustee who may be appointed with
respect to the assets of or estate in bankruptcy of Lessee, agree to pay monthly
in advance, on the first day of each month, as reasonable compensation for the
use and occupancy of the Leased Premises, an amount equal to all Rent due
pursuant to this Lease.

       

      (ii) Included
within and in addition to any other conditions or obligations imposed upon
Lessee or its successor in the event of the assumption and/or assignment of the
Lease are the following: (A) the cure of any monetary defaults and reimbursement
of pecuniary loss within not more than thirty (30) days of the assumption and/or
assignment; (B) the deposit of an additional amount equal to not less than three
(3) months’ Base Rent, which amount is agreed to be a necessary and appropriate
deposit to secure the future performance under the Lease of Lessee or its
assignee; (C) the continued use of the Leased Premises for the Primary Intended
Use; and (D) the prior written consent of any Facility Mortgagee.

       

      ARTICLE XVII 
– CURE BY LESSOR

       

      17.1 Lessor’s Right to Cure
Lessee’s Default.  If Lessee fails to make any payment or
perform any act required to be made or performed under this Lease, and fails to
cure the same within any grace or cure period applicable thereto, upon such
Notice as may be expressly required herein (or, if Lessor reasonably determines
that the giving of Notice would risk loss to the Leased Properties or cause
damage to Lessor, upon such Notice as is practical under the circumstances), and
without waiving or releasing any obligation of Lessee, Lessor may 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 Properties for such
purpose and take all such action thereon as, in Lessor’s sole opinion, may be
necessary or appropriate.  No such entry shall be deemed an eviction
of Lessee.  All amounts so paid by Lessor and all costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses) so
incurred, together with the late charge and interest provided for in Section 3.3 thereon, shall be paid by Lessee to Lessor on
demand.  The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this
Lease.

       

      ARTICLE XVIII 
– HOLDING OVER

       

      18.1 Holding
Over.  If Lessee remains in possession of all or any of the
Leased Properties after the expiration of the Term or earlier termination of
this Lease, such possession shall be as a month-to-month tenant, and throughout
the period of such possession Lessee shall pay as Rent for each month two (2)
times the sum of: (a) one-twelfth (1/12th) of the
Base Rent payable during the Lease Year in which such expiration or termination
occurs, plus (b) all Additional Charges accruing during the month, plus (c) any
and all other sums payable by Lessee pursuant to this Lease; provided, however,
that if Lessee is holding over at the request of Lessor or because Lessor has
been unable to find a replacement operator, then Lessee shall only be required
to pay as Rent for each month one (1) times such sum.  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 applicable law
to month-to-month tenancies, to continue its occupancy and use of the Leased
Properties until the month-to-month tenancy is terminated.  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.

       

      18.2 Indemnity.  If
Lessee fails to surrender the Leased Properties in a timely manner and in
accordance with the provisions of Section 9.1.5 upon
the expiration or termination of this Lease, in addition to any other
liabilities to Lessor accruing therefrom, Lessee shall defend, indemnify and
hold Lessor, its principals, officers, directors, agents and employees harmless
from loss or liability resulting from such failure, including, without limiting
the generality of the foregoing, loss of rental with respect to any new lease in
which the rental payable thereunder exceeds the Rent paid by Lessee pursuant to
this Lease during Lessee’s hold-over and any claims by any proposed new tenant
founded on such failure.  The provisions of this Section 18.2 shall survive the expiration or earlier
termination of the Term.

       

      ARTICLE XIX  -
SUBORDINATION

       

      19.1 Subordination.  Upon
the election of a Facility Mortgagee, this Lease shall be subject and
subordinate to any Facility Mortgage, to all advances made or hereafter to be
made thereunder and to all renewals, modifications, consolidations, replacements
and extensions thereof and substitutions therefore; provided, however, that
before any subordination pursuant to this Section 19.1 shall be effective, Lessor shall cause any holder
of a Facility Mortgage electing to subordinate this Lease to such mortgagee’s
security interest, to deliver to Lessee a “non disturbance agreement” reasonably
acceptable to such Facility Mortgagee and Lessee (a “Reasonable SNDA”) and
providing that, if such Facility Mortgagee acquires the Leased Properties by way
of foreclosure or deed in lieu of foreclosure, such Facility Mortgagee will not
disturb Lessee’s possession under this Lease and will recognize Lessee’s rights
hereunder if and for so long as no Event of Default has occurred under this
Lease and is continuing.  Upon delivery of a Reasonable SNDA to Lessee
by a Facility Mortgagee, this ARTICLE XIX shall be
self-operative.

       

      19.2 Attornment.  If
a Facility Mortgagee enforces the remedies provided for by law or by a Facility
Mortgage and has delivered a Reasonable SNDA to Lessee, Lessee shall, at the
option of the party succeeding to the interest of Lessor as a result of such
enforcement or as a result of a deed or delivery of possession of the Leased
Properties in lieu of such enforcement, attorn to such successor and recognize
such successor as Lessor under this Lease; provided, however, that such
successor in interest shall not (a) be bound by any payment of Rent for more
than one (1) month in advance, except for any such advance payments as may be
expressly required by this Lease; (b) be bound by any modification of this Lease
made after the delivery to Lessee of a Reasonable SNDA without the written
consent of the Facility Mortgagee or successor in interest; (c) be liable for
any act or omission of Lessor; or (d) be subject to any offset or defense
arising prior to the date such successor in interest acquired title to the
Leased Properties. Upon request, Lessee shall execute and deliver an instrument
or instruments confirming the attornment provided for herein.

       

      19.3 Lessee’s
Certificate.  Lessee shall, upon not less than ten (10) days
prior Notice from Lessor, execute, acknowledge and deliver to Lessor Lessee’s
Certificate containing then-current facts.  It is intended that any
Lessee’s Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Leased Properties, any mortgagee or
prospective mortgagee and any other party who reasonably may rely on such
statement.  Lessee’s failure to deliver the Lessee’s Certificate
within such time shall constitute an Event of Default.  In addition,
if Lessee fails to deliver the Lessee’s Certificate within the ten (10) day
period referred to above, Lessee hereby authorizes Lessor to execute and deliver
a certificate to the effect (if true) that Lessee represents and warrants that
(a) this Lease is in full force and effect without modification, and (b) Lessor
is not in breach or default of any of its obligations under this
Lease.

       

      19.4 Notice and
Cure.  If a Facility Mortgagee acquires title to one or more of
the Leased Properties by way of foreclosure or deed in lieu of foreclosure, then
commencing on the date the Facility Mortgagee acquires title, the Facility
Mortgagee shall have thirty (30) days within which to cure any default by Lessor
under this Lease existing on such date.  If the defaults by Lessor are
cured during such period, then this Lease shall remain in full force and effect
and Lessee shall have no right to terminate this Lease so long as the Facility
Mortgagee performs all of the Lessor’s subsequent obligations under this
Lease.  If the Facility Mortgagee does not cure such default during
such thirty (30) day period and such failure continues for an additional thirty
(30) days after written notice from Lessee to the Facility Mortgagee and Lessor
of such uncured defaults, then Lessee may exercise the Option pursuant to the
terms of ARTICLE XXIX during the ten (10) day period
commencing on the day the second thirty (30) day period expired.  The
foregoing rights to cure a Lessor default shall be exercisable in the sole
discretion of the Facility Mortgagee, and, the Facility Mortgagee shall have no
obligation to cure any default by Lessor.

       

      ARTICLE XX  –
RISK OF LOSS

       

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

       

      ARTICLE XXI  -
INDEMNIFICATION

       

      21.1 Indemnification.  Notwithstanding
the existence of any insurance or self-insurance provided for in ARTICLE XIII, and without regard to the policy limits
of any such insurance or self-insurance, Lessee shall protect, indemnify, save
harmless and defend Lessor and any Facility Mortgagee, and the principals,
officers, directors and agents and employees of Lessor and of any Facility
Mortgagee, from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys’ fees and expenses), to the extent permitted by law, and to
the extent arising out of acts, omissions, events or conditions occurring or
existing on or before the later of (i) the expiration
of the Term (without taking into account any early termination) and (ii) the
date Lessee delivers possession to Lessor or Lessor’s designee, and imposed upon
or incurred by or asserted against Lessor or any Facility Mortgagee by reason
of: (a) any accident, injury to or death of persons or loss of or damage to
property occurring on or about the Leased Properties or adjoining sidewalks,
including without limitation any claims of malpractice; (b) any use, misuse,
non-use, condition, maintenance or repair by Lessee of the Leased Properties;
(c) the failure to pay any Impositions; (d) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease; (e) the management and operation of the Facilities; (f)
the ownership of the Facilities by Lessor,
and (g) the nonperformance of any contractual obligation, express or
implied, assumed or undertaken by Lessee or any party in privity with Lessee
with respect to the Leased Properties or any business or other activity carried
on with respect to the Leased Properties.  Any amounts that become
payable by Lessee under this Section shall be paid within ten (10) days after
demand by Lessor, and, if not timely paid, shall bear interest (to the extent
permitted by law) at the Overdue Rate from the date of demand to the date of
payment.  Nothing herein shall be construed as indemnifying either
Lessor or any Facility Mortgagee against the grossly negligent acts or omissions
or willful misconduct of Lessor, a Facility Mortgagee, or the agents, employees,
licensees or invitees of Lessor or a Facility Mortgagee.  Nothing
herein shall be construed as indemnifying either Lessor or any Facility
Mortgagee against the negligent acts or omissions or willful misconduct of
Lessor, a Facility Mortgagee, or the agents, employees, licensees or invitees of
Lessor or a Facility Mortgagee occurring after the date Lessee delivers
possession of the Facilities to Lessor or Lessor’s designee.

       

      21.2 Survival of
Indemnification.  Lessee’s liability under this Article shall
survive the expiration or any earlier termination of this Lease.

       

      ARTICLE XXII 
– PROHIBITION AGAINST TRANSFERS

       

      22.1 General Prohibition against
Transfers.  Lessee acknowledges that a significant inducement
to Lessor to enter into this Lease with Lessee on the terms set forth herein is
the combination of financial strength, experience, skill and reputation
possessed by Lessee, the Person or Persons in Control of Lessee and the Manager
of the Facilities on the Commencement Date, together with Lessee’s assurance
that Lessor shall have the unrestricted right to approve or disapprove any
proposed Transfer. Therefore, there shall be no Transfer except as specifically
permitted by this Lease or consented to in advance by Lessor in writing. Lessee
agrees that Lessor shall have the right to withhold its consent to any proposed
Transfer on the basis of Lessor’s judgment as to the effect the proposed
Transfer may have on the Facilities and the future performance of the
obligations of the Lessee under this Lease, whether or not Lessee agrees with
such judgment.  Any attempted Transfer that is not specifically
permitted by this Lease or consented to by Lessor in advance in writing shall be
null and void and of no force and effect whatsoever.  In the event of
a Transfer, Lessor may collect Rent and other charges from the Transferee and
apply the amounts collected to the Rent and other charges herein reserved, but
no Transfer or collection of Rent and other charges shall be deemed to be a
waiver of Lessor’s rights to enforce Lessee’s covenants or an acceptance of the
Transferee as Lessee, or a release of the Lessee named herein from the
performance of its covenants. Notwithstanding any Transfer, Lessee shall remain
fully liable for the performance of all terms, covenants and provisions of this
Lease.  Any violation of this Lease by any Transferee shall be deemed
to be a violation of this Lease by Lessee.  Notwithstanding the
foregoing, the following transfers are permitted and will not require the
consent of Lessor:

       

      (a) any
transfer (whether by sale, gift, encumbrance, or otherwise) of an ownership
interest in Lessee or in Guardian Holdings solely between the Principals or
their permitted transferees described in (b) below; provided, however, that (1)
Lessee shall provide Lessor with Notice of such Transfer and such information
about such Transfer as Lessor may reasonably request, and (2) such transferee
shall grant Lessor a security interest in the interest in Lessee so transferred;
and

       

      (b) (I) a
Transfer upon the death of any equity owner of Lessee or Guardian Holdings to
his or her spouse, children, parents, heirs, lineal descendents or relatives
through marriage or otherwise (or to any one or more of them); (II) the
transfer, by gift or sale for estate planning purposes, by an equity owner of
Lessee or Guardian Holdings of all or any portion of his or her equity interest
in Lessee or Guardian Holdings to (A) his or her spouse, children, parents or
other heirs (or to any one or more of them) upon such equity owner’s death, or
(B) a revocable grantor trust of which such equity owner is the sole trustee and
settlor, (C) a “Mallinckrodt” trust, (D) any trust where such equity owner or
his or her spouse is the beneficiary during his or her lifetime, or either of
their descendents or some combination thereof are the beneficiaries of such
trust after such equity owner’s death, (E) a trust where such equity owner is
the trustee of such trust, (F) a trust where the trust assets will revert back
to such equity owner, (G) a trust where such equity owner, as permitted by the
trust document, may regain ownership of the assets in such trust, (H) a trust
where the ownership of such trust may be transferred to such equity owner or his
or her spouse (or widow) or either of their descendents, (I) to a trust where
such ownership in the trust may be transferred into a corporation or limited
liability company of which such trust is a controlling owner of such entity, (J)
a corporation or limited liability company of which a person set forth above is
a controlling owner of such entity, or (K) to a “defective grantor trust” ,
shall be deemed a permitted Transfer under this Agreement; provided, however,
that (1) Lessee shall provide Lessor with Notice of such Transfer and such
information about such Transfer as Lessor may reasonably request, (2) reserved,
and (3) such transferee shall grant Lessor a security interest in the interest
in Lessee so transferred.

       

      22.2 Subordination and
Attornment.  Lessee shall insert in any sublease permitted by
Lessor provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee thereunder will, at Lessor’s option, attorn to Lessor
and waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder, as a result of the termination of this Lease,
and (c) if the sublessee receives a written Notice from Lessor or Lessor’s
assignee, if any, stating that Lessee is in default under this Lease, the
sublessee thereafter shall be obligated to pay all rentals accruing under the
sublease directly to the party giving such Notice, or as such party may direct,
and such payments shall be credited against the amounts owing by Lessee under
this Lease.

       

      22.3 Sublease
Limitation.  Anything contained in this Lease to the contrary
notwithstanding, even if a sublease of a Leased Property is permitted, Lessee
shall not sublet such Leased Property on any basis such that the rental to be
paid by the sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of the sublessee,
or (b) any other formula such that any portion of the sublease rental received
by Lessor would fail to qualify as “rents from real property” within the meaning
of Section 856(d) of the Code, or any similar or successor provision
thereto.  The parties agree that this Section shall not be deemed
waived or modified by implication, but may be waived or modified only by an
instrument in writing explicitly referring to this Section by
number.

       

      ARTICLE XXIII 
– REPORTING REQUIREMENTS

       

      23.1 Financial Statements and
Other Reports and Materials Required by Lessor.  Lessee shall
furnish to Lessor, in paper form and by electronic means satisfactory to
Lessor:

       

      (a) Within
seventy five (75) days after the end of each of Lessee’s fiscal
years:  (i) Lessee’s Financial Statements; (ii) separate financial
statements for each of the Facilities that are prepared in accordance with GAAP,
except for principles of consolidation; (iii) a variance report comparing actual
items of income and expenses to such items as budgeted; (iv) an Officer’s
Certificate stating that Lessee is not in default in the performance or
observance of any of the terms of this Lease, or if Lessee is in default,
specifying all such defaults, the nature thereof, and the steps being taken to
remedy the same; and (v) a certificate from qualified, certified public
accountants acceptable to Lessor stating that nothing came to the attention of
the certified public accountants during the course of their audit of Lessee’s
Financial Statements that would cause them to believe that any Event of Default
had occurred; provided, however, that with respect to Lessee’s Financial
Statements and other items required to be delivered pursuant to this paragraph
for the year ended December 31, 2004, Lessee shall have until May 1, 2005 to
deliver such items; provided, further, that the date of delivery of the
Financial Statements required to be delivered by this paragraph may be extended
upon the mutual written agreement of Lessor and Lessee;

       

      (b) Within
thirty five (35) days after the end of each of Lessee’s quarters, quarterly
consolidated Financial Statements of Lessee, together with an Officer’s
Certificate stating that (i) Lessee is not in default of any covenant set forth
in ARTICLE VIII of this Lease, or if Lessee is in
default, specifying all such defaults, the nature thereof, and the steps being
taken to remedy the same; (ii) each Facility is in compliance with the terms of
its Medicare provider agreement and in good standing with the Medicare program;
(iii) each Facility is in compliance with the terms of its Medicaid provider
agreement and in good standing with the Medicaid program; and (iv) the
then-current number of licensed and operating beds at each
Facility;

       

      (c) Within
thirty (30) days after the end of each month, monthly financial reports for each
Facility, including detailed statements of income and expense and detailed
operational statistics regarding occupancy rates, patient mix and patient rates
by type for the Facility, including a rent roll and an aged accounts receivables
report in sufficient detail to show amounts due from each class of patient mix
(i.e., private, Medicare, Medicaid and Veterans Administration) by the account
age classifications of 30 days, 60 days, 90 days, 120 days and over 120
days;

       

      (d) Within
fifteen (15) days of filing a copy of each cost report filed with a governmental
agency for any Facility;

       

      (e) Within
fifteen (15) days of Lessee’s or Manager’s receipt thereof, copies of Medicare
and Medicaid Rate Letters and other material correspondence;

       

      (f) Within
fifteen (15) days after they are required to be filed with the SEC, copies of
any annual or quarterly report and of information, documents and other reports
(or copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that Lessee or Manager is required to file with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934;

       

      (g) Within
thirty (30) days of Lessee’s or Manager’s receipt thereof, copies of surveys
performed by the appropriate governmental agencies for licensing or
certification purposes, including, without limitation, annual surveys, revisits
and complaint surveys, copies of any plans of correction and all related
correspondence;

       

      (h) Immediate
Notice to Lessor of any action, proposal or investigation by any agency or
entity, or complaint to such agency or entity, known to Lessee, the result of
which could be to (i) modify in a way materially adverse to Lessee or revoke or
suspend or terminate, or fail to renew or fully continue in effect, any license
or certificate or operating authority pursuant to which Lessee carries on any
part of the Primary Intended Use of the Facilities, or (ii) suspend, terminate,
adversely modify, or fail to renew or fully continue in effect any cost
reimbursement or cost sharing program by any state or federal governmental
agency, including but not limited to Medicaid or Medicare or any successor or
substitute therefor, or seek return of or reimbursement for any funds previously
advanced or paid pursuant to any such program, or (iii) impose any bed hold,
limitation on patient admission or similar restriction on any Leased Property,
or (iv) prosecute any party with respect to the operation of any activity on the
Facilities or enjoin any party or seek any civil penalty in excess of One
Thousand Dollars ($1,000.00) in respect thereof;

       

      (i) As soon
as it is prepared in each Lease Year, but not later than the last day of the
second (2nd) month
in each Lease Year (i) a capital and operating budget for the Facilities for
that and the following Lease Year, which budget shall be subject to Lessor’s
reasonable approval; (ii) a financial plan for the third (3rd)
through fifth (5th) Lease
Years following the Lease Year in which such plan is prepared; (iii) a marketing
plan for that Lease Year;

       

      (j) With
reasonable promptness, such other information respecting the financial condition
and affairs of Lessee and the Facilities as Lessor reasonably may request from
time to time, including, without limitation, any such other information as may
be available to the administration of the Leased Properties;

       

      (k) Upon
Lessor’s request from time to time, such additional information and unaudited
quarterly financial information concerning the Leased Properties and Lessee as
Lessor may reasonably require for its on-going filings with the Securities and
Exchange Commission, under both the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, including, but not limited to, 10-Q
Quarterly Reports, 10-K Annual Reports and registration statements to be filed
by Lessor during the Term of this Lease;

       

      (l) Upon
Lessor’s request form time to time, the worksheets of Lessee and its accountants
used in the preparation of the Financial Statements; and

       

      (m) At least
fifteen (15) Business Days before the expiration of each license and permit
required for the operation of the Facilities for the Primary Intended Use,
evidence satisfactory to Lessor that such license or permit has been
unconditionally renewed by the issuer thereof.

       

      23.2 Public Offering
Information.  Lessee specifically agrees that Lessor may
include financial information and information concerning the operation of the
Facilities that does not violate the confidentiality of the facility-patient
relationship and the physician-patient privilege under applicable laws, in
offering memoranda or prospectus, or similar publications in connection with
syndications or public offerings of Lessor’s securities or interests, and any
other reporting requirements under applicable Federal and State Laws, including
those of any successor to Lessor.  Lessee agrees to provide such other
reasonable information necessary with respect to Lessee and the Leased
Properties to facilitate a public offering or to satisfy SEC or regulatory
disclosure requirements. Upon request of Lessor, Lessee shall notify Lessor of
any necessary corrections to information Lessor proposes to publish within a
reasonable period of time (not to exceed three (3) days) after being informed
thereof by Lessor.

       

      ARTICLE XXIV –
QUIET ENJOYMENT

       

      24.1 Quiet
Enjoyment.  So long as Lessee pays all Rent as it becomes due
and complies with all of the terms of this Lease and performs its obligations
under this Lease and the other Transaction Documents, Lessee shall peaceably and
quietly have, hold and enjoy the Leased Properties 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
hereafter provided for in this Lease or consented to by
Lessee.  Except as otherwise provided in this Lease, no failure by
Lessor to comply with the foregoing covenant will 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.  Lessee shall, however, have
the right, by separate and independent action, to pursue any claim it may have
against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Section.

       

      ARTICLE
XXV -
NOTICES

       

      25.1 Notices.  Any
notice, request or other communication to be given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, or by hand delivery or facsimile transmission to the following
address:

       

      To
Lessee:                           
 Guardian LTC Management, Inc.

      Rte. 219,
Brockway-DuBois Road

      P.O. Box
219

      Brockway,
PA 15824

      Attn:
Raymond Calhoun, President

      Telephone
No.:  (814) 265-1164

      Facsimile
No.:  (814) 265-1990

       

      With copy
to:                        Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

      (which
shall
not                     5
Palo Alto Square – 6th
Floor

      constitute
notice)                   3000
El Camino Real

      Palo Alto, CA 94306-2155

      Attn.: Gabriel Schnitzler,
Esq.

      Telephone
No.: (650) 251-7700

      Facsimile
No.: (650) 251-7739

      

      To
Lessor:                            OHI
Asset (PA) Trust

                   
c/o Omega Healthcare Investors, Inc.

      9690
Deereco Road,  Suite 100

      Timonium,
MD 21093

      Attn.:
Daniel J. Booth

      Telephone
No.: (410) 427-1700

      Facsimile
No.:  (410) 427-8800

       

      And with
copy
to                 Doran
Derwent, PLLC

      
        	
                (which
      shall not

              	
                125
      Ottawa Ave., N.W., Suite 420

              

      

      
        	
                 
      

              	
                constitute
      notice):

              	
                Grand
      Rapids, Michigan 49503

              

      

      
        	
                 
      

              	
                Attn:
      Mark E. Derwent

              

      

      Telephone
No.: (616) 451-8690

      Facsimile
No.: (616) 451-8697

       

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

       

      ARTICLE
XXVI  -
APPRAISAL

       

      26.1 Appraisers.  If
it becomes necessary to determine Fair Market Rent or Fair Market Value for any
purpose under this Lease, the party required or permitted to give Notice of such
required determination shall include in the Notice the name of a person selected
to act as appraiser on its behalf.  Within ten (10) days after such
Notice, the party receiving such Notice shall give Notice to the other party of
its selection of a person to act as appraiser on its behalf.  The
appraisers thus appointed, each of whom must be a member of the Appraisal
Institute (or any successor organization thereto) and experienced in appraising
facilities used for purposes similar to the Primary Intended Use of the
Facilities, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property or
Leased Properties, as the case may be, to determine the Fair Market Rent or Fair
Market Value thereof as of the relevant date (giving effect to the impact, if
any, of inflation between the date of their decision and the relevant date);
provided, however, that if only one appraiser has been so appointed, or if two
appraisers have been so appointed but only one such appraiser has made such
determination within fifty (50) days after the date of the Notice appointing the
first appraiser, then the determination of such appraiser shall be final and
binding upon Lessee.  To the extent consistent with sound appraisal
practice at the time of any such appraisal, such appraisal shall be made on a
basis consistent with the basis on which the Leased Property or Leased
Properties were appraised for purposes of determining its Fair Market Value at
the time of Lessor’s acquisition thereof.  If two appraisers have been
appointed and have made their determinations within the respective requisite
periods set forth above, and if the difference between the amounts so determined
does not exceed ten percent (10%) of the greater of such amounts, then the Fair
Market Rent shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined.  If the difference between the amounts so
determined exceeds ten percent (10%) of the greater of such amounts, then such
two appraisers shall within twenty (20) days appoint a third
appraiser.  If no such appraiser is appointed within such twenty (20)
days or within ninety (90) days of the date of the Notice appointing the first
appraiser, whichever is earlier, either Lessor or Lessee may apply to any court
having jurisdiction to have such appointment made by such court.  Any
appraiser appointed by the original appraisers or by such court shall be
instructed to determine the Fair Market Rent or Fair Market Value within
forty-five (45) days after appointment of such appraiser.  The
determination of the appraiser which differs most in terms of dollar amount from
the determinations of the other two appraisers shall be excluded, and the
average of the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Rent or Fair Market Value of the Leased
Property or Leased Properties, as the case may be.  If the Fair Market
Rent is being determined for more than one year, the Fair Market Rent may
include such annual increases, if any, as the appraisers determine to be in
accordance with the terms of this Lease.

       

      26.2 Enforceability.  This
provision for determining by appraisal shall be specifically enforceable to the
extent such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law, and judgment may be entered upon such determination
in a court of competent jurisdiction.  Lessor and Lessee shall each
pay the fees and expenses of the appraiser appointed by it and each shall pay
one-half of the fees and expenses of the third appraiser and one-half of all
other costs and expenses incurred in connection with each
appraisal.

       

      ARTICLE XXVII 
– TRANSFER OF FACILITIES

       

      27.1 Facility Trade
Names.  If this Lease is terminated after the occurrence of an
Event of Default, Lessee shall be deemed to have assigned to Lessor the
exclusive right to use the Facility Trade Names in perpetuity in the markets in
which the Facilities are located, and Lessee shall not after any such
termination use the Facility Trade Names in any business that competes with the
Facilities.

       

      27.2 Transfer of Operational
Control of the Facilities.

       

      27.2.1 Lessee
acknowledges and agrees that, subject to applicable law, the certificates of
need and licenses necessary to operate the Leased Properties for the Primary
Intended Use are appurtenant to the Leased Properties, both during and following
the expiration or earlier termination of the Term.  If the
certificates of need or licenses to operate the Leased Properties for the
Primary Intended Use are issued to Lessee, the Sublessees or the Manager, Lessee
agrees that it will cooperate with Lessor to turn over to Lessor or its
designee, upon the expiration or earlier termination of the Term, all of
Lessee’s rights in connection with the certificate of need and/or
licenses.

       

      27.2.2 Upon the
expiration or earlier termination of the Term, Lessee shall cooperate fully in
transferring operational control of the Facilities to Lessor or Lessor’s nominee
and shall use its best efforts to cause the business conducted at the Facility
to continue without interruption.  Upon the request of Lessor, Lessee
shall execute and deliver an Operations Transfer Agreement to Lessor and any new
operator identified by Lessor in substantially the same form as the Operations
Transfer Agreement attached as Exhibit
F.  The obligation of Lessee regarding the Operations Transfer
Agreement shall survive the termination of this Lease.  To that end,
pending completion of the transfer of the operational control of the Facility to
Lessor or its nominee:

       

      (a) Lessee
will provide all necessary information requested by Lessor or its nominee for
the preparation and filing of any and all necessary applications or
notifications of any federal or state governmental authority having jurisdiction
over a change in the operational control of the Facility, and any other
information reasonably required to effect an orderly transfer of the Facility,
and Lessee will use its best efforts to cause all operating health care licenses
to be transferred to Lessor or to Lessor’s nominee; and

       

      (b) Lessee
shall engage only in transactions or other activities with respect to the
Facility that are in the ordinary course of its business and shall perform all
maintenance and repairs reasonably necessary to keep the Facility in
satisfactory operating condition and repair, and shall maintain the supplies and
foodstuffs at levels that are consistent and in compliance with all health care
regulations, and shall not sell or remove any personal property except in the
ordinary course of business and in accordance with the terms and conditions of
this Lease.

       

      27.3 Intangibles and Personal
Property.  Notwithstanding any other provision of this Lease,
but subject to the security interest in favor of Lessor granted pursuant to the
Transaction Documents, Lessor’s Personal Property shall not include goodwill nor
shall it include any other intangible personal property that is severable from
Lessor’s “interests in real property” within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto.

       

      ARTICLE
XXVIII -
ARBITRATION

       

      28.1 Arbitration.  Except
with respect to the payment of Rent under this Lease, the determination of Fair
Market Rent (which shall be determined solely in accordance with  ARTICLE XXVI), and any proceedings to recover
possession of one or more of the Leased Properties, if any controversy arises
between the parties hereto as to any of the provisions of this Lease or the
performance thereof, and if the parties are unable to settle the controversy by
agreement or as otherwise provided herein, the controversy shall be decided by
arbitration.  The arbitration shall be conducted by three arbitrators
selected in accordance with the rules and procedures of the American Arbitration
Association.  The decision of the arbitrators shall be final and
binding, and judgment may be entered thereon in any court of competent
jurisdiction.  The decision shall set forth in writing the basis for
the decision.  In rendering the decision and award, the arbitrators
shall not add to, subtract from or otherwise modify the provisions of this
Lease.  The expense of the arbitration shall be divided between Lessor
and Lessee unless otherwise specified in the award.  Each party in
interest shall pay the fees and expenses of its own counsel. The arbitration
shall be conducted in Baltimore, Maryland.  In any arbitration, the
parties shall be entitled to conduct discovery in the same manner as permitted
under Federal Rules of Civil Procedure 26 through 37, as amended.  No
provision in this Article shall limit the right of any party to this Agreement
to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after or during the pendency of any arbitration, and the
exercise of such remedies does not constitute a waiver of the right of either
party to arbitration.

       

      ARTICLE
XXIX  – OPTION TO PURCHASE ALL FACILITIES

       

      29.1 Option to
Purchase All
Facilities.  In consideration of the execution of this Lease,
subject to the terms and conditions set forth below, Lessor hereby grants to
Lessee the option (the “Option”) to buy the
Option Property (as that term is defined below) in accordance with, and subject
to the terms and conditions of, this Article.  The Option may be
exercised only with respect to all of the Option Property, and may not be
exercised in part or with respect to less than all the Option
Property.

       

      29.2 Option Property. The
“Option
Property” means all of Lessor’s right, title and interest in the Leased
Properties, excluding the following items:

       

      (a) all
tradenames and trademarks related to the corporate name of Lessor and related
tradenames and trademarks;

       

      (b) cash,
general intangibles (other than (i) permits, licenses, approvals and
authorizations issued, granted or given for the benefit of the Facilities by or
under the authority of any federal, state or local governmental or
quasi-governmental agency, authority, official or tribunal that may be assigned
without cost or consent and (ii) rights to payments, reimbursements, or refunds
from the United States, any State, any insurer, municipality, public utility or
other agency, individual or entity, including without limitation, real estate
and personal property tax refunds, payments, reimbursements and deposits with
respect to the Facilities, each to the extent that such rights to payments,
reimbursements, refunds or deposits relate to expenses paid or services rendered
by Lessee or Manager during the Term), accounts, accounts receivable, deposits
(including, without limitation, bank and demand deposit accounts), insurance
policies, and contract rights of the Lessor, other than any accounts, accounts
receivable, deposits, policies or rights relating to expenses paid or services
rendered by Lessee or Manager during the Term;

       

      (c) books,
records and financial statements of Lessor;

       

      (d) rights to
payments, reimbursements or refunds from the United States of America, any
State, or municipality relating to income taxes paid by Lessor;

       

      (e) all
permits, licenses, approvals and authorizations issued, granted or given by or
under the authority of any federal, state or local governmental or
quasi-governmental agency, authority, official or tribunal which are not
assignable, for which consent to assignment is not obtained, or for which an
assignment will cause Lessor to incur costs (unless Lessee agrees to bear such
costs on Lessor’s behalf); and

       

      (f) actions,
suits, claims, rights and choses in action, instruments, promissory notes, and
documents owned by Lessor.

       

      29.3 Exercise of
Option.  During the Term, Lessee may exercise the Option only
during (the “Option
Period”) (i) the period beginning on the first day of the last Lease Year
of the Initial Term or any Renewal Term and ending thirty (30) days thereafter
and (ii) the ten (10) day period set forth in Section 19.4; provided, however, that Lessee may not exercise
the Option at any time when an Event of Default or Unmatured Event of Default
has occurred and is continuing.  Lessee shall exercise the option by
delivering Notice thereof to Lessor during the Option Period, together with a
non-refundable deposit in the amount of equal to ten percent (10%) of the Base
Amount (the “Option
Deposit”).  The Option Deposit shall be deemed to be fully
earned by Lessor upon Lessor’s receipt thereof, and shall only be returned to
Lessee under certain circumstances as more particularly set forth
below.

       

      29.4 Option
Price.  If Lessee exercises its option to purchase the Option
Property as set forth in this Lease, the purchase price for the Option Property
(the “Purchase
Price”) to be paid by Lessee shall be equal to the sum of (i) the Base
Amount plus (ii) 40% of the amount, if any, that (A) the Fair Market Value of
the Facilities on the date of exercise of the Option exceeds (B) the Base
Amount.  The Purchase Price shall be payable by Lessee in immediately
available funds at closing.  The Option Deposit shall be applied
against the Purchase Price at closing. Lessee shall also pay the cost of any
revenue or transfer stamps required to be affixed to the deeds, and all
reasonable expenses, disbursements and reasonable attorneys’ fees incurred by
Lessor in the sale transaction.

       

      29.5 Closing.  The
consummation of the transaction contemplated by the Option (the “Closing”) shall occur
on the last day of the Lease Year in which the Option is exercised, or such
other date mutually as is acceptable to Lessor and Lessee (the “Closing
Date”).  The Closing shall take place at the offices of the
title company issuing the Title Policies, or at such other place as is mutually
acceptable to Lessor and Lessee.  If the Option has been exercised,
but the Closing has not yet occurred as of the end of the Term, the Term shall
be automatically extended until the Closing Date.

       

      29.6 Conveyance(s); State of
Title; Title Insurance.  On the Closing Date, Lessor shall,
upon receipt from Lessee of the Purchase Price, together with full payment of
any unpaid Rent due and payable with respect to any period (prorated on a per
diem basis, if appropriate) ending on or before the Closing Date, deliver to
Lessee: (1) deeds conveying the Land underlying the Facilities and warranting
only that Lessor has committed no act by which the Land has been encumbered
except as set forth in instruments recorded in the real estate records of the
applicable recording office, and (2) a bill of sale for that portion of the
Option Property that is personal property, which bill of sale shall be delivered
without warranty or recourse of any kind.  The deed, assignment and
bill of sale shall in any event be subject to the following:

       

      (a) This
Lease, the Subleases, and all real estate taxes, assessments, water charges,
requirements of municipal or other governmental authorities, or other covenants,
agreements, matters or things which are the obligation of Lessee to pay, comply
with, conform to or discharge under the provisions of this Lease;

       

      (b) All
liens, encumbrances, violations, charges or conditions that are due to any act
or omission of Lessee;

       

      (c) The
Permitted Encumbrances; and

       

      (d) Such
other exceptions to title set forth in the Title Policy.

       

      Within
fourteen (14) days after the exercise of the Option by Lessee, Lessee shall
order  title commitments (the “Title Commitments”)
for the real estate portion of the Option Property.  If, within ten
(10) days of the receipt of the Title Commitments, Lessee determines that the
matters listed in the Title Commitments are not acceptable to Lessee, then
Lessee shall provide Lessor with a written list of Lessee’s objection to title
(the “Objections”);
provided, however, that Lessee shall have no right to object to any of the
matters listed in paragraphs (a), (b) and (c)
above.   If Lessor is unable or unwilling to eliminate one or
more of the Objections, then Lessee may either (1) proceed to close and, by
doing so, waive any such Objections that Lessor is unable or unwilling to
eliminate; or (2) terminate this Option by written notice to Lessor, in which
case Lessee shall be entitled to a return of the Option Deposit; provided,
however, that Lessor shall be obligated to remove any financial encumbrances
voluntarily placed on the Option Property by Lessor and all judgment or
involuntary liens on the Option Property that secure obligations of Lessor not
arising from a failure of Lessee to perform its obligations under this Lease and
the other Transaction Documents.  At closing, Lessor shall deliver to
Lessee standard owner’s policies of title insurance (the “Title Policies”) with
respect to the real estate in the amount of the Purchase Price.  The
cost of the Title Policies and any endorsements to it shall be paid by
Lessee.

       

      29.7 Lessee
Acknowledgment. LESSEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
SPECIFICALLY PROVIDED IN THIS ARTICLE, LESSOR HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER
EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO,
CONCERNING OR WITH RESPECT TO: (I) VALUE; (II) THE INCOME TO BE DERIVED FROM THE
OPTION PROPERTY; (III) THE SUITABILITY OF THE OPTION PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH LESSEE MAY CONDUCT THEREON, INCLUDING THE
POSSIBILITIES FOR FUTURE DEVELOPMENT; (IV) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE OPTION
PROPERTY; (V) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
OPTION PROPERTY; (VI) THE NATURE, QUALITY OR CONDITION OF THE OPTION PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY; (VII) THE COMPLIANCE
OF OR BY THE OPTION PROPERTY OR THEIR OPERATION WITH ANY LAWS, RULES, ORDINANCES
OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY; (VIII) THE
MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO
THE PROPERTY; (IX) COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR
LAND USE LAWS, RULES, REGULATION, ORDERS OR REQUIREMENTS, INCLUDING BUT NOT
LIMITED TO, TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1990, THE
FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL RESOURCE CONSERVATION AND
RECOVERY ACT, THE U. S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C. F.
R., PART 261, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, AS AMENDED, THE RESOURCE CONSERVATION AND RECOVERY ACT OF
1976, THE CLEAN WATER ACT, THE SAFE DRINKING WATER ACT, THE HAZARDOUS MATERIALS
TRANSPORTATION ACT, THE TOXIC SUBSTANCE CONTROL ACT, AND REGULATIONS PROMULGATED
UNDER ANY OF THE FOREGOING; (X) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS
AT, ON, UNDER, OR ADJACENT TO THE OPTION PROPERTY; (XI) THE CONTENT,
COMPLETENESS OR ACCURACY OF THE DUE DILIGENCE MATERIALS OR PRELIMINARY REPORT
REGARDING TITLE; (XII) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY
HAVE BEEN OR MAY BE PROVIDED TO LESSEE; (XIII) THE CONFORMITY OF THE PROPERTY TO
PAST, CURRENT OR FUTURE APPLICABLE ZONING OR BUILDING REQUIREMENTS; (XIV)
DEFICIENCY OF ANY UNDERSHORING; (XV) DEFICIENCY OF ANY DRAINAGE; (XVI) THE
EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING THE
PROPERTY; OR (XVII) WITH RESPECT TO ANY OTHER MATTER.  LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO OCCUPY AND
INSPECT THE OPTION PROPERTY AND REVIEW INFORMATION AND DOCUMENTATION AFFECTING
IT, LESSEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE OPTION PROPERTY AND
REVIEW OF SUCH INFORMATION AND DOCUMENTATION, AND NOT ON ANY INFORMATION
PROVIDED OR TO BE PROVIDED BY LESSOR. LESSEE FURTHER ACKNOWLEDGES AND AGREES
THAT ANY INFORMATION MADE AVAILABLE TO LESSEE OR PROVIDED OR TO BE PROVIDED BY
OR ON BEHALF OF LESSOR WITH RESPECT TO THE OPTION PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT LESSOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. LESSOR IS NOT LIABLE OR BOUND IN ANY MANNER
BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER,
AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. LESSEE FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE OPTION PROPERTY AND
AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS
WITH ALL FAULTS, AND THAT LESSOR HAS NO OBLIGATIONS TO MAKE REPAIRS,
REPLACEMENTS OR IMPROVEMENTS EXCEPT AS MAY OTHERWISE BE EXPRESSLY STATED HEREIN.
LESSEE REPRESENTS, WARRANTS AND COVENANTS TO LESSOR THAT, EXCEPT FOR LESSOR'S
EXPRESS REPRESENTATIONS AND WARRANTIES SPECIFIED IN THIS AGREEMENT AND IN THE
INSTRUMENTS TO BE DELIVERED AT CLOSING, LESSEE IS RELYING SOLELY UPON LESSEE’S
OWN INVESTIGATIONS.

       

      29.8 Default;
Remedies.  In the event that either party hereunder fails to
perform their respective duties or obligations under this Article, the other
party shall give Notice thereof and, if the non-performing Party fails to remedy
such default within a ten (10) day period, the performing party’s remedies shall
be as follows: (i) Lessor’s sole and exclusive remedy shall be to retain the
Deposit as full liquidated damages, and not as a penalty, the parties hereby
acknowledging Lessor’s actual damages will be difficult, if not impossible, to
calculate under the circumstances, and Lessor hereby waiving and releasing any
right to pursue any other remedy hereunder, at law, in equity or otherwise,
including without limitation the remedies of specific performance and damages,
and (ii) Lessee may pursue any and all rights and remedies available hereunder
at law, in equity, or otherwise, including without limitation an action for
specific performance or damages.  In no event will any default
hereunder result in the termination of the Lease.

       

      29.9 Assignments.  Lessee
shall have no right to assign the Option, or any interest therein, without
Lessor’s consent, which may be withheld in Lessor’s sole
discretion.

       

      ARTICLE XXX  –
TERMINATION OF OPTION TO PURCHASE PETERSON FACILITY

       

      30.1 Termination of Option to
Purchase Peterson Facility.  Pursuant to the Existing Lease,
Lessor and Lessee terminated the Peterson Option.

       

      ARTICLE XXXI 
– SECURITY DEPOSIT

       

      31.1 Security
Deposit.  Concurrently with Lessee’s
execution of this Lease, Lessee shall deliver to Lessor a security deposit in
the amount of Three Million Six Hundred Ninety Thousand Six Hundred Twenty Five
and 00/100 Dollars ($3,690,625.00), in the form of an absolute, unconditional
site draft letter(s) of credit for a term of one (1) year (renewable
automatically) issued by an “A” rated financial institution (as increased, the
“Security
Deposit”), which Lessor shall hold as security for the full and faithful
performance by Lessee of each and every term, provision, covenant and condition
of this Lease in accordance with, and subject to, the terms and conditions of
the Letter of Credit Agreement.  If at any time the Security Deposit
is in the form of cash, it may be deposited by Lessor into an interest-bearing
account, and the interest shall be added to and become part of the Security
Deposit.  The Security Deposit shall not be considered an advance
payment of Rent (or of any other sum payable to Lessee under this Lease) or a
measure of Lessor’s damages in case of a default by Lessee.  The
Security Deposit shall not be considered a trust fund, and Lessee expressly
acknowledges and agrees that Lessor is not acting as a trustee or in any
fiduciary capacity in controlling or using the Security
Deposit.  Lessor shall have no obligation to maintain the Security
Deposit separate and apart from Lessor’s general and/or other
funds.  The Security Deposit, less any portion thereof applied as
provided in the Letter of Credit Agreement or Section 31.2, shall be returned to Lessee within sixty (60)
days following the expiration of the Term.

       

      31.2 Application of Security
Deposit.  If an Event of Default has occurred and such Event of
Default is continuing, Lessor may, but shall not be required to, in addition to
and not in lieu of any other rights and remedies available to Lessor, apply all
or any part of the Security Deposit to the payment of any sum in default, or any
other sum that Lessor may expend or be required to expend by reason of Lessee’s
default, including but not limited to, any damages or deficiency in reletting
the Leased Properties.  Whenever, and as often as, Lessor has applied
any portion of the Security Deposit to cure Lessee’s default hereunder or under
any agreement with which this Lease is cross-defaulted, Lessee shall, within ten
(10) days after Notice from Lessor, deliver a new letter of credit meeting the
requirements of the Letter of Credit Agreement to Lessor (or, at Lessor’s
option, deposit additional money with Lessor) sufficient to restore the Security
Deposit to the full amount then required to be deposited with Lessor pursuant to
Section  31.1 above, and Lessee’s failure
to do so shall constitute an Event of Default without any further
Notice.

       

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

       

      ARTICLE XXXII 
- MISCELLANEOUS

       

      32.1 Survival, Choice of
law.  Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee arising prior to
the date of expiration or termination of this Lease shall survive such
expiration or termination.  If any term or provision of this Lease or
any application thereof is held invalid or unenforceable, the remainder of this
Lease and any other application of such term or provisions shall not be affected
thereby. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing and in recordable
form signed by Lessor and Lessee.  All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  The headings in this
Lease are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Lease shall be governed by and construed in
accordance with the laws of the state of Maryland, except as to matters that,
under applicable procedural conflicts of laws rules require the application of
laws of another State.

       

      LESSEE
CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE
STATES OF MARYLAND AND EACH STATE IN WHICH A FACILITY IS LOCATED, AND AGREES
THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND FEDERAL
COURTS LOCATED IN THE STATES OF MARYLAND OR EACH STATE IN WHICH A FACILITY IS
LOCATED.  LESSEE AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON
IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATES OF MARYLAND OR EACH
STATE IN WHICH A FACILITY IS LOCATED AND IRREVOCABLY WAIVES ANY OBJECTION TO
VENUE IN THE STATE AND FEDERAL COURTS OF THE STATES OF MARYLAND OR EACH STATE IN
WHICH A FACILITY IS LOCATED.

       

      32.2 MUTUAL WAIVER OF RIGHT TO
JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO:  (i) THIS LEASE, OR ANY OF THE TRANSACTION
DOCUMENTS; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
BETWEEN OR AMONG THEM; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF ANY PARTY
HERETO OR ANY OF THEIR DIRECTORS, TRUSTEES, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH THEM; IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

       

      32.3 Memorandum or Short Form of
Lease.  Lessor and Lessee shall, promptly upon the request of
either, enter into a Memorandum or Short Form of this Lease, substantially in
the form of attached Exhibit G, with such
modifications as may be appropriate under the laws and customs of the States and
in the customary form suitable for recording under the laws of each of the
States.  Lessee shall pay all costs and expenses of recording such
memorandum or short form of this Lease.

       

      32.4 Limitation on
Recovery.  Notwithstanding anything in this Lease or any of the
other Transaction Documents to the contrary, Lessee specifically agrees to look
solely to Lessor’s interest in the Leased Properties for recovery of any
judgment from Lessor, it being specifically agreed that no constituent
shareholder, officer or director of Lessor shall ever be personally liable for
any such judgment or for the payment of any monetary obligation to
Lessee.  Furthermore, Lessor (original or successor) shall never be
liable to Lessee for any indirect or consequential damages suffered by Lessee or
any of its Affiliates from whatever cause.

       

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

       

      32.6 Waivers.  Lessee
waives any defense by reason of any disability of Lessee, and waives any other
defense based on the termination of Lessee’s (including Lessee’s successor’s)
liability from any cause.  Lessee waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance, and waives all notices of the existence,
creation, or incurring of new or additional obligations.

       

      32.7 Consents.  Whenever
the consent or approval of Lessor is required hereunder, Lessor may in its sole
discretion and without reason withhold that consent or approval unless otherwise
specifically provided.

       

      32.8 Lessee to Pay Reasonable
Expenses.  Lessee shall pay or reimburse Lessor for all
reasonable costs and expenses incurred by Lessor in connection with or relating
in any way to the administration of this Lease, including without limitation,
search costs, audit fees, appraisal fees, reasonable attorneys’ fees, and other
costs paid or incurred by Lessor in the analysis, administration and enforcement
of this Lease and the other Transaction Documents, the protection and defense of
the rights of Lessor in and to the Leased Properties, the Collateral and the
other Transaction Documents, or as otherwise referred to in this Lease or in the
other Transaction Documents, and all costs and expenses relating to extensions,
amendments, waivers, or consents requested by Lessee, pursuant to this Lease or
any other Transaction Document or any agreements with other parties or
termination of this Lease (collectively, “Reasonable
Expenses”); provided, however, that Reasonable Expenses does not include
the overhead expenses incurred by Lessor in the ordinary course of its
business.  All such Reasonable Expenses shall be due on demand;
provided, however, that so long as no Event of Default has occurred hereunder,
Reasonable Expenses incurred after the date of this Lease which are unrelated to
the closing shall be paid on or before the earlier of (i) 30 days following
written notice thereof to Lessee or (ii) the date of expiration or earlier
termination of this Lease.  Any Reasonable Expenses not paid when due
shall bear interest at the Overdue Rate.

       

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

       

      32.10 Options
Personal.  The renewal options granted to Lessee in this Lease
are granted solely to Lessee and are not assignable or transferable except in
connection with a Transfer permitted under Section 22.1.

       

      32.11 Lessor’s Right to
Inspect.  Lessee shall permit Lessor and its authorized
representatives to inspect the Leased Properties and Lessee’s books and records
pertaining thereto during normal business hours at any time without
Notice.

       

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

       

      32.13 Remedies
Cumulative.  To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor now or hereafter
provided either in this 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.

       

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

       

      32.15 No Merger of
Title.  There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate, and (b) the fee estate in the
Leased Properties.

       

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

       

      32.17 Conveyance by
Lessor.  If Lessor or any successor owner of the Leased
Properties conveys the Leased Properties other than as security for a debt,
Lessor or such successor owner, as the case may be, shall be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer, and all
such future liabilities and obligations shall be binding upon the new
owner.

       

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

       

      32.19 Entire
Agreement.  There are no oral or written agreements or
representations between the parties hereto affecting this Lease.  This
Lease supersedes and cancels any and all previous negotiations, arrangements,
representations, brochures, agreements and understandings, if any, between
Lessor and Lessee.

       

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

       

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

       

      32.22 Time of the
Essence.  Except for the delivery of possession of the
Facilities to Lessee, time is of the essence with respect to all provisions of
this Lease of which time is an element.

       

      SIGNATURE
PAGES FOLLOW

       

      
        
          
             

             

             

          

           

        

        
           

          
            

          

        

        
           

          
            Signature
Page to

            SECOND
AMENDED AND RESTATED MASTER LEASE

          

        

      

      IN
WITNESS WHEREOF, the parties have executed this Master Lease by their duly
authorized officers as of the date first above written.

       

      LESSOR:

       

      OHI ASSET (PA) TRUST

       

      By:           OHI
Asset (PA), LLC, trustee

       

      By:           Omega
Healthcare Investors, Inc., its sole member

       

      

       

      By:           /s/ Daniel J.
Booth

      Name:        Daniel
J. Booth

      Title:          Chief
Operating Officer

       

      THE STATE
OF
MARYLAND                                                                    )

                                           
)

      COUNTY
OF  BALTIMORE                                                           
            )

                                     

      The
foregoing instrument was acknowledged before me this 24th day of September,
2008, by Daniel J. Booth, who is the Chief Operating Officer of Omega Healthcare
Investors, Inc., a Maryland corporation, the sole member of OHI Asset (PA), LLC,
a Delaware limited liability company, a trustee of OHI Asset (PA) Trust, a
Maryland business trust, on behalf of the trust.

       

      Notary
Public Judith A. Jacobs

      Notary Public, State of Maryland

      County of Baltimore

      My Commission Expires May 12, 2012

      

       

      
        
          
            Signature
Page -  1 of 2

            

          

           

        

        
           

          
            

          

        

        
           

          
            Signature
Page to

            SECOND
AMENDED AND RESTATED MASTER LEASE

          

        

      

      LESSEE:

       

      GUARDIAN
LTC MANAGEMENT, INC.

       

      By:           /s/ Peter C.
Varischetti

      Name:      Peter
C. Varischetti

                      
 Title:      Secretary

       

      

      

      THE STATE
OF
PENNSYLVANIA                                                                           )

                                                     
    )

      COUNTY OF
JEFFERSON                                                                                     
    )

       

      This
instrument was acknowledged before me on the 30th day of September, 2008,
by Peter C. Varischetti, the Secretary of Guardian LTC Management, Inc., a
Pennsylvania corporation, on behalf of said corporation.

       

      Notary
Public Melissa Beatty

      Notary Public Snyder TWp.,

      Jefferson County

      My Commission Expires Sept. 1, 2011

       

      
        
          
                                        Signature Page
- 2 of 2

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      LIST
OF EXHIBITS TO LEASE

       

      

       

      Exhibits A
–                                                                Facility
Trade Names

       

      Exhibits B-1 through B-21
–                                  Description
of Land

       

      Exhibit C
–                                                                Permitted
Encumbrances

       

      Exhibit D
–                                                                Form
of Lessee’s Certificate

       

      Exhibit E
–                                                                List
of Sublessees

       

      Exhibit F
–                                                                Form
of Operations Transfer Agreement

       

      Exhibit G
–                                                                Form
of Memorandum and Short Form of Lease

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A

       

      FACILITY
TRADE NAMES

      

       

      
        	 
      	
                Facility Name

              	
                Trade Names

                 

              
	
                1.

              	
                Mulberry
      Square Elder Care and Rehabilitation Center

                 

              	
                Mulberry
      Square

              
	
                2.

              	
                Curwensville
      Nursing Home

                 

              	
                Ridgeview
      Elder Care Rehabilitation Center

              
	
                3.

              	
                Meadow
      View Senior Living Center

                 

              	
                Meadow
      View Senior Living Center

                 

              
	
                4.

              	
                Ivy
      Woods Manor / Rolling Acres Care Center

                 

              	
                Ivy
      Woods Manor

              
	
                5.

              	
                Lakeview
      Senior Care and Living Center

                 

              	
                Lakeview
      Senior Care and Living Center

                 

              
	
                6.

              	
                Beaver
      Elder Care / Guardian Elder Care at Aliquippa

                 

              	
                Beaver
      Elder Care and Rehabilitation Center

              
	
                7.

              	
                Scenery
      Hill Manor / North American Medical Centers

                 

              	
                Scenery
      Hill Manor

              
	
                8.

              	
                Milford
      Valley Convalescent Home

                 

              	
                Milford
      Senior Care and Rehabilitation Center

              
	
                9.

              	
                Bradyview
      Manor

                 

              	
                Bradyview
      Manor

                 

              
	
                10.

              	
                Jefferson
      Hills Manor

                 

              	
                Jefferson
      Hills Manor

                 

              
	
                11.

              	
                Scottdale
      Manor Rehabilitation Center

                 

              	
                Scottdale
      Manor Rehabilitation Center

                 

              
	
                12.

              	
                Minerva
      Convalescent Center

                 

              	
                Minerva
      Convalescent Center

                 

              
	
                13.

              	
                Carleton
      Senior Care and Rehabilitation Center

                 

              	
                Carleton
      Senior Care and Rehabilitation Center

                 

              
	
                14.

              	
                Highlands
      Care Center

                 

              	
                Highlands
      Care Center

                 

              
	
                15.

              	
                Guardian
      Elder Care at Nanticoke

                 

              	
                Guardian
      Elder Care Center

              
	
                16.

              	
                Peterson
      Rehabilitation Hospital and Geriatric Center

              	
                Peterson
      Rehabilitation Hospital and Geriatric Center

                 

              
	
                17.

              	
                Darway
      Elder Care Rehabilitation Center

              	
                Darway
      Elder Care Rehabilitation Center

                 

              
	
                18.

              	
                Highland
      View Healthcare

                 

              	
                Highland
      View Healthcare

              
	
                19.

              	
                Rolling
      Hills Manor

                 

              	
                Rolling
      Hills Manor

              
	
                20.

              	
                Forest
      Park Health Center

                 

              	
                Forest
      Park Health Center

              
	
                21.

              	
                Brookline
      Village

              	
                Brookline
      Village

              

      

      
        
          
            A -
Page  1 of 1

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBITS
B-1 THROUGH B-21

       

      DESCRIPTION
OF LAND

      
        
 

        Legal
description of the real property for the following facilities:

        

        B-1                      Beaver
Elder Care

        B-2                      Bradyview
Manor

        B-3                      Carleton
Senior Center

        B-4                      Curwensville
Nursing Home

        B-5                      Ivy
Wood Manor

        B-6                      Jefferson
Hills Manor

        B-7                      Lakeview
Senior Care

        B-8                      Highlands
Care Center

        B-9                      Meadow
View Senior Living

        B-10                    Milford
Senior Care

        B-11                    Minerva,
Ohio

        B-12                    Mulberry
Square

        B-13                    Guardian
Elder Care

        B-14                    Peterson
Rehab Hospital

        B-15                    Scenery
Hill Manor

        B-16                    Scottdale
Manor

        B-17                     Darway
Elder Care Rehab Center

        B-18                     Highland
View Healthcare

        B-19                      Rolling
Hills Manor

        B-20                      Forest
Park Health Center

        B-21                      Brookline
Village

        

      
        
          
            B-
1

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
C

       

      PERMITTED
ENCUMBRANCES

      

      The exceptions to title contained in
the deeds delivered to Lessor pursuant to the Purchase Agreements.

      

      
        
          
            C-
1

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
D

      

      FORM OF
LESSEE’S CERTIFICATE

       

      The
undersigned                                                                                          (“Lessee”)
under that certain Lease (the “Lease”)
dated                         ,
20     and made with,
a             (“Lessor”),
hereby certifies:

       

      1. That it
is Lessee under the Lease; that attached hereto as Exhibit “A” is a true
and correct copy of the Lease; that the Lease is now in full force and effect
and has not been amended, modified or assigned except as disclosed or included
in Exhibit “A”;
and that the Lease constitutes the entire agreement between Lessor and
Lessee.

       

      2. That
there exist no defenses or offsets to enforcement of the Lease; that there are,
as of the date hereof, no breaches or uncured defaults on the part of Lessee or
Lessor thereunder; and that Lessee has no notice or knowledge of any prior
assignment, hypothecation, subletting or other transfer of Lessor’s interest in
the Lease.

       

      3. That the
Base Rent for the first Lease Year under this Lease is $_____________.  All
Rent which is due has been paid, and there are no unpaid Additional Charges
owing by Lessee under the Lease as of the date hereof.  No Base Rent
or other items (including without limitation security deposit and any impound
account or funds) have been paid by Lessee in advance under the Lease except for
the security deposit held by Lessor [in the form of an irrevocable letter of
credit] in the amount of $ and the monthly installment of Base Rent that became
due on .

       

      4. That
Lessee has no claim against Lessor for any security deposit, impound account or
prepaid Rent except as provided in paragraph 3 of this Certificate.

       

      5. That
there are no actions, whether voluntary or otherwise, pending against the
undersigned under the bankruptcy laws of the United States or any state thereof,
nor has Lessee nor, to the best of Lessee’s knowledge has Lessor begun any
action, or given or received any notice for the purpose of termination of the
Lease.

       

      6. That
there are, as of the date hereof, no breaches or uncured defaults on the part of
Lessee under any other agreement executed in connection with the
Lease.

       

      7. This
Certificate has been requested by Lessor pursuant to Section 19.3 of this Lease
and for the benefit of __________________________________(“Relying
Party”).  The Relying Party is entitled to rely on the statements of
Lessee contained in this certificate.

       

      8. All
capitalized terms used herein and not defined herein shall have the meanings for
such terms set forth in the Lease.

       

      Dated:                      _____,
20__                                                      LESSEE:

       

                                    By:

      
        
          
            D-
1

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
E

       

      LIST OF
SUBLESSEES

       

      

      
        	 
      	
                Facility Name

              	
                Sublessee

                 

              
	
                1.

              	
                Mulberry
      Square Elder Care and Rehabilitation Center

              	
                Mulberry
      Square Elder Care and Rehabilitation Center, LLC, a Pennsylvania limited
      liability company

                 

              
	
                2.

              	
                Curwensville
      Nursing Home

              	
                Curwensville
      Nursing Home, Inc., a Pennsylvania corporation

                 

              
	
                3.

              	
                Meadow
      View Senior Living Center

              	
                Meadow
      View Senior Living Center, LLC, a Pennsylvania limited liability
      company

                 

              
	
                4.

              	
                Ivy
      Woods Manor / Rolling Acres Care Center

              	
                Rolling
      Acres Care Center, LLC, an Ohio limited liability company

                 

              
	
                5.

              	
                Lakeview
      Senior Care and Living Center

              	
                Lakeview
      Senior Care and Living Center, LLC, a Pennsylvania limited liability
      company

                 

              
	
                6.

              	
                Beaver
      Elder Care / Guardian Elder Care at Aliquippa

              	
                Guardian
      Elder Care at Aliquippa, LLC, a Pennsylvania limited liability
      company

                 

              
	
                7.

              	
                Scenery
      Hill Manor / North American Medical Centers

              	
                North
      American Medical Centers, Inc., a Pennsylvania corporation

                 

              
	
                8.

              	
                Milford
      Valley Convalescent Home

              	
                Milford
      Valley Convalescent Home, Inc., a Pennsylvania corporation

                 

              
	
                9.

              	
                Bradyview
      Manor

              	
                Bradyview
      Manor, LLC, a Pennsylvania limited liability company

                 

              
	
                10.

              	
                Jefferson
      Hills Manor

              	
                Jefferson
      Hills Manor, LLC, a Pennsylvania limited liability company

                 

              
	
                11.

              	
                Scottdale
      Manor Rehabilitation Center

              	
                Scottdale
      Manor Rehabilitation Center, LLC, a Pennsylvania limited liability
      company

              
	
                12.

              	
                Minerva
      Convalescent Center

              	
                Minerva
      Convalescent Center, LLC, an Ohio limited liability company

                 

              
	
                13.

              	
                Carleton
      Senior Care and Rehabilitation Center

              	
                Carleton
      Senior Care and Rehabilitation Center, LLC, a Pennsylvania limited
      liability company

                 

              
	
                14.

              	
                Highlands
      Care Center

              	
                Guardian
      Elder Care at Laporte, LLC, a Pennsylvania limited liability
      company

                 

              
	
                15.

              	
                Guardian
      Elder Care at Nanticoke

              	
                Guardian
      Elder Care at Nanticoke, LLC, a Pennsylvania limited liability
      company

                 

              
	
                16.

              	
                Peterson
      Rehabilitation Hospital and Geriatric Center

              	
                Guardian
      Elder Care at Wheeling, LLC, a West Virginia limited liability
      company

                 

              
	
                17.

              	
                Darway
      Elder Care Rehabilitation Center

              	
                Guardian
      Elder Care at Forksville, LLC, a Pennsylvania limited liability
      company

                 

              
	
                18.

              	
                Highland
      View Healthcare

              	
                Guardian
      Elder Care at Brockway, LLC, a Pennsylvania limited liability
      company

                 

              
	
                19.

              	
                Rolling
      Hills Manor

              	
                Guardian
      Elder Care at Millmont, LLC, a Pennsylvania limited liability
      company

                 

              
	
                20.

              	
                Forest
      Park Health Center

              	
                Guardian
      Elder Care at Carlisle, LLC, a Pennsylvania limited liability
      company

                 

              
	
                21.

              	
                Brookline
      Village

              	
                Brookline
      at Mifflintown, Inc., a Pennsylvania
corporation

              

      

      

       

      
        
          
                                        E -
Page 1 of 1

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      
        EXHIBIT
F

         

        FORM OF
OPERATIONS TRANSFER AGREEMENT

         

        OPERATIONS
TRANSFER AGREEMENT

         

        THIS
OPERATIONS TRANSFER AGREEMENT (“Agreement”) is
entered into as of the _____________________, 20__ by and between by GUARDIAN
LTC MANAGEMENT, INC., a Pennsylvania corporation (“Lessee”), and the
Sublessees listed on the signature page to this Agreement (the “Sublessees”), OHI
ASSET (PA) TRUST, a Maryland business trust (“Lessor”), and
_________________________ (“New
Operator”).

         

        Recitals

         

        A.           
Lessor is the owner of the skilled nursing facilities listed on Exhibit A to this
Agreement (the “Facilities”).

         

        B.           Pursuant
to an Amended and Restated Multiple Faclities Lease dated as of August __, 2006
(the “Lease”),
Lessee is leasing the Facilities from Lessor.

         

        C.           The
Sublessees are affiliates of Lessee, are subleasing the Facilities from Lessee,
and are the parties licensed to operate the Facilities.

         

        D.           The
parties to this Agreement desire to enter into this Agreement in order
to  facilitate an orderly transition of the operation of the
Facilities to New Operator (the “Facilities
Transfer”).

         

        Agreement

         

        NOW,
THEREFORE, in consideration of the mutual promises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree that:

         

        ARTICLE
I

        FACILITIES
TRANSFER DATE

         

        1.1           Facilities Transfer
Date.  As used in this Agreement, the “Facilities Transfer
Date” shall be the 12:01 a.m. on ______________________.

         

        1.2           Liabilities Not
Assumed.  Neither Lessor nor New Operator shall assume or be
responsible to pay, perform or discharge any obligations, liabilities,
contracts, leases or commitments of the Lessee Parties of any kind or nature
whatsoever.  Except for costs and expenses arising out of the action
or inaction of a Lessee or a Sublessee (each a “Lessee Party” and
together, the “Lessee
Parties”), New Operator shall be liable for the cost and expense of
operating the Facilities from and after the Facilities Transfer
Date.

         

        ARTICLE
2

        TRANSFER
OF OPERATIONS

         

        2.1           Cooperation.  Lessee
Parties agree to cooperate with New Operator, and New Operator agrees to
cooperate with Lessee Parties, to effect an orderly transfer of the operation of
the Facilities.

         

        2.2           Conveyance of Supplies and
Personal Property.  To the extent not otherwise transferred
pursuant to the terms of the Lease, each of the Lessee Parties hereby transfers
and conveys to New Operator effective as of the Facilities Transfer Date, all of
its right, title and interest in and to any furniture, fixtures, equipment
(including, to the extent owned, if any, computer hardware and software, except
(1) proprietary software and (2) computer hardware and software subject to
lease), and supplies (including linens, consumables and foodstuffs, medical
supplies, office supplies, and maintenance inventories) owned by an Lessee Party
and located at the Facilities, (collectively, the “Personal Property”)
for and in consideration of the mutual promises contained in this Agreement and
the other Transaction Documents (as defined in the Lease).  The Lessee
Parties shall have no obligation to deliver the Personal Property to any
location other than that at which each item of Personal Property is currently
located, and New Operator agrees that the presence of the Personal Property at
the Facilities on the Facilities Transfer Date shall constitute delivery
thereof.

         

        2.3           Transfer of Patient Trust
Funds.  On the Facilities Transfer Date, the Lessee Parties
shall provide to New Operator a true, correct and complete accounting (properly
reconciled) of any patient trust funds and an inventory of all residents’
property held by the Lessee Parties on the Facilities Transfer Date for patients
at the Facilities.  On the Facilities Transfer Date, the Lessee
Parties shall assign and transfer to New Operator the patient trust accounts
maintained for the Lessee Parties with respect to the Facilities as of the
Facilities Transfer Date.

         

        2.4           Cost
Reports.

         

        (a)           The
applicable Lessee Party shall prepare, sign and file with the appropriate
Medicare and Medicaid agencies its final cost reports in respect to its
operation of the Facilities as soon as practicable after the applicable
Facilities Transfer Date, but in no event later than the earlier
of:

         

        (1)           ninety
(90) days after the applicable Facilities Transfer Date; or

         

        2)           the
period required by applicable law.

         

        (b)           The
Lessee Parties shall promptly provide New Operator with copies of such
reports.  In the event of an audit of cost reports for a period prior
to the Facilities Transfer Date, if New Operator, or its assignee, receives
payment from any federal or state agency, which payment represents reimbursement
with respect to underpayments made to the applicable Lessee Party for services
rendered prior to the Facilities Transfer Date, then New Operator shall promptly
remit such payments to the applicable Lessee Party, less reasonable expenses, if
any, incurred by New Operator in connection with the audit.  The
Lessee Parties shall furnish to New Operator certified copies of the last two
(2) cost reports applicable to the Facilities on or before the Facilities
Transfer Date.

         

        (c)           The
Lessee Parties shall cooperate with New Operator in connection with any claim,
demand, appeal, lawsuit or proceeding, including any appeals of Medicaid or
Medicare cost reports or requests for exceptions to Medicare and Medicaid cost
limits filings, arising out of or in any way relating to the operation of the
Facilities prior to the Facilities Transfer Date, including providing and making
available for inspection and copying any information that New Operator deems
useful in prosecuting or defending any such claim, demand, appeal, lawsuit or
proceeding.

         

        2.5           Employees.

         

        (a)           Upon
the request of New Operator, the Lessee Parties shall terminate all of the
Facilities employees effective as of the Facilities Transfer Date. The Lessee
Parties shall pay all wages due to all Facilities employees as of the Facilities
Transfer Date.  In addition, the Lessee Parties shall be solely liable
for payment of all Employee Benefits (as defined in Section 2.8) due as of the
Facilities Transfer Date to all employees.

         

        (b)           The
Lessee Parties shall retain and continue to make available during the transition
period the Directors of Nursing, Facilities Administrator and those employees of
Manager who are not employed at the Facilities but who provide essential
services to the  Facilities, such as billing, collection, filing
Medicare and Medicaid cost reports, attending to licensing issues and similar
services, investigating, documenting and filing proof of claims with respect to
potential claims arising under Facilities insurance policies, and others who are
designated by New Operator.

         

        2.6           Accounts
Receivable.

         

        (a)           Subject
to the terms of the Transaction Documents, including the grant of security
interests and exercise of any remedies thereunder, the applicable Lessee Party
shall retain all unpaid accounts receivable, as of the close of business on the
day prior to the Facilities Transfer Date with respect to the Facilities, but
only to the extent that such accounts receivable relate to services rendered
prior to the Facilities Transfer Date, and shall provide New Operator with
copies of the records with respect thereto.

         

        (b)           If
at any time after the Facilities Transfer Date, New Operator shall receive any
payment from any federal or state agency, which payment represents reimbursement
with respect to payments or underpayments made to a Lessee Party for services
rendered prior to the Facilities Transfer Date, then New Operator shall, to the
extent that a Lessee Party is obligated to make payments to Lessor or any of its
Affiliates under the Transaction Documents, pay such amounts over to Lessor, and
shall remit any amounts remaining after satisfaction of such obligations to the
applicable Lessee Party.  If at any time after the Facilities Transfer
Date, a Lessee Party shall receive any payment from any federal or state agency,
which payment represents reimbursement with respect to payments or underpayments
made to New Operator for services rendered after the Facilities Transfer Date,
then the Lessee Parties shall remit such payments to New Operator; provided,
however, in the event payment is made without remittance advice, such payment
will first be applied to any post-Facilities Transfer Date balances of New
Operator, with the excess, if any, applied to the extent of any balances due for
services rendered by the Lessee Parties prior to the Facilities Transfer Date,
which amount, if any, shall be paid over to Lessor to the extent of any
outstanding obligations of a Lessee Party under the Transaction
Documents.

         

        (c)           To
the extent either party receives any proceeds from the accounts receivable of
the other party, both parties acknowledge that the party receiving the payment
belonging to the other party shall hold the payment in trust, that the Lessee
Party shall have no right to offset with respect to such accounts receivable,
that Lessor or New Operator shall have the right to set-off to the extent of
amounts owed by the Lessee Parties under the Transaction Documents, and shall
remit the same to the other within ten (10) days of receipt.

         

        (e)           For
a period of six (6) months following the Facilities Transfer Date, New Operator
and the applicable Lessee Party shall provide each other with an accounting by
the twentieth day of each month setting forth all accounts receivable by each
during the preceding month with respect to the accounts receivable of the
Facilities.

         

        (f)           Nothing
herein shall be deemed to limit in any way either party’s rights and remedies to
recover accounts receivable due and owing to it under the terms of this
Agreement, or any of the other Transaction Documents.

         

        2.7           Employment
Benefits.  To the extent that the Lessee Parties have not
satisfied such liabilities, Lessor and/or New Operator may advance funds on
behalf of the Lessee Parties to satisfy any liabilities of a Lessee Party for
payment of accrued and/or earned vacation time, sick time, bereavement days,
other paid time off and all other employee benefits due to employees of the
Facilities in accordance with the Lessee Parties’ standard policies and state
and federal law as of the Facilities Transfer Date (collectively, “Employee
Benefits”).  The Lessee Parties will, within ten (10) days at
the applicable Facilities Transfer Date, provide New Operator an accounting
reflecting such unpaid liabilities.  The Lessee Parties acknowledge
that (a) New Operator shall have no liability to any employees terminated by the
Lessee Parties on or prior to the Facilities Transfer Date for Employee Benefits
or benefits pursuant to Section 601, et seq. of ERISA and Section
4980B of the Internal Revenue Code and any amendments or modifications thereto
(“COBRA”); and
(b)the Lessee Parties shall be solely responsible for providing required notices
to all employees of the Facilities as of the Facilities Transfer Date pursuant
to COBRA.  The Lessee Parties acknowledge and agree that New Operator
is not assuming any of the Lessee Parties’ obligations to its past or present
employees under COBRA or with respect to the Employee Benefits, and that all
such obligations arising before the Facilities Transfer Date shall remain the
obligations of the Lessee Parties.

         

        2.8           Prorations.  Revenues
and expenses pertaining to utility charges for the billing period in which the
Facilities Transfer Date occurs, prepaid expenses and like items of revenue or
expense attributable to the Facilities shall be prorated between the applicable
Lessee Party and New Operator as of the Facilities Transfer Date.  All
such prorations shall be made on the basis of actual days elapsed in the
relevant accounting or revenue period and shall be based on the most recent
information available to the Lessee Party.  Utility charges that are
not metered and read on the Facilities Transfer Date shall be estimated based on
prior charges, and shall be reprorated upon receipt of statements
therefor.  In general, such prorations shall be made so as to
reimburse the Lessee Parties for actual prepaid expense items, and to charge the
Lessee Parties for prepaid revenue items, to the extent that the same are
attributable to periods after the Facilities Transfer Date.  The
accounts of the Lessee Parties and New Operator created pursuant to this Section
2.9 shall be netted against each other.  Any amounts owing to New
Operator by the Lessee Parties pursuant to this Agreement shall be secured by
the liens and security interests granted Lessor pursuant to the Transaction
Documents.

         

        2.9           Medicare/Medicaid.  The
Lessee Parties and New Operator understand that reimbursements from Medicare
and/or Medicaid for items/services provided/rendered after the Facilities
Transfer Date may continue to be issued to the Lessee Parties for a period of
time.  The Lessee Parties agrees that, within two (2) days of the
Facilities Transfer Date, the Lessee Parties shall arrange for any and all
direct deposits from Medicare and Medicaid to be changed to direct deposits to
an account designated by New Operator.  If after the Facilities
Transfer Date, the Lessee Parties receive payment for periods following the
Facilities Transfer Date, the Lessee Parties shall immediately remit such
payments to New Operator.  New Operator, in its sole discretion, may
approve an alternative method of receiving such funds.  In any event,
concurrent with its payment of the reimbursement monies to New Operator,
Operator shall provide documentation from Medicare and Medicaid of the amounts
received by the Lessee Parties that month.

         

        2.10           Transfer of
Records.  The Lessee Parties shall transfer to New Operator all
employment files, medical records, cost reports, surveys with plans of
correction, historical financial records, policy and procedures manuals,
electronic files, and any other operational data reasonably necessary to the
operation of the Facilities as authorized by applicable law; provided, however,
the Lessee Parties shall be entitled to keep copies of all of the foregoing as
it deems necessary.

         

        2.11           Computer
Systems.  The Lessee Parties shall transfer to New Operator or
a successor manager or operator designated by Owner all computer hardware and
software located at the Facilities and shall make available to New Operator and
any successor manager or operator all computer hardware and software located at
the Lessee Parties’ corporate headquarters or regional offices that are
necessary to review and process the electronic records turned over pursuant to
this Article 2; provided, however, that New Operator acknowledges that the
Lessee Parties will not be transferring any proprietary software.

         

        2.12           Transfer of Medicare
Provider Numbers.  In connection with a Facilities Transfer,
upon the request of New Operator, the Lessee Parties agree to transfer to New
Operator their Medicare Provider Numbers as authorized by applicable
law.

         

        2.13           Efforts to Obtain
Licenses. To the extent such assignment is permitted by law, each Lessee
Entity hereby agrees to proceed diligently and in good faith to assign all
licenses, approvals and consents with respect to the Facilities, and New
Operator shall use its commercially reasonable efforts to assist each Lessee
Entity in such efforts.  New Operator shall be responsible for
obtaining all other necessary state and federal licenses (or, to the extent
permitted by law, interim licenses), and other governmental approvals and
consents required in connection with the transactions contemplated by this
Agreement for its benefit and the Lessee Entities shall use their commercially
reasonable efforts to assist New Operator in such efforts.

         

        2.14           Advances by
Lessor.   To the extent that the Lessee Parties are unable
to perform their obligations under this Agreement, which performance requires in
whole or in part the payment of money, Lessor or any entity affiliated with
Lessor may advance funds on behalf of any such Lessee Party for purposes of
fulfilling such obligation.  To the extent that Lessor or any entity
affiliated with Lessor advance funds on behalf of a Lessee Party to effectuate
the Facilities Transfer pursuant to this Agreement, including funds advanced for
purposes of preparing cost reports, bills, invoices or claims for payment with
Medicare, Medicaid or other third party payors with respect to services rendered
or goods delivered at the Facilities, or to fund the Accrued Benefits, the
Lessee Parties agree that any amounts advanced pursuant to this Agreement shall
constitute additional secured obligations of the Lessee Entities and shall be
secured by the Transaction Documents.

         

        ARTICLE
3

        RESPRESENTATION
AND WARRANTIES AND AGREEMENTS OF

         LESSOR

         

        3.1           Authority, Validity and
Binding Effect.  Lessor has all necessary power and authority
to carry on its business as it is now being conducted.  Lessor has all
necessary power and authority to enter into this Agreement and to execute all
documents and instruments referred to herein or contemplated hereby and all
necessary action has been taken to authorize the individual executing this
Agreement to do so.  This Agreement has been duly and validly executed
and delivered by Lessor and is enforceable against Lessor in accordance with its
terms.

         

        ARTICLE
4

        RESPRESENTATION
AND WARRANTIES AND AGREEMENTS OF

         NEW
OPERATOR

         

        4.1           Authority, Validity and
Binding Effect.  New Operator has all necessary power and
authority to carry on its business as it is now being conducted.  New
Operator has all necessary power and authority to enter into this Agreement and
to execute all documents and instruments referred to herein or contemplated
hereby and all necessary action has been taken to authorize the individual
executing this Agreement to do so.  This Agreement has been duly and
validly executed and delivered by New Operator and is enforceable against New
Operator in accordance with its terms.

         

        4.2           Access to
Records.  Subsequent to the Facilities Transfer Date, New
Operator shall allow the Lessee Parties and its agents and representatives, at
the Lessee Parties’ sole cost and expense, to have reasonable access to (upon
reasonable prior notice), and to make copies of, the books and records and
supporting material of the Facilities relating to the period prior to and
including the Facilities Transfer Date, to the extent reasonably necessary to
enable the Lessee Parties to investigate and defend malpractice, employee or
other claims, to file or defend cost reports and tax returns, to verify accounts
receivable collections due the Lessee Parties, and to perform similar
matters.  New Operator will maintain such books, records and other
material comprising records of the Facilities’ operations prior to the
Facilities Transfer Date that have been received by New Operator from the Lessee
Parties or otherwise, including, but not limited to, patient records and records
of patient funds, to the extent required by law, but in no event less than a
period of three (3) years.

         

        ARTICLE
5

        REPRESENTATION
AND WARRANTIES OF THE LESSEE PARTIES

         

        The
Lessee Parties hereby represent and warrants as follows:

         

        5.1           Authority, Validity and
Binding Effect.  Each Lessee Party has all necessary power and
authority to enter into this Agreement and to execute all documents and
instruments referred to herein or contemplated hereby and all necessary action
has been taken to authorize the individual executing this Agreement to do
so.  This Agreement has been duly and validly executed and delivered
by each Lessee Party and is enforceable against each Lessee Party in accordance
with its terms.

         

        5.2           Personal
Property.  The Lessee Parties will maintain personal property,
including inventories of linens, consumables and foodstuffs, and medical
supplies prior to the Facilities Transfer Date consistent with the operation of
the Facilities in the ordinary course of business and the requirements of
applicable law, and the personal property transferred to New Operator pursuant
thereto reflects supply levels required to be maintained by a Lessee Party in
order to operate a Medicare/Medicaid certified skilled nursing
facility.

         

        ARTICLE
6

        INDEMNIFICATION

         

        6.1           Lessee Entities
Indemnification of New Operator.  The Lessee Entities shall
defend, indemnify and hold harmless each of Lessor and New Operator from and
against any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind of any nature, whether arising in contract or tort, at
law or in equity, or otherwise, from or arising out of or in connection with the
management and operation of the Facilities on or prior to the Facilities
Transfer Date, including, but not limited to, (i) bodily injury or property
damage occurring within or about the Facilities on or prior to the Facilities
Transfer Date, (ii) labor disputes, including unfair labor practice allegations,
from acts or occurrences on or prior to the Facilities Transfer Date, (iii)
accounts payable with respect to goods or services provided to the Facilities on
or prior to the Facilities Transfer Date and which have not been assumed by New
Operator under this Agreement, and (iv) claims made by Lessor or New Operator
against Operator with respect to Operator’s indemnification obligations under
this Agreement, including without limitation claims relating to civil monetary
penalties and fraud offsets relating to the period on or prior to the Facilities
Transfer Date.

         

        6.2           New Operator Indemnification
of Lessee Entities. New Operator shall defend, indemnify and hold
harmless the Lessee Entities, their directors, officers and shareholders, from
and against any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind of any nature, whether arising in contract or
tort, at law or in equity, or otherwise, from or arising out of or in connection
with the management and operation of the Facilities by New Operator after the
Facilities Transfer Date, including, but not limited to, (i) bodily injury or
property damage occurring within or about the Facilities after the Facilities
Transfer Date, (ii) labor disputes, including unfair labor practice allegations,
from acts or occurrences after the Facilities Transfer Date, (iii) accounts
payable with respect to goods or services provided to the Facilities after the
Facilities Transfer Date, and (iv) claims made by a Lessee Entity against New
Operator with respect to New Operator’s indemnification obligations under this
Agreement, including without limitation claims relating to civil monetary
penalties and fraud offsets relating to the period after the Facilities Transfer
Date.

         

        6.3           Claims.  As
soon as is reasonably practicable after a Lessee Entity, Lessor or New Operator
becomes aware of any claim that it has to recover against the other under this
Article 6, the party to be indemnified (“Indemnified Party”)
shall notify the other party (“Indemnifying Party”)
in writing, which notice shall describe the claim in reasonable detail, and
shall indicate the amount (estimated, if necessary and to the extent feasible)
of the claim.  The failure of any Indemnified Party to promptly give
any Indemnifying Party such notice shall not preclude such Indemnified Party
from obtaining indemnification under this Agreement, except to the extent that
such Indemnified Party’s failure has materially prejudiced the Indemnifying
Party’s rights or materially increased its liabilities and obligations
hereunder. In the event of a third party claim which is subject to
indemnification under this Agreement, the Indemnifying Party shall promptly
defend such claim by counsel of its own choosing, subject to the approval of the
Indemnified Party, which approval shall not unreasonably be withheld, and the
Indemnified Party shall cooperate with the Indemnifying Party in the defense of
such claim including the settlement of the matter on the basis stipulated by the
Indemnifying Party (with the Indemnifying Party being responsible for all costs
and expenses of such settlement). If the Indemnifying Party within a reasonable
time after notice of a claim fails to defend the Indemnified Party, the
Indemnified Party shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnifying Party.

         

        ARTICLE
7

        MISCELLANEOUS

         

        7.1           Further
Assurances.  Each of the parties hereto agrees to execute and
deliver any and all further agreements, documents or instruments necessary to
effectuate this Agreement and the transactions referred to herein or
contemplated hereby or reasonably requested by the other party to perfect or
evidence their rights hereunder.

         

        7.2           Notices. Any notice,
request or other communication to be given by any party hereunder shall be in
writing and shall be sent by registered or certified mail, postage prepaid, or
by hand delivery or facsimile transmission to the following
address:

         

        To
Lessee:                             Guardian
LTC Management, Inc.

        Rte. 219,
Brockway-DuBois Road

        P.O. Box
219

        Brockway,
PA 15824

        Attn:
Raymond Calhoun, President

        Telephone
No.:  (814) 265-1164

        Facsimile
No.:  (814) 265-1990

         

        With copy
to:                        Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

        (which
shall
not                    One
Financial Center

        constitute
notice)                  Boston,
MA  02111

        Attn.: Gabriel Schnitzler,
Esq.

        Telephone
No.: (617) 348-3099

        Facsimile
No.: (617) 542-2241

        

        To
Lessor:                             OHI
Asset (PA) Trust

                       
c/o Omega Healthcare Investors, Inc.

        9690
Deereco Road,  Suite 100

        Timonium,
MD 21093

        Attn.:
Daniel J. Booth

        Telephone
No.: (410) 427-1700

        Facsimile
No.:  (410) 427-8800

         

        And with
copy to Mark E. Derwent, Esq.

        
          	
                  (which
      shall not

                	
                  Doran
      Derwent, PLLC

                

        

        
          	
                   
      

                	
                  constitute
      notice):

                	
                  125
      Ottawa Ave., NW, Suite 420

                

        

        
          	
                   
      

                	
                  Grand
      Rapids, MI  49503

                

        

        Telephone
No.: (616) 451-8690

        Facsimile
No.: (616) 451-8697

         

        To New
Operator:                                           [INSERT]

        __________________________

        __________________________

        Telephone
No.:  _____________

        Facsimile
No.:  _____________

         

        With copy
to                                                      [INSERT]

        (which
shall not

        constitute
notice):

        Telephone
No.:

        Facsimile
No.:

         

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

         

        7.3           Payment of
Expenses.  Each party hereto shall bear its own legal,
accounting, and other expenses incurred in connection with the preparation and
negotiation of this Agreement and the consummation of the transaction
contemplated hereby, whether or not the transaction is
consummated.  In the event of any dispute or controversy arising out
of this Agreement, including in connection with the interpretation of any term
or condition of this Agreement, the prevailing party shall recover from the
non-prevailing party all costs and expenses, including attorneys’ fees incurred
by the prevailing party.

         

        7.4           Entire Agreement; Amendment;
Waiver.  This Agreement together with the other Transaction
Documents, and the other agreements referred to herein and therein, constitutes
the entire understanding between the parties with respect to the subject matter
hereof, superseding all negotiations, prior discussions and preliminary
agreements.  This Agreement may not be modified or amended except in
writing signed by the parties hereto.  No waiver of any term,
provision or condition of this Agreement, in any one or more instances, shall be
deemed to be or be construed as a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.  No failure to act shall be construed as a waiver
of any term, provision, condition or rights granted hereunder.

         

        7.5           Assignment.  Neither
this Agreement nor the rights, duties or obligations arising hereunder shall be
assignable or delegable by either party hereto without the express prior written
consent of the other party hereto; provided, however, that, the rights but not
the obligations under this Agreement shall be assignable in whole or in part
without the Lessee Parties’ prior consent (but after notice to the Lessee Party)
to any entity that is owned or controlled directly or indirectly by Lessor, any
entity that controls, is controlled by or is under common control with Lessor,
including, without limitation, through any merger or acquisition, or any entity
which is the holder of the obligations evidenced by the Transaction
Documents.

         

        7.6           Joint Venture; Third Party
Beneficiaries.  Nothing contained herein shall be construed as
forming a joint venture or partnership between the parties hereto with respect
to the subject matter hereof.  The parties hereto do not intend that
any third party shall have any rights under this Agreement.

         

        7.7           Representation by
Counsel.  The parties hereto acknowledge that they have been
represented by independent legal counsel of their choosing throughout all of the
negotiations which proceeded the execution of this Agreement, and that each
party has executed this Agreement with the consent and on the advice of such
independent legal counsel.  This Agreement is a negotiated
document.  As a result, any rule of construction providing for any
ambiguity in the terms of this Agreement to be construed against the
draftsperson of this Agreement shall be inapplicable to the interpretation of
this Agreement.

         

        7.8           Captions.  The
section headings contained herein are for convenience only and shall not be
considered or referred to in resolving questions of interpretation.

         

        6.9           Counterparts.  This
Agreement may be executed in one or more counterparts and all such counterparts
taken together shall constitute a single original Agreement.

         

        6.10           Governing
Law.  This Agreement shall be governed in accordance with the
laws of the State of Maryland, without giving effect to its conflict of laws
provisions.

         

        6.11           MUTUAL WAIVER OF RIGHT TO
JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO:  (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN OR AMONG THEM; OR (iii) ANY
CONDUCT, ACTS OR OMISSIONS OF ANY PARTY HERETO OR ANY OF THEIR DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
WITH THEM; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.

         

        6.12           Arbitration. In case
any controversy arises between the parties hereto as to any of the provisions of
this Agreement or the performance thereof, and the parties are unable to settle
the controversy by agreement or as otherwise provided herein, the controversy
shall be decided by arbitration.  The arbitration shall be conducted
by three arbitrators selected in accordance with the rules and procedures of the
American Arbitration Association.  The decision of the arbitrators
shall be final and binding, and judgment may be entered thereon in any court of
competent jurisdiction.  The decision shall set forth in writing the
basis for the decision.  In rendering the decision and award, the
arbitrators shall not add to, subtract from, or otherwise modify the provisions
of this Agreement.  The expense of the arbitration shall be divided
between the parties unless otherwise specified in the award.  Each
party in interest shall pay the fees and expenses of its own
counsel.  The arbitration shall be conducted in Baltimore,
Maryland.  In any arbitration, the parties shall be entitled to
conduct discovery in the same manner as permitted under Federal Rules of Civil
Procedure 26 through 37, as amended.  No provision in this Section
shall limit the right of any party to this Agreement to obtain provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration, and the exercise of such remedies does
not constitute a waiver of the right of either party to
arbitration.

         

        [Remainder
of Page Intentionally Left Blank]

         

        
          
            
              Exhibit F
– Page 1 of 1

            

             

          

          
             

            
              

            

          

          
             

            
              Signature
Page to

              OPERATIONS
TRANSFER AGREEMENT

               

              

              

            

          

        

        LESSEE
ENTITIES:

         

        LESSEE:

        

        GUARDIAN
LTC MANAGEMENT, INC.

        

        

        By:           ________________________

        Name:      ________________________

        Title:         ________________________

        

        SUBLESSEES:

        

        MULBERRY
SQUARE ELDER CARE AND REHABILITATION CENTER, LLC

        MEADOW
VIEW SENIOR LIVING CENTER, LLC

        LAKEVIEW
SENIOR CARE AND LIVING CENTER, LLC

        GUARDIAN
ELDER CARE AT ALIQUIPPA, LLC

        BRADYVIEW
MANOR, LLC

        JEFFERSON
HILLS MANOR, LLC

        SCOTTDALE
MANOR REHABILITATION CENTER, LLC

        CARLETON
SENIOR CARE AND REHABILITATION CENTER, LLC

        GUARDIAN
ELDER CARE AT LAPORTE, LLC

        GUARDIAN
ELDER CARE AT NANTICOKE, LLC

        ROLLING
ACRES CARE CENTER, LLC

        MINERVA
CONVALESCENT CENTER, LLC

        GUARDIAN
ELDER CARE AT WHEELING, LLC

        

        By:           Guardian
LTC Management, Inc., a member

        

        

        By:           ________________________

        Name:       ________________________

        Title:          ________________________

        

        
          
            
              Signature
Page -  1 of 5

              

            

             

          

          
             

            
              

            

          

          
             

            
              Signature
Page to

              OPERATIONS
TRANSFER AGREEMENT

               

              

              

            

          

        

        GUARDIAN
ELDER CARE AT FORKSVILLE, LLC

        

        

        

        By:           ________________________

        Name:      ________________________

        Title:         ________________________

        

        THE STATE
OF
_____________                                                                           )

                                                          
)

        COUNTY
OF      _______________                                                                   
   )

         

        This
instrument was acknowledged before me on the ______ day of __________, 20__, by
__________, the _____________ of GUARDIAN ELDER CARE AT FORKSVILLE, LLC, a
Pennsylvania limited liability company,  and of GUARDIAN LTC
MANAGEMENT, INC., a Pennsylvania corporation, a member of MULBERRY SQUARE ELDER
CARE AND REHABILITATION CENTER, LLC, a Pennsylvania limited liability company,
MEADOW VIEW SENIOR LIVING CENTER, LLC, a Pennsylvania limited liability company,
LAKEVIEW SENIOR CARE AND LIVING CENTER, LLC, a Pennsylvania limited liability
company, GUARDIAN ELDER CARE AT ALIQUIPPA, LLC, a Pennsylvania limited liability
company, BRADYVIEW MANOR, LLC, a Pennsylvania limited liability company,
JEFFERSON HILLS MANOR, LLC, a Pennsylvania limited liability company, SCOTTDALE
MANOR REHABILITATION CENTER, LLC, a Pennsylvania limited liability company,
CARLETON SENIOR CARE AND REHABILITATION CENTER, LLC, a Pennsylvania limited
liability company, GUARDIAN ELDER CARE AT LAPORTE, LLC, a Pennsylvania limited
liability company, GUARDIAN ELDER CARE AT NANTICOKE, LLC, a Pennsylvania limited
liability company, ROLLING ACRES CARE CENTER, LLC, an Ohio limited liability
company, MINERVA CONVALESCENT CENTER, LLC, a Ohio limited liability company, and
GUARDIAN ELDER CARE AT WHEELING, LLC, a West Virginia limited liability company,
on their behalf and on behalf of each the companies.

         

        

        

        _________________________________________

        Notary Public

        

        
          
            
              Signature
Page -  2 of 5

              

            

             

          

          
             

            
              

            

          

          
             

            
              Signature
Page to

              OPERATIONS
TRANSFER AGREEMENT

               

              

              

            

          

        

        

        CURWENSVILLE
NURSING HOME, INC.

        NORTH
AMERICAN MEDICAL CENTERS, INC.

        MILFORD
VALLEY CONVALESCENT HOME, INC.

        

        

        By:           ________________________

        Name:      ________________________

        Title:        ________________________

        

        

        THE STATE
OF
_____________                                                                           )

                                                          
)

        COUNTY
OF      _______________                                                                     
 )

         

        This
instrument was acknowledged before me on the ______ day of __________, 20__, by
__________, the _____________ of CURWENSVILLE NURSING HOME, INC., a Pennsylvania
corporation, NORTH AMERICAN MEDICAL CENTERS, INC., a Pennsylvania corporation,
MILFORD VALLEY CONVALESCENT HOME, INC., a Pennsylvania corporation, on behalf of
the corporations.

         

        

        

        _________________________________________

        Notary Public

        
          
            
              Signature
Page - 3  of 5

              

            

             

          

          
             

            
              

            

          

          
             

            
              Signature
Page to

              OPERATIONS
TRANSFER AGREEMENT

               

              

              

            

          

        

        LESSOR:

         

        OHI ASSET
(PA) TRUST

         

        By:           OHI
Asset (PA), LLC, its sole trustee

         

        By:           Omega
Healthcare Investors, Inc., its sole Member

        

        

        By:           _____________________

        Name:      _____________________

        Title:     
  _____________________

         

        

        
          	
                  STATE
      OF _________________

                	
                  )

                
	 
      	
                  )
      SS

                
	
                  COUNTY
      OF _______________

                	
                  )

                

        

        

        The
foregoing instrument was acknowledged before me this ___ day of _______, 20__,
by _____________________, who is the ______________ of Omega Healthcare
Investors, Inc., a Maryland corporation, the sole member of OHI Asset (PA), LLC,
a Delaware limited liability company, the sole trustee of OHI Asset (PA) Trust,
a Maryland business trust, on behalf of the trust.

         

        
          	 
      
	
                  Notary
      Public, ________ County, ___________

                  My
      Commission Expires:

                

        

        

         

        

         

        
          
            
              Signature
Page - 4 of 5

              

            

             

          

          
             

            
              

            

          

          
             

            
              Signature
Page to

              OPERATIONS
TRANSFER AGREEMENT

               

              

              

            

          

        

        NEW
OPERATOR:

         

        ________________________________

        

         

        By:           _____________________

        Name:      _____________________

        Title:        _____________________

         

        

         

        THE STATE
OF
___________                                                                )

                                          
)

        COUNTY
OF       _____________                                                         
 )

         

        This
instrument was acknowledged before me on the ______ day of ____________, 20__,
by __________, the _____________ of _________________________, on behalf of said
corporation.

         

        Notary
Public

         

        

        

         

        

        
          
            
              Signature
Page -  5 of 5

              

            

             

          

          
             

            
              

            

          

          
             

          

        

      EXHIBIT
G

       

      MEMORANDUM
OR SHORT FORM OF LEASE

       

      THIS
INSTRUMENT PREPARED BY:

      Mark E.
Derwent

      Doran
Derwent PLLC

      125
Ottawa Ave., N.W., Suite 420

      Grand
Rapids, Michigan 49503

      Telephone:
616.233.9640

       

      

      THIS
LEASE, made and entered into as of _____________, 20__, by and between
___________ __________________________________, having its principal office at
9690 Deereco Road, Suite 100, Timonium, MD 21093, as Lessor, and
__________________ Inc., a ___________________, having its
principal  office at ___________________________, as Lessee with
respect to the real property identified in Exhibit(s)
“  “  attached hereto and located in
________________________________________.

       

      WITNESSETH:

       

      9. For and
in consideration of the rents reserved and the other covenants contained in that
certain Lease made by and between the parties hereto and dated the date hereof
(“Lease”), Lessor has and does hereby lease to Lessee, and Lessee has and does
hereby take and rent from Lessor, all of Lessor’s rights and interest in and to
the parcel of real property described in Exhibit(s)
“   “ and all fixtures and improvements thereto, and
certain personal and other property as set forth in the Lease.

       

      10. The
Initial Term of the Lease is approximately ____________ (_____) years,
commencing _____________, 200__ and ending on _________________,
200__.

       

      11. As more
particularly provided in the Lease, Lessee may elect to renew the original term
for ___ (_) ___ (_) year optional renewal periods for a maximum term, if
exercised, of_______ (__) years after the Commencement Date.

       

      12. As more
particularly provided in the Lease, the Lease grants Lessee an option to
purchase the Lease Properties.

       

      13. This
instrument is executed and recorded for the purpose of giving notice of Lessee’s
interest in the property covered by the Lease and giving notice of the existence
of the Lease, to which reference is made for a full statement of the terms and
conditions thereof.  The respective addresses of the parties hereto
are:

       

      Lessee:

       

      Attn:

       

      Lessor:

       

      Attn:

       

      IN
WITNESS WHEREOF, the parties have caused this instrument to be executed by their
duly authorized [officer or officers] and [general partners] [managing
partners], as applicable, all as of the day and date first above
written.

       

      LESSOR:

       

      ___________________________,

      a

       

      By:           

       

      Name:

       

      Title:

       

      LESSEE:

       

      ______________________________

      a

       

      Name:                                                      

       

      Title:                                                      

      

      
        	
                STATE
      OF MARYLAND

              	
                )

              
	 
      	
                )
      SS

              
	
                COUNTY
      OF_______________

              	
                )

              

      

      

      This
instrument was acknowledged before me on the ____ day of _____________, 200__,
by ___ __________________________, the ________________ of ___________________,
a __________________________, on behalf of said _______________.

       

      Notary
Public

       

      

      
        	
                STATE
      OF MARYLAND

              	
                )

              
	 
      	
                )
      SS

              
	
                COUNTY
      OF_______________

              	
                )

              

      

      

      This
instrument was acknowledged before me on the ____ day of _____________, 200__,
by ___ __________________________, the ________________ of ___________________,
a __________________________, on behalf of said _______________.

       

      Notary
Public

      

       

      
        
          
                                    G-
1exv10w3

EXHIBIT 10.3

2008 AMENDMENT TO 2002 STOCK INCENTIVE PLAN, AS AMENDED

AND RESTATED

BIO-IMAGING TECHNOLOGIES, INC.

2002 STOCK INCENTIVE PLAN

AS AMENDED AND RESTATED EFFECTIVE MAY 11, 2005

AND AS SUBSEQUENTLY AMENDED AND RESTATED MAY 14, 2008

ARTICLE ONE

GENERAL PROVISIONS

     I. PURPOSE OF THE PLAN

          The 2002 Stock Incentive Plan, as amended and restated (the “Plan”), is intended to promote
the interests of Bio-Imaging Technologies, Inc., a Delaware corporation, by providing eligible
persons in the Corporation’s service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an incentive for them to
remain in such service.

          The Plan was amended and restated in its entirety in 2005 and approved by the Corporation’s
stockholders at the 2005 Annual Meeting held on May 11, 2005 (the “2005 Restatement”). The purpose
of this 2008 Amendment and Restatement (the “2008 Restatement”) is to effect the following changes
to the 2005 Restatement, subject to stockholder approval at the 2008 Annual Meeting:

          (i) increase the number of shares of Common Stock reserved for issuance under the Plan
by an additional 1,000,000 shares;

  

          (ii) increase the limitation on the maximum number of shares for which options may be
granted in the aggregate under the Plan in any fiscal year from two percent to three percent
of (A) the total number of shares of Common Stock actually outstanding at the start of that
fiscal year plus (ii) any additional shares of Common Stock newly issued in that year as a
result of new equity investments in the Corporation (including exercises of outstanding
options under the Plan) or the Corporation’s acquisitions of other companies or enterprises
for consideration payable in Common Stock;

 

 

          (iii) revise the 50,000-share limitation on the maximum number of shares for which
restricted stock or restricted stock unit awards may be made under the Plan so that such
limit applies on a per person, per calendar year basis, thereby allowing restricted stock or
restricted stock units covering up to 50,000 shares of Common Stock to be made per recipient
each calendar year; and

          (iv) effect certain technical revisions to the Plan to reflect recent changes in
applicable tax and accounting rules.

          Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.

     II. STRUCTURE OF THE PLAN

          The Plan shall consist of a Discretionary Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock or
be issued such shares pursuant to restricted stock or restricted stock unit awards.

     III. ADMINISTRATION OF THE PLAN

          A. The Compensation Committee shall have sole and exclusive authority to administer the
Discretionary Grant Program with respect to Section 16 Insiders. Administration of the
Discretionary Grant Program with respect to all other persons eligible to participate in that
program may, at the Board’s discretion, be vested in the Compensation Committee or a Secondary
Board Committee, or the Board may retain the power to administer the program with respect to all
such persons. However, any discretionary option grants or other awards for members of the
Compensation Committee must be authorized by a disinterested majority of the Board.

          B. Members of the Compensation Committee or any Secondary Board Committee shall serve for such
period of time as the Board may determine and may be removed by the Board at any time. The Board
may also at any time terminate the functions of any Secondary Board Committee and reassume all
powers and authority previously delegated to such committee.

          C. Each Plan Administrator shall, within the scope of its administrative functions under the
Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules
and regulations as it may deem appropriate for proper administration of the Discretionary Grant
Program and to make such determinations under, and issue such interpretations of, the provisions of
that program and any outstanding options or other awards thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its administrative functions
under the Plan shall be final and binding on all parties who

2

 

have an interest in the Discretionary Grant Program under its jurisdiction or any stock option
or other award thereunder.

          D. Service as a Plan Administrator by the members of the Compensation Committee or the
Secondary Board Committee shall constitute service as Board members, and the members of each such
committee shall accordingly be entitled to full indemnification and reimbursement as Board members
for their service on such committee. No member of the Compensation Committee or the Secondary
Board Committee shall be liable for any act or omission made in good faith with respect to the Plan
or any option grant or other award thereunder.

     IV. ELIGIBILITY

          A. The persons eligible to participate in the Discretionary Grant Program are as follows:

               (i) Employees,

               (ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and

               (iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

          B. The Plan Administrator shall have full authority to determine, with respect to the grant of
options or other awards under the Discretionary Grant Program, which eligible persons are to
receive such grants or awards, the time or times when those grants or awards are to be made, the
number of shares to be covered by each such grant or award, the time or times when any granted
option is to become exercisable, the vesting schedule (if any) applicable to each grant or award,
the maximum term for which a granted option is to remain outstanding and the status of that option
as either an Incentive Option or a Non-Statutory Option.

          C. To the extent permitted by applicable law, the Board may delegate to one or more executive
officers of the Corporation the power to grant stock options under the Plan to one or more
Employees and to exercise such other powers under the Plan as the Board may determine; provided,
however, that, the Board shall fix the terms of the option grants to be made by such executive
officers (including the exercise price of any awarded stock options, which may include a formula by
which such exercise price is to be determined, the applicable vesting schedules and the maximum
option term) and the maximum number of shares for which stock options may be granted by such
executive officers. In no event, however, shall any executive officer be authorized to make option
grants to any Section 16 Insider.

3

 

     V. STOCK SUBJECT TO THE PLAN

          A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Corporation on the open market. The number of
shares of Common Stock reserved for issuance over the remaining term of the Plan shall be limited
to two million six hundred thirty eight thousand two hundred and eight (2,638,208) shares. Such
share reserve shall be comprised of (i) the number of shares of Common Stock which remained
available for issuance under the Plan on the May 11, 2005 effective date of the 2005 Restatement,
including the portion of those shares subject to options outstanding under the Plan on that date,
plus (ii) an additional 1,000,000-share increase subject to stockholder approval at the 2008 Annual
Meeting. All options or other awards outstanding under the Plan on the 2008 Restatement Effective
Date shall continue in full force and effect in accordance with their terms, and no provision of
this 2008 Restatement shall be deemed to affect or otherwise modify the rights or obligations of
the holders of those options or awards with respect to their acquisition of shares of Common Stock
thereunder.

          B. The maximum number of shares for which options may be granted in the aggregate in any
fiscal year of the Corporation, beginning with the fiscal year ending December 31, 2008, shall be
limited to three percent (3%) of (i) the total number of shares of Common Stock actually
outstanding at the start of that fiscal year plus (ii) any additional shares of Common Stock newly
issued in that year as a result of new equity investments in the Corporation (including exercises
of outstanding options under the Plan) or the Corporation’s acquisitions of other companies or
enterprises for consideration payable in Common Stock. The increase from two percent (2%) to three
percent (3%) of such total shall be subject to stockholder approval of the 2008 Restatement at the
2008 Annual Meeting.

          C. The maximum number of shares of Common Stock for which any one person may be granted
restricted stock or restricted unit awards under the Plan in any calendar year shall be limited to
fifty thousand (50,000) shares. Such restricted stock or restricted stock unit awards shall vest
upon the attainment of designated performance goals or the satisfaction of specified Service
requirements.

          D. No one person may receive stock options or other awards under the Plan for more than two
hundred thousand (200,000) shares of Common Stock in the aggregate per calendar year.

          E. Shares of Common Stock subject to outstanding options or other awards made under the Plan
shall be available for subsequent grant under the Plan to the extent those options or awards expire
or terminate for any reason prior to the issuance of the shares of Common Stock subject to those
options or awards. Unvested shares issued under the Plan and subsequently forfeited or repurchased
by the Corporation, at a price per share not greater than the original issue price paid per share,
pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of
shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for
subsequent reissuance. Should the exercise price of an option under the Plan be paid with shares of
Common Stock, then the authorized reserve of

4

 

Common Stock under the Plan shall be reduced by the gross number of shares for which that
option is exercised, and not by the net number of shares issued under the exercised stock option.
If shares of Common Stock otherwise issuable under the Plan are withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise of an option or the
vesting or issuance of shares under Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares issuable under the exercised
stock option or the total number of shares vesting or issued, calculated in each instance prior to
any such share withholding.

          F. If any change is made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, spin-off transaction or other change
affecting the outstanding Common Stock as a class without the Corporation’s receipt of
consideration, or should the value of outstanding shares of Common Stock be substantially reduced
as a result of a spin-off transaction or an extraordinary dividend or distribution, then the
Compensation Committee shall make equitable adjustments to: (i) the maximum number and/or class of
securities issuable under the Plan; (ii) the maximum number and/or class of securities for which
any one person may be granted stock options or other awards in the aggregate under the Plan per
calendar year, (iii) the maximum number and/or class of securities for which any one person be
awarded restricted stock or restricted stock units under the Plan per calendar year, (iv) the
number and/or class of securities and the exercise price per share in effect under each outstanding
option and (v) the number and/or class of securities subject to each outstanding restricted stock
unit or other stock-based award under the Plan and the cash consideration (if any) payable per
share Such adjustments shall be made by the Compensation Committee in such manner as it deems
appropriate, and the adjustments shall be final, binding and conclusive upon each person holding
an option or other award under the Plan. The foregoing adjustment provisions shall govern all
options and awards outstanding under the Plan on the 2008 Restatement Effective Date and all
options and awards granted under the Plan thereafter; provided, however, that each Incentive Option
outstanding under the Plan on the 2008 Restatement Plan Effective Date shall continue to be
governed by the capital adjustment provisions of this Section V.F of Article One as in effect at
the time that Incentive Option was granted.

          G. Outstanding options or other awards granted pursuant to the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.

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ARTICLE TWO

DISCRETIONARY GRANT PROGRAM

     I. OPTION TERMS

          Each option shall be evidenced by one or more documents in the form approved by the Plan
Administrator; provided, however, that each such document shall comply with the terms specified
below. Each document evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.

          A. Exercise Price.

               1. The exercise price per share shall be fixed by the Plan Administrator; provided, however,
that such exercise price shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the grant date.

               2. The exercise price shall become immediately due upon exercise of the option and shall,
subject to the provisions of the documents evidencing the option, be payable in one or more of the
forms specified below:

               (i) cash or check made payable to the Corporation,

               (ii) shares of Common Stock held for the requisite period (if any) necessary to
avoid any resulting charge to the Corporation’s earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date, or

               (iii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide instructions to (a) a brokerage firm (reasonably satisfactory
to the Corporation for purposes of administering such procedure in compliance with
the Corporation’s pre-clearance/pre-notification policies) to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable income and employment
taxes required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm on such settlement date in order to complete the sale.

          Except to the extent such sale and remittance procedure is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.

6

 

          B. Exercise and Term of Options. Each option shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option. However, no option granted
under the 2005 Restatement shall have a term in excess of seven (7) years measured from the option
grant date.

          C. Effect of Termination of Service.

               1. The following provisions shall govern the exercise of any options granted pursuant to the
Discretionary Grant Program that are outstanding at the time of the Optionee’s cessation of Service
or death:

               (i) Any option outstanding at the time of the Optionee’s cessation of Service
for any reason shall remain exercisable for such period of time thereafter as shall
be determined by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the expiration of the
option term.

               (ii) Any option held by the Optionee at the time of the Optionee’s death may,
to the extent vested and exercisable at that time, be subsequently exercised by the
personal representative of the Optionee’s estate or by the person or persons to whom
the option is transferred pursuant to the Optionee’s will or the laws of inheritance
or by the Optionee’s designated beneficiary or beneficiaries of that option.

               (iii) Should the Optionee’s Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct while holding one or more outstanding
options granted under this Article Two, then all of those options shall terminate
immediately and cease to be outstanding.

               (iv) During the applicable post-Service exercise period, the option may not be
exercised for more than the number of vested shares for which the option is at the
time exercisable. No additional shares shall vest under the option following the
Optionee’s cessation of Service, except to the extent (if any) specifically
authorized by the Plan Administrator in its sole discretion pursuant to an express
written agreement with the Optionee. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any shares for which the option has not
been exercised.

               2. The Plan Administrator shall have complete discretion, exercisable either at the time an
option is granted or at any time while the option remains outstanding, to:

7

 

               (i) extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of the
option term,

               (ii) include an automatic extension provision whereby the specified
post-Service exercise period in effect for any option granted under this Article Two
shall automatically be extended by an additional period of time equal in duration to
any interval within the specified post-Service exercise period during which the
exercise of that option or the immediate sale of the shares acquired under such
option could not be effected in compliance with applicable federal and state
securities laws, but in no event shall such an extension result in the continuation
of such option beyond the expiration date of the term of that option, and/or

               (iii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee’s cessation
of Service but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.

          D. Stockholder Rights. The holder of an option shall have no stockholder rights with
respect to the shares subject to the option until such person shall have exercised the option, paid
the exercise price and become a holder of record of the purchased shares. Notwithstanding the
foregoing, in the event the outstanding shares of Common Stock are split by means of a stock
dividend and the exercise price of and the number of shares subject to outstanding options under
the Plan are to be adjusted as of the date of the distribution of the dividend (rather than as of
the record date for such dividend), then an Optionee who exercises such an option between the
record date and the distribution date for that stock dividend shall be entitled to receive, on the
distribution date, the stock dividend with respect to the shares of Common Stock acquired upon the
exercise of such Option, notwithstanding the fact that such shares were not outstanding as of the
close of business on the record date for such stock dividend.

          E. Repurchase Rights. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the Optionee cease
Service while such shares are unvested, the Corporation shall have the right to repurchase any or
all of those unvested shares at a price per share equal to the lower of (i) the exercise price paid
per share or (ii) the Fair Market Value per share of Common Stock at the time of repurchase. The
terms upon which such repurchase right shall be exercisable (including the

8

 

period and procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the document evidencing
such repurchase right.

          F. Transferability of Options. The transferability of options granted under the Plan
shall be governed by the following provisions:

               (i) Incentive Options: During the lifetime of the Optionee, Incentive Options shall
be exercisable only by the Optionee and shall not be assignable or transferable other than by will
or the laws of inheritance following the Optionee’s death.

               (ii) Non-Statutory Options. Non-Statutory Options shall be subject to the same
limitation on transfer as Incentive Options, except that the Plan Administrator may structure one
or more Non-Statutory Options so that the option may be assigned in whole or in part during the
Optionee’s lifetime, by gift or pursuant to a domestic relations order, to one or more Family
Members of the Optionee or to a trust established exclusively for one or more such Family Members.
The assigned portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator may deem
appropriate.

               (iii) Beneficiary Designations. Notwithstanding the foregoing, the Optionee may
designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two (whether Incentive Options or Non-Statutory Options), and those options
shall, in accordance with such designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and conditions of the
applicable agreement evidencing each such transferred option, including (without limitation) the
limited time period during which the option may be exercised following the Optionee’s death.

     II. INCENTIVE OPTIONS

          The terms specified below shall be applicable to all Incentive Options. Except as modified by
the provisions of this Section II, all the provisions of Articles One, Two and Five shall be
applicable to Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall not be subject to the terms of this Section II.

          A. Eligibility. Incentive Options may only be granted to Employees.

          B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more options granted to
any Employee under the Plan (or any other option plan of the Corporation or

9

 

any Parent or Subsidiary) may for the first time become exercisable as Incentive Options
during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000).

               To the extent the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, then for purposes of the foregoing limitations on the
exercisability of those options as Incentive Options, such options shall be deemed to become first
exercisable in that calendar year on the basis of the chronological order in which they were
granted, except to the extent otherwise provided under applicable law or regulation.

          C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option
term shall not exceed five (5) years measured from the option grant date.

     III. CHANGE IN CONTROL

          A. In the event of a Change in Control, each outstanding option under the Discretionary Grant
Program shall automatically accelerate so that each such option shall, immediately prior to the
effective date of that Change in Control, become exercisable as to all the shares of Common Stock
at the time subject to such option and may be exercised as to any or all of those shares as fully
vested shares of Common Stock. However, an outstanding option shall not become exercisable on such
an accelerated basis if and to the extent: (i) such option is to be assumed by the successor
corporation (or parent thereof) or is otherwise to continue in full force and effect pursuant to
the terms of the Change in Control transaction or (ii) such option is to be replaced with a cash
retention program of the successor corporation which preserves the spread existing at the time of
the Change in Control on any shares as to which the option is not otherwise at that time
exercisable and provides for subsequent vesting and payout of that spread in accordance with the
same exercise/vesting schedule applicable to those shares or (iii) the acceleration of such option
is subject to other limitations imposed by the Plan Administrator.

          B. All outstanding repurchase rights under the Discretionary Grant Program shall automatically
terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of a Change in Control, except to the extent: (i) those repurchase rights are
to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in
full force and effect pursuant to the terms of the Change in Control transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan Administrator.

          C. Immediately following the consummation of the Change in Control, all outstanding options
under the Discretionary Grant Program shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise continued in full
force and effect pursuant to the terms of the Change in Control transaction.

10

 

          D. Each option which is assumed in connection with a Change in Control or otherwise continued
in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities which would have been issuable to the Optionee in consummation
of such Change in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments to reflect such Change in Control shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same, (ii) the maximum number and/or
class of securities available for issuance over the remaining term of the Plan, (iii) the maximum
number and/or class of securities for which any one person may be granted stock options and other
awards in the aggregate under the Plan per calendar year and (iv) the maximum number and/or class
of securities for which any one person be awarded restricted stock or restricted stock units under
the Plan per calendar year. To the extent the actual holders of the Corporation’s outstanding
Common Stock receive cash consideration for their Common Stock in consummation of the Change in
Control, the successor corporation may, in connection with the assumption or continuation of the
outstanding options under the Discretionary Grant Program, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid per share of Common
Stock in such Change in Control transaction.

          E. The Plan Administrator shall have the discretionary authority to structure one or more
outstanding options under the Discretionary Grant Program so that those options shall, immediately
prior to the effective date of a Change in Control, become exercisable as to all the shares of
Common Stock at the time subject to those options and may be exercised as to any or all of those
shares as fully vested shares of Common Stock, whether or not those options are to be assumed in
the Change in Control transaction or otherwise continued in effect. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Discretionary Grant Program so that those rights shall immediately
terminate upon the consummation of the Change in Control transaction, and the shares subject to
those terminated rights shall thereupon vest in full.

          F. The Plan Administrator shall have full power and authority to structure one or more
outstanding options under the Discretionary Grant Program so that those options shall become
exercisable as to all the shares of Common Stock at the time subject to those options in the event
the Optionee’s Service is subsequently terminated by reason of an Involuntary Termination within a
designated period following the effective date of any Change in Control transaction in which those
options do not otherwise fully accelerate. In addition, the Plan Administrator may structure one
or more of the Corporation’s repurchase rights so that those rights shall immediately terminate
with respect to any shares held by the Optionee at the time of such Involuntary Termination, and
the shares subject to those terminated repurchase rights shall accordingly vest in full at that
time.

          G. The portion of any Incentive Option accelerated in connection with a Change in Control
shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent

11

 

such dollar limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-statutory Option under the Federal tax laws.

     IV. PROHIBITION ON REPRICING PROGRAMS

          The Plan Administrator shall not (i) implement any cancellation/regrant program pursuant to
which outstanding options under the Plan are cancelled and new options are granted in replacement
with a lower exercise price per share, (ii) cancel outstanding options under the Plan with exercise
prices per share in excess of the then current Fair Market Value per share of Common Stock for
consideration payable in equity securities of the Corporation or (iii) otherwise directly reduce
the exercise price in effect for outstanding options under the Plan, without in each such instance
obtaining stockholder approval.

     V. STOCK ISSUANCE TERMS

          A. Shares of Common Stock may also be issued under the Discretionary Grant Program, either as
vested or unvested shares, through direct and immediate issuances without any intervening option
grants and without cash consideration payable for the shares. Each such stock issuance shall be
evidenced by a Stock Issuance Agreement which complies with the terms specified below. Shares of
Common Stock may also be issued pursuant to share right awards or restricted stock units which
entitle the recipients to receive the shares underlying those awards or units upon the attainment
of designated performance goals or the satisfaction of specified Service requirements or upon the
expiration of a designated time period following the vesting of those awards or units. However, the
maximum number of shares of Common Stock for which any one person may be granted restricted stock
or restricted unit awards under the Plan in any calendar year shall be limited to fifty thousand
(50,000) shares, subject to adjustment from time to time in accordance with Section V.F of Article
One. The terms and conditions of each such award or restricted stock unit, (including, without
limitation, the applicable vesting schedule and vesting acceleration provisions) shall be
determined by the Plan Administrator.

          B. The Plan Administrator shall also have the discretionary authority, consistent with Code
Section 162(m), to structure one or more restricted stock issuances or restricted stock unit awards
so that the shares of Common Stock subject to those issuances or awards shall vest (or vest and
become issuable) upon the achievement of certain pre-established corporate performance goals based
on one or more of the following criteria: (1) return on total stockholder equity; (2) earnings per
share of Common Stock; (3) net income or operating income (before or after taxes); (4) earnings
before interest, taxes, depreciation and amortization; (5) earnings before interest, taxes,
depreciation, amortization and charges for stock-based compensation, (6) sales or revenue targets;
(7) return on assets, capital or investment; (8) cash flow; (9) market share; (10) cost reduction
goals; (11) budget comparisons; (12) measures of customer satisfaction; (13) any combination of, or
a specified increase in, any of the foregoing; (14) new product development or successful
completion of research and development projects; and (15) the formation of joint ventures, research
or development collaborations, or the completion of other corporate transactions intended to
enhance the Corporation’s revenue or

12

 

profitability or enhance its customer base. In addition, such performance goals may be based
upon the attainment of specified levels of the Corporation’s performance under one or more of the
measures described above relative to the performance of other entities and may also be based on the
performance of any of the Corporation’s business units or divisions or any Parent or Subsidiary.
Performance goals may include a minimum threshold level of performance below which no award will be
earned, levels of performance at which specified portions of an award will be earned and a maximum
level of performance at which an award will be fully earned.

          C. The recipient shall have full stockholder rights with respect to any shares of Common Stock
issued to him or her under the Plan, whether or not the recipient’s interest in those shares is
vested. Accordingly, such individual shall have the right to vote such shares and to receive any
dividends paid on such shares, subject to any applicable vesting requirements. The recipient shall
not have any stockholder rights with respect to the shares of Common Stock subject to a restricted
stock unit until that unit vests and the shares of Common Stock are actually issued thereunder.
However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom
shares of Common Stock, on outstanding restricted stock unit or share right awards, subject to such
terms and conditions as the Plan Administrator may deem appropriate.

          D. The Plan Administrator may in its discretion waive the surrender and cancellation of one or
more unvested shares of Common Stock or restricted stock units which would otherwise occur upon the
cessation of the recipient’s Service or the non-attainment of the performance objectives applicable
to those shares or units. Any such waiver shall result in the immediate vesting of the recipient’s
interest in the shares of Common Stock or restricted stock units as to which the waiver applies.
Such waiver may be effected at any time, whether before or after the recipient’s cessation of
Service or the attainment or non-attainment of the applicable performance objectives. However, no
vesting requirements tied to the attainment of performance objectives may be waived with respect to
shares or units which were intended at the time of issuance to qualify as performance-based
compensation under Code Section 162(m), except in connection with a Change in Control or, with
respect to awards made prior to January 1, 2009, in the event of the recipient’s Involuntary
Termination.

          E. The Plan Administrator shall have full power and authority to structure one or more
restricted stock or restricted stock unit awards under the Plan so that those awards shall vest,
and all the underlying shares shall become immediately issuable, upon the effecitve date of a
Change in Control transaction or in the event the individual’s Service is terminated by reason of
an Involuntary Termination within a designated period following the effective date of the Change in
Control transaction.

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ARTICLE THREE

MISCELLANEOUS

     I. TAX WITHHOLDING

          A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options
or the vesting or issuance of shares under the Plan shall be subject to the satisfaction of all
applicable income and employment tax withholding requirements.

          B. The Plan Administrator may, in its discretion, provide one or more participants in the Plan
with the right to use shares of Common Stock in satisfaction of all or part of the Withholding
Taxes to which such participants may become subject in connection with the exercise of their
options or the vesting or issuance of any shares acquired by them under the Plan. Such right may
be provided to any such participant in either or both of the following formats:

               Stock Withholding: The election to have the Corporation withhold, from the vested
shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or upon
the vesting or issuance of shares under the Plan, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent
(100%)) designated by such person.

               Stock Delivery: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised for vested shares or at the time any shares vest or are issued
under the Plan vest, one or more shares of Common Stock previously acquired by such person (other
than in connection with the option exercise or share vesting or issuance triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to
exceed one hundred percent (100%)) designated by such person.

     II. SHARE ESCROW/LEGENDS

          Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the
Corporation until the recipient’s interest in such shares vests or may be issued directly to the
recipient with restrictive legends on the certificates evidencing those unvested shares.

     III. EFFECTIVE DATE AND TERM OF THE PLAN

          A. This 2008 Restatement shall become effective on the 2008 Restatement Effective Date.

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          B. Each option or other award outstanding under the Plan immediately prior to the 2008
Restatement Effective Date shall continue to be governed solely by the terms of the documents
evidencing such option or award, and no provision of the 2008 Restatement shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such options or awards with respect
to their acquisition of shares of Common Stock thereunder. However, one or more provisions of the
2008 Restatement may, in the Plan Administrator’s discretion, be extended to one or more of those
options or awards that do not otherwise contain such provisions.

          C. The Plan as hereby amended and restated shall terminate upon the earliest to occur
of (i) January 13, 2012, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully vested shares or (iii) the termination of all outstanding options
and repurchase rights in connection with a Change in Control. Should the Plan terminate on January
13, 2012, then all option grants and other awards outstanding at that time shall continue to have
force and effect in accordance with the provisions of the documents evidencing such grants or
awards.

     IV. AMENDMENT OF THE PLAN

          A. The Board shall have complete and exclusive power and authority to amend or modify the Plan
in any or all respects, except with regard to Article II, Section IV hereof. However, no such
amendment or modification shall adversely affect the rights and obligations with respect to stock
options or other awards at the time outstanding under the Plan unless the Optionee or other Plan
participant consents to such amendment or modification. In addition, amendments to the Plan will
be subject to stockholder approval to the extent required under applicable law or regulation or
pursuant to the listing standards of the Stock Exchange on which the Common Stock is at the time
primarily traded.

          B. Options may be granted under the Discretionary Grant Program that in involve shares of
Common Stock in excess of the number of shares then available for issuance under the Plan, provided
no shares shall actually be issued pursuant to those grants until the number of shares of Common
Stock available for issuance under the Plan is sufficiently increased by stockholder approval of an
amendment of the Plan authorizing such increase. If stockholder approval is required and is not
obtained within twelve (12) months after the date the first excess grant made against such
contingent increase, then any options granted on the basis of such excess shares shall terminate
and cease to be outstanding.

     V. USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares of Common Stock under
the Plan shall be used for general corporate purposes.

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     VI. REGULATORY APPROVALS

          A. The implementation of the Plan, the granting of any stock option under the Plan and the
issuance of any shares of Common Stock under the Plan shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options or other awards granted under it and the shares of Common Stock
issued pursuant to it.

          B. No shares of Common Stock or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable requirements of applicable
securities laws, including the filing and effectiveness of the Form S-8 registration statement for
the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any
Stock Exchange on which Common Stock is then listed for trading.

     VII. NO EMPLOYMENT/SERVICE RIGHTS

          Nothing in the Plan shall confer upon the Optionee or other Plan participant any right to
continue in Service for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such
person) or of the Optionee or other participant, which rights are hereby expressly reserved by
each, to terminate such person’s Service at any time for any reason, with or without cause.

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APPENDIX 

          The following definitions shall be in effect under the Plan:

          A. Board shall mean the Corporation’s Board of Directors.

          B. Change in Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

          (i) a merger, consolidation or other reorganization approved by the
Corporation’s stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who beneficially
owned the Corporation’s outstanding voting securities immediately prior to such
transaction,

          (ii) a stockholder-approved sale, transfer or other disposition of all or
substantially all of the Corporation’s assets, or

          (iii) the closing of any transaction or series of related transactions pursuant
to which any person or any group of persons comprising a “group” within the meaning
of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that,
prior to such transaction or series of related transactions, directly or indirectly
controls, is controlled by or is under common control with, the Corporation) becomes
directly or indirectly the beneficial owner (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing (or convertible into or exercisable for
securities possessing) more than fifty percent (50%) of the total combined voting
power of the Corporation’s securities (as measured in terms of the power to vote
with respect to the election of Board members) outstanding immediately after the
consummation of such transaction or series of related transactions, whether such
transaction involves a direct issuance from the Corporation or the acquisition of
outstanding securities held by one or more of the Corporation’s existing
stockholders.

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

          D. Common Stock shall mean the Corporation’s common stock.

          E. Compensation Committee shall mean the Compensation Committee of the Board comprised
of two (2) or more non-employee Board members.

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          F. Corporation shall mean Bio-Imaging Technologies, Inc., a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting stock of Bio-Imaging
Technologies, Inc. which has by appropriate action assumed the Plan.

          G. Discretionary Grant Program shall mean the discretionary grant program in effect
under Article Two of the Plan pursuant to which stock options and other awards may be granted to
one or more eligible individuals.

          H. Employee shall mean an individual who is in the employ of the Corporation (or any
Parent or Subsidiary, whether now existing or subsequently established), subject to the control and
direction of the employer entity as to both the work to be performed and the manner and method of
performance.

          I. Exercise Date shall mean the date on which the Corporation shall have received
written notice of the option exercise.

          J. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

          (i) If the Common Stock is at the time traded on the Nasdaq Global Market, then
the Fair Market Value shall be the closing selling price per share of Common Stock
at the close of regular hours trading (i.e., before after- hours trading begins) on
such Stock Exchange on the date in question, as such price is reported by the
National Association of Securities Dealers. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation exists.

          (ii) If the Common Stock is at the time listed on any other Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of Common
Stock at the close of regular hours trading (i.e., before after-hours trading
begins) on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If there
is no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date for
which such quotation exists.

          K. Family Member means, with respect to a particular Optionee or other Plan
participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
bother-in-law or sister-in-law.

          L. Incentive Option shall mean an option which satisfies the requirements of Code
Section 422.

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          M. Involuntary Termination shall mean the termination of the Service of any individual
which occurs by reason of:

          (i) such individual’s involuntary dismissal or discharge by the Corporation (or
any Parent or Subsidiary) for reasons other than Misconduct, or

          (ii) such individual’s voluntary resignation following (A) a change in his or
her position with the Corporation (or any Parent or Subsidiary) which materially
reduces his or her duties and responsibilities or the level of management to which
he or she reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonus under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation
of such individual’s place of employment by more than fifty (50) miles, provided and
only if such change, reduction or relocation is effected by the Corporation (or any
Parent or Subsidiary) without the individual’s consent.

          N. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not
in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to
discharge or dismiss any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be
deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct.

          O. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

          P. Non-Statutory Option shall mean an option not intended to satisfy the requirements
of Code Section 422.

          Q. Optionee shall mean any person to whom an option is granted under the Discretionary
Grant Program.

          R. Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

          S. Permanent Disability or Permanently Disabled shall mean the inability of the
Optionee to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

A-3

 

          T. Plan shall mean the Corporation’s 2002 Stock Incentive Plan, as amended and
restated in this document.

          U. Plan Administrator shall mean the particular entity, whether the Compensation
Committee, the Board or the Secondary Board Committee, which is authorized to administer the
Discretionary Grant Program with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under that program with respect to the
persons under its jurisdiction.

          V.  2008 Restatement shall mean the May 14, 2008 amendment and restatement of the Plan
which effects the changes set forth in this document.

          W. 2008 Restatement Effective Date shall mean the date of the 2008 Annual Meeting of
the Corporation’s stockholders, provided the stockholders approve the 2008 Restatement at such
Annual Meeting.

          X. Secondary Board Committee shall mean a committee of one or more Board members
appointed by the Board to administer the Discretionary Grant Program with respect to eligible
persons other than Section 16 Insiders.

          Y. Section 16 Insider shall mean an officer or director of the Corporation subject to
the short-swing profit liabilities of Section 16 of the 1934 Act.

          Z. Service shall mean the performance of services for the Corporation (or any Parent
or Subsidiary, whether now existing or subsequently established) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or independent advisor,
except to the extent otherwise specifically provided in the documents evidencing the option grant
or stock issuance. For purposes of the Plan, a person shall be deemed to cease Service immediately
upon the occurrence of the either of the following events: (i) the person no longer performs
services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii)
the entity for which the person is performing such services ceases to remain a Parent or Subsidiary
of the Corporation, even though such person may subsequently continue to perform services for that
entity. Service shall not be deemed to cease during a period of military leave, sick leave or other
personal leave approved by the Corporation; provided, however, that should such leave of
absence exceed three (3) months, then for purposes of determining the period within which an
Incentive Option may be exercised as such under the federal tax laws, the Optionee’s Service
shall be deemed to cease on the first day immediately following the expiration of such three
(3)-month period, unless Optionee is provided with the right to return to Service following such
leave either by statute or by written contract. Except to the extent otherwise required by law or
expressly authorized by the Plan Administrator or the Corporation’s written policy governing leaves
of absence, no Service credit shall be given for vesting purposes for any period the person is on a
leave of absence.

          AA. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global
Select Market or the New York Stock Exchange.

A-4

 

          BB. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.

          CC. 10% Stockholder shall mean the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation (or any Parent or Subsidiary).

          DD. Withholding Taxes shall mean the applicable income and employment withholding
taxes to which the holder of an option or shares of Common Stock under the Plan may become subject
in connection with the grant or exercise of those options or the vesting or issuance of those
shares.

A-5

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