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Exhibit 10.34  

 
 

GUARANTY
  (Vista Woods Health Associates LLC, City Heights Health Associates LLC, and Claremont Foothills Health Associates LLC)    

        This
GUARANTY (this "Guaranty") is given as of September    , 2003 ("Effective Date"), by VISTA WOODS HEALTH ASSOCIATES LLC, a Nevada limited liability company, CITY HEIGHTS
HEALTH ASSOCIATES LLC, a Nevada limited liability company, CLAREMONT FOOTHILLS HEALTH ASSOCIATES LLC, a Nevada limited liability company (each a "Guarantor", and collectively, the "Guarantors"), whose
address is 32232 Paseo Adelanto, Suite 100, San Juan Capistrano, CA 92675, in favor of OHI ASSET (CA), LLC, a Delaware limited liability company ("Lessor") whose address is 9690 Deereco Road, Suite
100, Timonium, Maryland 21093, with reference to the following facts: 

 
 

RECITALS    

        A.    PERMUNITUM
LLC, a Nevada limited liability. company ("Lessee"), has executed and delivered to Lessor a Master Lease dated the same date as this Guaranty (the "Master
Lease") pursuant to which Lessee is leasing from Lessor three (3) skilled nursing facilities located in California (the "Facilities"). 

        B.    Each
Guarantor is the sublessee of one the Facilities under a sublease agreement (the "Sublease") between Guarantor and Lessee dated the same date as this Guaranty. It is
to the advantage of each Guarantor that Lessor enter into the Master Lease and consent to the entry by Lessee into the Sublease. 

        C.    As
a material inducement to Lessor to lease the Facilities pursuant to the Master Lease and to consent to the Sublease, the Guarantors have agreed to guarantee the
payment of all amounts due from, and the performance of all obligations undertaken by the Lessee and its Affiliates under the Master Lease and the other Transaction Documents (as defined in the Master
Lease), all as hereinafter set forth. 

        WHEREFORE,
the parties hereby agree as follows: 

        1.     Defined
Terms. All capitalized terms used herein and not defined herein shall have the meaning for such terms set forth in the Master Lease. 

        2.     Guaranty.
Each Guarantor hereby unconditionally and irrevocably guaranties to Lessor (i) the payment when due of all Rent and all other sums payable by the Lessee
and its Affiliates under the Master Lease and all the other Transaction Documents; and (ii) the faithful and prompt performance when due of each and every one of the terms, conditions and
covenants to be kept and performed by Lessee and its Affiliates under the Transaction Documents, any and all amendments, modifications, extensions and renewals of the Transaction Documents, including
without limitation all indemnification obligations, insurance obligations, and all obligations to operate, rebuild, restore or replace any facilities or improvements now or hereafter located on the
real estate covered by the Master Lease. In the event of the failure of Lessee or its Affiliates to pay any such amounts owed, or to render any other performance required of Lessee or its Affiliates
under the Transaction Documents, when due, Guarantors shall forthwith perform or cause to be performed all provisions of the Transaction Documents to be performed by Lessee or its Affiliates
thereunder, and pay all damages that may result from the non-performance thereof to the full extent provided under the Transaction Documents (collectively, the "Obligations"). As to the
Obligations, each Guarantor's liability under this Guaranty is without limit. 

        3.     Survival
of Obligations. The obligations of each Guarantor under this Guaranty with respect to the Transaction Documents shall survive and continue in full force and
effect notwithstanding: 

        (a)   any
amendment, modification, or extension of any Transaction Document; 

 

        (b)   any
compromise, release, consent, extension, indulgence or other action or inaction in respect of any terms of any Transaction Document or any other guarantor (including
any other Guarantor); 

        (c)   any
substitution or release, in whole or in part, of any security for this Guaranty which Lessor may hold at any time; 

        (d)   any
exercise or nonexercise by Lessor of any right, power or remedy under or in respect of any Transaction Document or any security held by Lessor with respect thereto,
or any waiver of any such right, power or remedy; 

        (e)   any
bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation, or the like of the Lessee or any other guarantor (including any other
Guarantor); 

        (f)    any
limitation of Lessee's liability under any Transaction Document or any limitation of Lessee's liability thereunder which may now or hereafter be imposed by any
statute, regulation or rule of law, or any illegality, irregularity, invalidity or unenforceability, in whole or in part, of any Transaction Document or any term thereof; 

        (g)   any
sale, lease, or transfer of all or any part of any interest in any Facilities (other than the assignment of the Master Lease to Lessee) to any other person, firm or
entity other than to Lessor; 

        (h)   any
act or omission by Lessor with respect to any of the security instruments or any failure to file, record or otherwise perfect any of the same; 

        (i)    any
extensions of time for performance under the Transaction Documents, whether prior to or after maturity; 

        (j)    the
release of any collateral from any lien in favor of Lessor, or the release of Lessee from performance or observation of any of the agreements, covenants, terms or
conditions contained in any Transaction Document by operation of law or otherwise, provided that Guarantors will not be liable for future payments of Base Rent under the Master Lease and the Sublease
to the extent Lessor receives Net Reletting Proceeds; 

        (k)   the
fact that Lessee may or may not be personally liable, in whole or in part, under the terms of any Transaction Document to pay any money judgment; 

        (1)   the
failure to give a Guarantor any notice of acceptance, default or otherwise; 

        (m)  any
other guaranty now or hereafter executed by Guarantor or anyone else in connection with any Transaction Document; 

        (n)   any
rights, powers or privileges Lessor may now or hereafter have against any other person, entity or collateral; or 

        (o)   any
other circumstances, whether or not Guarantor have notice or knowledge thereof, other than the payment or performance of all of the Obligations. 

        4.     Primary
Liability. The liability of each Guarantor with respect to the Transaction Documents shall be primary, direct and immediate, and Lessor may proceed against a
Guarantor: (i) prior to or in lieu of proceeding against Lessee, its assets, any security deposit, or any other guarantor; and (ii) prior to or in lieu of pursuing any other rights or
remedies available to Lessor. All rights and remedies afforded to Lessor by reason of this Guaranty or by law are separate, independent and cumulative, and the exercise of any rights or remedies shall
not in any way limit, restrict or prejudice the exercise of any other rights or remedies. 

        In
the event of any default under any Transaction Document, a separate action or actions may be brought and prosecuted against a Guarantor whether or not Lessee is joined therein or a
separate action or actions are brought against Lessee or any other Guarantor. Lessor may maintain successive 

2

 

actions
for other defaults. Lessor's rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and
unless all indebtedness and obligations the payment and performance of which are hereby guaranteed have been paid and fully performed. 

        5.     Waiver.
With respect to the Transaction Documents, each Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to sureties and/or
guarantors or any other accommodation parties, under any statutory provisions, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such
rights or remedies including, but not limited to: 

        (a)   any
right to require Lessor to proceed against the Lessee or any other person or to proceed against or exhaust any security held by Lessor at any time or to pursue any
other remedy in Lessor's power before proceeding against a Guarantor or to require that Lessor cause a marshaling of Lessee's assets or the assets, if any, given as collateral for this Guaranty or to
proceed against Lessee and/or any collateral, including collateral, if any, given to secure a Guarantor's obligation under this Guaranty, held by Lessor at any time or in any particular order; 

        (b)   any
defense that may arise by reason of the incapacity or lack of authority of any other person or persons; 

        (c)   notice
of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Lessee,
Lessor, any creditor of Lessee or a Guarantor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by
Lessor or in connection with any obligation hereby guaranteed; 

        (d)   any
defense based upon an election of remedies by Lessor which destroys or otherwise impairs the subrogation rights of a Guarantor or the right of a Guarantor to proceed
against Lessee for reimbursement, or both; 

        (e)   any
defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; 

        (f)    any
duty on the part of Lessor to disclose to a Guarantor any facts Lessor may now or hereafter know about Lessee, regardless of whether Lessor has reason to believe
that any such facts materially increase the risk beyond that which Guarantors intend to assume or has reason to believe that such facts are unknown to Guarantors or has a reasonable opportunity to
communicate such facts to Guarantors, it being understood and agreed that Guarantors are fully responsible for being and keeping informed of the financial condition of Lessee and of all circumstances
bearing on the risk of non-payment or non-performance of any obligations or indebtedness hereby guaranteed; 

        (g)   any
defense arising because of Lessor's election, in any proceeding instituted under the federal Bankruptcy Code, of the application of Section 1111 (b)(2) of the
federal Bankruptcy Code; and 

        (h)   any
defense based on any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code. 

        (i)    all
rights and remedies accorded by applicable law to guarantors, including without limitation, any extension of time conferred by any law now or hereafter in effect and
any requirement or notice of acceptance of this Guaranty or any other notice to which the undersigned may now or hereafter be entitled to the extent such waiver of notice is permitted by applicable
law. 

        6.     Warranties.
With respect to the Transaction Documents, each Guarantor warrants that: (a) this Guaranty is executed at Lessee's request; and (b) such
Guarantor has established adequate means of 

3

 

obtaining
from Lessee on a continuing basis financial and other information pertaining to Lessee's financial condition. Each Guarantor agrees to keep adequately informed from such means of any facts,
events or circumstances which might in any way affect a Guarantor's risks hereunder, and each Guarantor further agrees that Lessor shall have no obligation to disclose to a Guarantor information or
material acquired in the course of Lessor's relationship with Lessee. 

        7.     No-Subrogation.
Until all obligations of Lessee under the Transaction Documents have been satisfied and discharged in full for one (1) year, no
Guarantor shall have any right of subrogation and waives any right to enforce any remedy which Lessor now has or may hereafter have against Lessee and any benefit of, and any right to participate in,
any security now or hereafter held by Lessor with respect to the Master Lease. 

        8.     Subordination.
Upon the occurrence of an Event of Default under any Transaction Document, which is not cured by a Guarantor, the indebtedness or obligations of Lessee to
Guarantors shall not be paid in whole or in part nor will any Guarantor accept any payment of or on account of any amounts owing, without the prior written consent of Lessor and at Lessor's request,
each Guarantor shall cause Lessee to pay to Lessor all or any part of the subordinated indebtedness until the obligations under the Transaction Documents have been paid in full. Any payment by Lessee
in violation of this Guaranty shall be received by Guarantor in trust for Lessor, and each Guarantor shall cause the same to be paid to Lessor immediately on account of the amounts owing from Lessee
to Lessor. No such payment will reduce or affect in any manner the liability of a Guarantor under this Guaranty. 

        9.     No
Delay. Any payments required to be made by a Guarantor hereunder shall become due on demand in accordance with the terms hereof immediately upon the happening of an
Event of Default under any Transaction Document. 

        10.   Application
of Payments. With respect to the Transaction Documents, and with or without notice to Guarantors, Lessor, in Lessor's sole discretion and at any time and
from time to time and in such manner and upon such terms as Lessor deems appropriate, may (a) apply any or all payments or recoveries from Lessee or from any other guarantor under any other
instrument or realized from any security, in such manner and order of priority as Lessor may determine, to any indebtedness or other obligation of the Lessee with respect to the Transaction Documents
and whether or not such indebtedness or other obligation is guaranteed hereby or is otherwise secured or is due at the time of such application, and (b) refund to Lessee any payment received by
Lessor under the Transaction Documents. 

        11.   Guaranty
Default. 

        (a)   As
used herein, the term Guaranty Default shall mean one or more of the following events (subject to applicable cure periods): 

        (i)    an
event of default under the Master Lease or the other Transaction Documents. 

        (ii)   the
failure of Guarantors to pay the amounts required to be paid hereunder at the times specified herein; 

        (iii)  the
failure of Guarantors to observe and perform any covenants, conditions or agreement on their part to be observed or performed, other than as referred to in
Subsection (i) above, for a period of thirty (30) days after written notice of such failure has been given to Guarantors by Lessor, unless Lessor agrees in writing to an extension of
such time prior to its expiration; 

        (iv)  the
occurrence of a default under any other guaranty between Lessor and a Guarantor. 

        (b)   Upon
the occurrence of a Guaranty Default, Lessor shall have the right to bring such actions at law or in equity, including appropriate injunctive relief, as it deems
appropriate to compel 

4

 

compliance,
payment or deposit, and among other remedies to recover its attorneys' fees in any proceeding, including any appeal therefrom and any post-judgement proceedings. 

        12.   Covenants:
At all times while any Obligations guaranteed by Guarantors remain outstanding (the "Term of this Guaranty"), each Guarantor shall comply with any and all
covenants of the Master Lease applicable to a Guarantor, as the same may be amended, modified or restated from time to time during the Term of this Guaranty. 

        13.   Notices.
All notices, demands or requests required or permitted to be given to either party hereto shall be in writing and shall be deemed given if delivered personally,
sent by reputable overnight courier, with acknowledgment of receipt requested, or mailed by registered, overnight or certified mail, with full postage paid thereon, return receipt requested (such
notice to be effective on the date such receipt is acknowledged), as follows: 

	Guarantors:	 	Vista Woods Health Associates LLC

City Heights Health Associates LLC

Claremont Foothills Health Associates LLC

Before 1/01/04:
	
 	
 	

Attn: General Counsel

32232 Paseo Adelanto, Suite 100

San Juan Capistrano, CA 92675

Telephone No.: (949) 487-9500

Facsimile No.: (949) 487-9300
	
 	
 	

After 1/01/04:
	
 	
 	

Attn: General Counsel

27101 Puerta Real, Suite 450

Mission Viejo, CA 92691

Telephone No.: (949) 487-9500

Facsimile No.. (949) 487-9300
	
 Lessor:	
 	

OHI Asset (CA), LLC

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
	

With copy to:	
 	

Myers Nelson Dillon & Shierk, PLLC

125 Ottawa Ave., N.W., Suite 270

Grand Rapids, Michigan 49503

Attn: Mark E. Derwent

Telephone No.: (616) 233-9640

Facsimile No.: (616) 233-9642
	

 	
 	

 

or to such place and with such other copies as a Guarantor or Lessor may designate for itself by written notice to the other. 

        14.   Miscellaneous.

        (a)   No
term, condition or provision of this Guaranty may be waived except by an express written instrument to that effect signed by Lessor. No waiver of any term, condition
or provision of this Guaranty will be deemed a waiver of any other term, condition or provision, irrespective of similarity, 

5

 

or
constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided. 

        (b)   If
any one or more of the terms, conditions or provisions contained in this Guaranty is found in a final award or judgment rendered by any court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions of this Guaranty shall not in any way
be affected or impaired thereby, and this Guaranty shall be interpreted and construed as if the invalid, illegal, or unenforceable term, condition or provision had never been contained in this
Guaranty. 

        (c)   THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND. EACH GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE
STATE AND FEDERAL COURTS OF CALIFORNIA AND MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS GUARANTY BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA OR MARYLAND. EACH
GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF CALIFORNIA OR MARYLAND AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE
STATE AND FEDERAL COURTS OF THE STATE OF CALIFORNIA OR MARYLAND. 

        (d)   EACH
GUARANTOR AND LESSOR HEREBY WAIVE TRIAL BY JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON, UNDER, OUT OF, BY REASON OF OR RELATING 1N
ANY WAY TO THIS GUARANTY OR THE INTERPRETATION, BREACH OR ENFORCEMENT THEREOF. 

        (e)   In
the event of any suit, action, arbitration or other proceeding to interpret this Guaranty, or to determine or enforce any right or obligation created hereby, the
prevailing party in the action shall recover such party's actual costs and expenses reasonably incurred in connection therewith, including, but not limited to, attorneys' fees and costs of appeal,
post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit,
action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such-judgment or award such party's costs and expenses as
provided in this paragraph. 

        (f)    Each
Guarantor (i) represents that they have been represented and advised by counsel in connection with the execution of this Guaranty; (ii) acknowledges
receipt of a copy of the Transaction Documents; and (iii) further represents that such Guarantor has been advised by counsel with respect thereto. This Guaranty shall be construed and
interpreted in accordance with the plain meaning of its language, and not for or against Guarantor or Lessor, and as a whole, giving effect to all of the terms, conditions and provisions hereof. 

        (g)   Except
as provided in any other written agreement now or at any time hereafter in force between Lessor and a Guarantor, this Guaranty shall constitute the entire
agreement of Guarantors with Lessor with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof will be binding upon
Lessor or Guarantors unless expressed herein. 

        (h)   All
stipulations, obligations, liabilities and undertakings under this Guaranty shall be binding upon each Guarantor and its respective successors and assigns and shall
inure to the benefit of Lessor and to the benefit of Lessor's successors and assigns. 

        (i)    Whenever
the singular shall be used hereunder, it shall be deemed to include the plural (and vice-versa) and reference to one gender shall be construed to
include all other genders, including 

6

 

neuter,
whenever the context of this Guaranty so requires. Section captions or headings used in the Guaranty are for convenience and reference only, and shall not affect the construction thereof. 

        (j)    The
obligations of Guarantors under this Guaranty are joint and several. 

Signatures
and acknowledgment follows. 

7

 

IN
WITNESS WHEREOF, the undersigned has executed this Lease Guaranty as of the date first written above. 

	

 	
 	

 	
 	

 	
 	

GUARANTOR:

Vista Woods Health Associates LLC

City Heights Health Associates LLC

Claremont Foothills Health Associates LLC
	

 	

 	

 	

 	

 	

 	

By:	

 	

The Ensign Group, Inc., a Delaware

corporation, their sole member
	

 	

 	

 	

 	

 	

 	

By:	

 	

/s/  CHRISTOPHER R. CHRISTENSEN      

	

 	
 	

 	
 	

 	
 	

 	
 	

Name: Christopher R. Christensen

Title: President
	

STATE OF

COUNTY OF	

 	

        California
        Orange
	

 	

)

)SS

)	

 	

 	

 	

 
	

 	
 	

 	
 	

 	
 	

 	
 	

 

This instrument was acknowledged before me on the 30 day of September, 2003, by Christopher R. Christensen, the President of The Ensign Group, Inc., a Delaware
corporation, the sole member of each of Vista Woods Health Associates LLC, a Nevada limited liability company, City Heights Health Associates LLC, a Nevada limited liability company, Claremont
Foothills Health Associates LLC, a Nevada limited liability company, on behalf of said limited liability companies. 

	

 	
 	

            /s/  MARCUS PAXMAN      
 Notary Public, CA County Orange

My Commission Expires: 7/23/04
	

 	
 	

 

8

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GUARANTY (Vista Woods Health Associates LLC, City Heights Health Associates LLC, and Claremont Foothills Health Associates LLC)

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Exhibit 10.35  

[MESA, AZ] 

 
 

MASTER LEASE    
    
    between    
    
    HEALTH CARE PROPERTY INVESTORS, INC.,
  a Maryland corporation,
  d/b/a in the State of Arizona under the fictitious name of
  HC PROPERTIES,
 INC.    
    
    as Lessor    
    
    AND    
    
    MOENIUM HOLDINGS LLC,    
    
    as Lessee    
    
    Dated as of January    , 2003    
    

   TABLE OF CONTENTS  

	ARTICLE I.	 	6
	1.1	 	Leased Property; Term	 	6
	

ARTICLE II.	
 	

7
	2.1	 	Definitions	 	7
	

ARTICLE III.	
 	

16
	3.1	 	Minimum Rent	 	16
	3.2	 	Additional Charges	 	16
	3.3	 	Late Payment of Rent	 	16
	3.4	 	Net Lease	 	17
	

ARTICLE IV.	
 	

17
	4.1	 	Impositions	 	17
	4.2	 	Utility Charges	 	18
	4.3	 	Insurance Premiums	 	18
	4.4	 	Impound Account	 	18
	4.5	 	Tax Service	 	19
	

ARTICLE V.	
 	

19
	5.1	 	No Termination, Abatement, etc.	 	19
	5.2	 	Termination with Respect to Fewer than All of the Facilities	 	19
	

ARTICLE VI.	
 	

20
	6.1	 	Ownership of the Leased Property	 	20
	6.2	 	Personal Property	 	20
	6.3	 	Transfer of Personal Property and Capital Additions to Lessor	 	20
	6.4	 	Option to Purchase Removable Personal Property	 	20
	

ARTICLE VII.	
 	

21
	7.1	 	Condition of the Leased Property	 	21
	7.2	 	Use of the Leased Property	 	21
	7.3	 	Lessor to Grant Easements, etc.	 	22
	7.4	 	Preservation of Facility Value	 	22
	

ARTICLE VIII.	
 	

22
	8.1	 	Compliance with Legal and Insurance Requirements, Instruments, etc.	 	22
	

ARTICLE IX.	
 	

23
	9.1	 	Maintenance and Repair	 	23
	9.2	 	Encroachments, Restrictions, Mineral Leases, etc.	 	24
	9.3	 	Replacement Reserve	 	24
	

ARTICLE X.	
 	

25
	10.1	 	Construction of Capital Additions and Other Alterations to the Leased Property	 	25
	10.2	 	Construction Requirements for all Alterations	 	26
	

ARTICLE XI.	
 	

27
	11.1	 	Liens	 	27
	

ARTICLE XII.	
 	

27
	12.1	 	Permitted Contests	 	27
	

ARTICLE XIII.	
 	

28
	 	 	 	 	 

2

 

	13.1	 	General Insurance Requirements	 	28
	13.2	 	Replacement Cost	 	29
	13.3	 	Additional Insurance	 	29
	13.4	 	Waiver of Subrogation	 	29
	13.5	 	Policy Requirements	 	29
	13.6	 	Increase in Limits	 	30
	13.7	 	Blanket Policies and Policies Covering Multiple Locations	 	30
	13.8	 	No Separate Insurance	 	30
	

ARTICLE XIV.	
 	

31
	14.1	 	Insurance Proceeds	 	31
	14.2	 	Insured Casualty	 	31
	14.3	 	Uninsured Casualty	 	31
	14.4	 	No Abatement of Rent	 	32
	14.5	 	Waiver	 	32
	

ARTICLE XV.	
 	

32
	15.1	 	Condemnation	 	32
	

ARTICLE XVI.	
 	

33
	16.1	 	Events of Default	 	33
	16.2	 	Certain Remedies	 	34
	16.3	 	Damages	 	35
	16.4	 	Receiver	 	35
	16.5	 	Lessee's Obligation to Purchase	 	35
	16.6	 	Waiver	 	36
	16.7	 	Application of Funds	 	36
	16.8	 	Facility Operating Deficiencies	 	36
	16.9	 	Lessor's Right of Appraisal	 	37
	16.10	 	Lessor's Security Interest	 	38
	

ARTICLE XVII.	
 	

39
	17.1	 	Lessor's Right to Cure Lessee's Default	 	39
	

ARTICLE XVIII.	
 	

39
	18.1	 	Purchase of the Leased Property	 	39
	

ARTICLE XIX.	
 	

39
	19.1	 	Renewal Terms	 	39
	19.2	 	Lessor's Rights of Renewal and Early Termination	 	40
	

ARTICLE XX.	
 	

40
	20.1	 	Holding Over	 	40
	

ARTICLE XXI.	
 	

41
	21.1	 	Letters of Credit	 	41
	21.2	 	Times for Obtaining Letters of Credit	 	41
	21.3	 	Amounts for Letters of Credit	 	41
	21.4	 	Uses of Cash Security Deposit or Letter of Credit	 	41
	21.5	 	Cash Security Deposit	 	42
	21.6	 	WAIVER	 	42
	

ARTICLE XXII.	
 	

42
	22.1	 	Risk of Loss	 	42
	

ARTICLE XXIII.	
 	

43
	 	 	 	 	 

3

 

	23.1	 	General Indemnification	 	43
	

ARTICLE XXIV.	
 	

43
	24.1	 	Transfers.	 	43
	

ARTICLE XXV.	
 	

49
	25.1	 	Officer's Certificates and Financial Statements.	 	49
	

ARTICLE XXVI.	
 	

51
	26.1	 	Lessor's Right to Inspect and Show the Leased Property and Capital Additions	 	51
	

ARTICLE XXVII.	
 	

51
	27.1	 	No Waiver	 	51
	

ARTICLE XXVIII.	
 	

51
	28.1	 	Remedies Cumulative	 	51
	

ARTICLE XXIX.	
 	

51
	29.1	 	Acceptance of Surrender	 	51
	

ARTICLE XXX.	
 	

51
	30.1	 	No Merger.	 	51
	

ARTICLE XXXI.	
 	

51
	31.1	 	Conveyance by Lessor	 	51
	31.2	 	New Lease	 	52
	

ARTICLE XXXII.	
 	

52
	32.1	 	Quiet Enjoyment	 	52
	

ARTICLE XXXIII.	
 	

53
	33.1	 	Notices	 	53
	

ARTICLE XXXIV.	
 	

53
	34.1	 	Appraiser	 	53
	

ARTICLE XXXV.	
 	

54
	35.1	 	Lessee's Option to Purchase the Leased Property	 	54
	35.2	 	Defaults	 	55
	35.3	 	Escrow Provisions	 	56
	35.4	 	Lessor's Election of 1031 Exchange	 	56
	

ARTICLE XXXVI.	
 	

57
	36.1	 	Lessor May Grant Liens	 	57
	36.2	 	Attornment	 	57
	

ARTICLE XXXVII.	
 	

58
	37.1	 	Hazardous Substances and Mold	 	58
	37.2	 	Notices	 	58
	37.3	 	Remediation	 	58
	37.4	 	Indemnity	 	59
	37.5	 	Inspection	 	59
	

ARTICLE XXXVIII.	
 	

60
	38.1	 	Memorandum of Lease	 	60
	

ARTICLE XXXIX.	
 	

60
	39.1	 	Sale of Assets	 	60
	 	 	 	 	 

4

 

	

ARTICLE XL.	
 	

60
	40.1	 	Subdivision	 	60
	

ARTICLE XLI.	
 	

61
	41.1	 	Authority	 	61
	

ARTICLE XLII.	
 	

61
	42.1	 	Attorneys' Fees	 	61
	42.2	 	Administrative Expenses	 	61
	42.3	 	Annual Inspection Costs	 	61
	

ARTICLE XLIII.	
 	

61
	43.1	 	Brokers	 	61
	

ARTICLE XLIV.	
 	

62
	44.1	 	Submission to Arbitration	 	62
	

ARTICLE XLV.	
 	

63
	45.1	 	Miscellaneous	 	63
	

ARTICLE XLVI.	
 	

66
	46.1	 	Provisions Relating to Master Lease	 	66

	

Exhibit A	
 	

Legal Description of the Land
	

Exhibit B-I	
 	

List of Facilities, Facility Description and Primary Intended Use, Allocated Initial Investment, and Reserve Amount
	

Exhibit B-2	
 	

Minimum Rent Schedule
	

Exhibit C	
 	

List of Lessor's Personal Property
	

Exhibit D	
 	

Form of Amendment
	

Exhibit E	
 	

Form of Letter of Credit

5

   MASTER LEASE  

        THIS MASTER LEASE ("Lease") is dated as of January    , 2003, and is between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation, d/b/a
in the State of Arizona under the fictitious name of HC PROPERTIES, INC. ("Lessor")and MOENIUM HOLDINGS LLC, a Nevada limited liability company ("Lessee"). 

ARTICLE I.  

        1.1    Leased Property; Term.    

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

        (a)   the
real property or properties described in Exhibit A attached hereto (collectively, the "Land"); 

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

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

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

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

        SUBJECT,
HOWEVER, to the easements, encumbrances, covenants, conditions and restrictions and other matters which affect the Leased Property as of the date hereof or the Commencement Date
or which are created thereafter as permitted hereunder to have and to hold for (1) the Fixed Term (as defined below), and (2) the Extended Terms provided for in Article XIX unless
this Lease is earlier terminated as hereinafter provided. Following the Commencement Date, the parties shall execute an amendment to this Lease in substantially the form attached hereto as
Exhibit D to confirm certain matters, including the Commencement Date and the Minimum Rent as determined pursuant to Section 3.1 below. Upon any change in the Minimum Rent in accordance
with the provisions of Section 3.1 below or otherwise pursuant to this Lease, the parties shall similarly execute an amendment to this Lease confirming such matters. Notwithstanding the
foregoing, the failure of Lessee to so execute and deliver any such amendment shall not affect Lessor's determination of the matters to be confirmed thereby. 

6

 
ARTICLE II.  

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

        1031
Exchange: As defined in Section 35.4. 

        AAA:
As defined in Article XLIV. 

        Accommodator:
As defined in Section 35.4. 

        Additional
Charges: As defined in Article III. 

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

        Allocated
Initial Investment. With respect to each Facility, the amount set forth in or determined under the heading "Allocated Initial Investment" as set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference. 

        Allocated
Minimum Rent: With respect to each Facility, the amount of Minimum Rent allocated to such Facility as determined by the applicable Minimum Rent Schedule for such Facility as
set forth on Exhibit B-2 attached hereto and incorporated herein by this reference. 

        Appraiser:
As defined in Article XXXIV. 

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

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

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

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

7

 

        Business
Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which 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. 

        Buyer's
Excess Transaction Costs: Buyer's Transaction Costs in excess of the Commitment Fee Deposit. 

        Buyer's
Transaction Costs: As defined in the Contract of Acquisition. 

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

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

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

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

        Close
of Escrow: As defined in Article XXXV. 

        Closing
Date: As defined in the Contract of Acquisition. 

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

        Collateral:
As defined in Section 16.10.1. 

        Commencement
Date: The Closing Date. 

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

8

 

        Commitment
Fee Deposit: As defined in the Contract of Acquisition. 

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

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

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

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

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

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

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

        Contract
of Acquisition: The agreement of even date herewith by and between Lessor and Seller relative to the acquisition by Lessor of the Leased Property of the Grand Court Facility. 

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

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

9

 

        County:
With respect to each Facility, the County or Township in which the Leased Property of such Facility is located. 

        CPT
Increase: The percentage increase (rounded to two (2) decimal places), if any, in (i) the Cost of Living Index published for the month which is one (1) month
prior to the commencement of the applicable Lease Year, over (ii) the Cost of Living Index published for the month which is one (I) month prior to the commencement of the immediately
prior Lease Year. 

        CPR:
As defined in Article XLIV. 

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

        Environmental
Costs: As defined in Article XXXVII. 

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

        Escrow:
As defined in Article XXXV. 

        Escrow
Holder: As defined in Article XXXV. 

        Event
of Default: As defined in Article XVI. 

        Extended
Term(s): As defined in Article XIX. 

        Facility:
Each facility being (and to be) operated or proposed to be operated on the Leased Property, together with any Capital Additions, as described on Exhibit B-1
attached hereto and incorporated herein by this reference. 

        Facility
Mortgage: As defined in Article XIII. 

        Facility
Mortgagee: As defined in Article XIII. 

        Facility
Operating Deficiency: With respect to any Facility, a deficiency in the conduct of the operation of such Facility which, in the reasonable determination of Lessor, if not
corrected within a reasonable time, would have the likely effect of jeopardizing such Facility's licensure or certification under government reimbursement programs 

        Fair
Market Rental: With respect to each Facility, the fair market rental value of the Leased Property and all Capital Additions (other than Capital Additions financed solely by Lessee)
of such Facility, or applicable portion(s) thereof (including any appropriate periodic escalations therein), determined in accordance with the appraisal procedures set forth in Article XXXIV
and this definition assuming the
same is exposed on the open market at the time of the appraisal, but specifically excluding brokerage commissions and other Lessor payments that do not directly inure to the benefit of lessees. 

        Fair
Market Value: With respect to each Facility, the fair market value of the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, determined in
accordance with the appraisal procedures set forth in Article XXXIV and this definition. Fair 

10

 

Market
Value shall be the higher value obtained by assuming that the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, is either unencumbered by this Lease
or encumbered by this Lease. Fair Market Value shall also be the higher value obtained by valuing the Leased Property and all Capital Additions (other than Capital Additions financed solely by Lessee)
of such Facility, or applicable portion(s) thereof, for their highest and best use or as a fully-permitted Facility operated in accordance with the provisions of this Lease. In addition, the following
specific matters shall be factored in or out, as appropriate, in determining Fair Market Value: 

          (i)  The
negative value of (a) any deferred maintenance or other items of repair or replacement of the Leased Property or any Capital Additions of such Facility,
(b) any then current or prior licensure or certification violations and/or admissions holds and (c) any other breach or failure of Lessee to perform or observe its obligations hereunder
shall not be taken into account; rather, the Leased Property and all Capital Additions of such Facility shall be deemed to be in the condition required by this Lease (i.e., good order and repair) and
Lessee shall at all times be deemed to have operated the Facility in compliance with and to have performed all obligations of the Lessee under this Lease. 

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

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

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

        Fixed
Term: The period of time commencing on the Commencement Date and ending at 11:59 p.m. Los Angeles time on the expiration of the fifteenth (15th) Lease Year. 

        Fixtures:
With respect to each Facility, the Fixtures (as defined in Article I) of such Facility. 

        GAAP:
Generally accepted accounting principles. 

        Grand
Court Facility: The Facility located at 262 East Brown Road, Mesa, Arizona commonly known as "Grant Court Mesa." 

        Guarantors:
Collectively, The Ensign Group, Inc., and any present or future guarantor of Lessee's obligations pursuant to this Lease (each individually, a "Guarantor"). 

11

 

        Guaranty:
The Guaranty of even date herewith executed by each Guarantor and any future written guaranty of Lessee's obligations hereunder executed by a Guarantor. 

        Handling:
As defined in Article XXXVII. 

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

        HCPI:
Health Care Property Investors, Inc., a Maryland corporation. 

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

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

        Intangible
Property: All documents, chattel paper, instruments, contract rights (other than the right to payment for services), securities accounts, general intangibles, investment
property, securities entitlements, commercial tort claims, causes of action (except causes of action relating to accounts or the proceeds thereof), now owned or hereafter acquired by Lessee (including
any right to any refund of any Impositions) arising from or in connection with Lessee's operation or use of the Leased Property and all Capital Additions; all licenses and permits now owned or
hereinafter acquired by Lessee, which are necessary or desirable for Lessee's use of the Leased Property and all Capital Additions for the Primary Intended Use, including, if applicable, any
certificate of need or similar certificate; the right to use any trade name or other name associated with any Facility; and any and all third-party provider agreements (including Medicare and
Medicaid). 

12

 

        Land:
As defined in Article I, or, with respect to each Facility, the Land (as defined in Article I) relating to such Facility. 

        Lease:
As defined in the preamble. 

        Lease
Rate: 10.8%. 

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

        Leased
Improvements: As defined in Article I, or, with respect to each Facility, the Leased Improvements (as defined in Article I) of such Facility 

        Leased
Property: As defined in Article I, or, with respect to each Facility, the Leased Property (as defined in Article I) of such Facility. 

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

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

        Lessee:
As defined in the preamble. 

        Lessee's
Personal Property: With respect to each Facility, the Personal Property other than Lessor's Personal Property allocable or relating to such Facility. 

        Lessor:
As defined in the preamble. 

        Lessor's
Personal Property: As defined in Article I, or, with respect to each Facility, Lessor's Personal Property (as defined in Article l) allocable or relating to such
Facility. 

        Letter
of Credit Date: As defined in Section 21.2. 

        Master
Sublease: With respect to any Facility, a Master Sublease (as defined in Article XXIV) of such Facility. 

        Minimum
Rent: As defined in Article III. 

13

 

        Minimum
Repurchase Price: With respect to each Facility at any given time, the greater of (a) an amount equal to ten (10) times the then-current annual Rent for
such Facility, or (b) the sum of (i) the Allocated Initial Investment with respect to such Facility, and (ii) any Capital Addition Costs funded by Lessor with respect to such
Facility. 

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

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

        Mold
Inspector: An industrial hygienist certified by the American Board of Industrial Hygienists ("C1H") or an otherwise qualified mold consultant selected by or otherwise acceptable to
Lessor. 

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

        New
Lease: As defined in Section 31.2.1. 

        New
Lease Effective Date: As defined in Section 31.2.1. 

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

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

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

        Opening
Deposit: As defined in Article XXXV. 

        Outside
Closing Date: As defined in Article XXXV. 

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

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

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

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

14

  

        Primary
Intended Use: With respect to each Facility, the use set forth under the heading "Primary Intended Use" set forth on Exhibit B-1 with respect to such Facility
and such other uses necessary or incidental to such use. 

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

        Put
Event: With respect to any Facility, an Event of Default hereunder pursuant to any of Sections 16.1 (a) (arising out of any material default under any such other lease
or other agreement or instrument), 16.1(b), 16.1(c), 16.1(e) (arising out of (i) a breach or default by Lessee during the Term of any of its obligations or covenants pursuant to
Sections 7.2.1, 7.2.2, 7.2.3, 7.2.5, 7.4, 37.1 or 37.2 relating to such Facility, or (ii) any other failure of Lessee to obtain and maintain all material licenses, permits and other
authorizations to use and operate such Facility for its Primary Intended Use in accordance with all Legal Requirements), 16.1(j) (relating to such Facility), 16.1(k) (arising out of a breach of any
material representation or warranty of Lessee or any Guarantor in any such document relating to such Facility), 16.1(1) (relating to such Facility) and/or 16.1(o) (relating to such Facility).
Notwithstanding that Lessor and Lessee have specifically defined a "Put Event" for the limited purpose of setting forth the circumstances under which Lessor shall be entitled to the remedy set forth
in Section 16.5, in no event shall this definition derogate the materiality of any other Event of Default (including any Event of Default which does not constitute a Put Event) or otherwise
limit Lessor's rights and remedies upon the occurrence of any such Event of Default, including those rights and remedies set forth in Sections 16.2, 16.3, 16.4, 16.8, 16.9 and/or 16.10. 

        Related
Rights: With respect to each Facility, the Related Rights (as defined in Article I) of such Facility. 

        Removable
Personal Property: Any item of Lessee's Personal Property which (i) does not constitute a replacement, modification, alteration or substitution of or to any of Lessor's
Personal Property (whether or not an upgrade thereof) or (ii) is not required in order to operate any Facility in compliance with all licensure and certification requirements and all other
Legal Requirements and Insurance Requirements for the Primary Intended Use, or either; provided, however, that "Removable Personal Property" shall specifically not include any motorized vehicle used
by Lessee to transport residents/patients. 

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

        Replacement
Reserve. As defined in Section 9.3. 

        Reserve
Amount: With respect to each Facility, the amount set forth in or determined under the heading "Reserve Amount" on Exhibit B-1 with respect to such Facility. 

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

        SEC:
Securities and Exchange Commission. 

15

 

        Seller:
As defined in the Contract of Acquisition. 

        Separated
Property: As defined in Section 31.2. 

        State:
With respect to each Facility, the State or Commonwealth in which the Leased Property for such Facility is located. 

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

        Supplemental
Rent: As defined in Article III. 

        Target
Property: As defined in Section 35.4. 

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

        Transfer:
As defined in Article XXIV. 

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

ARTICLE III.  

        3.1    Minimum Rent.    Lessee shall pay to Lessor in lawful money of the United States of America which shall be
legal tender for the payment of public and private debts, without offset or deduction, the amounts set forth in or determined by Exhibit B-2 attached hereto and incorporated herein
as Minimum Rent for each Facility during the Term. Payments of Minimum Rent shall be made in advance in equal monthly installments on or before the first (1st) day of each calendar month from and
after the Commencement Date via delivery of Lessee's check therefore to Lessor at the address for notices specified in Article XXVII or such other address or Person as Lessor may designate from
time to time in writing. 

        3.2    Additional Charges.    In addition to the Minimum Rent, (i) Lessee shall also pay and discharge as and
when due and payable all other amounts, liabilities, obligations and Impositions which Lessee assumes or agrees to pay under this Lease; and (ii) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (i) above, Lessee shall also promptly pay and discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses (i) and (ii) above being referred to herein collectively as the "Additional Charges"), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of non-payment of the Additional Charges as
in the case of non-payment of the Minimum Rent. 

        3.3    Late Payment of Rent.    

        (a)   LESSEE
HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY LESSEE TO LESSOR OF RENT WILL CAUSE LESSOR TO INCUR COSTS NOT CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH IS
PRESENTLY ANTICIPATED TO BE EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS MAY INCLUDE PROCESSING AND ACCOUNTING CHARGES AND LATE CHARGES WHICH MAY BE IMPOSED ON LESSOR BY THE TERMS OF ANY LOAN
AGREEMENT AND OTHER EXPENSES OF A SIMILAR OR DISSIMILAR NATURE. ACCORDINGLY, IF ANY INSTALLMENT OF RENT OTHER THAN ADDITIONAL CHARGES PAYABLE TO A PERSON OTHER THAN LESSOR SHALL NOT BE 

16

 

PAID
WITHIN THREE (3) BUSINESS DAYS AFTER ITS DUE DATE, LESSEE WILL PAY LESSOR ON DEMAND A LATE CHARGE EQUAL TO THE LESSER OF (I) FIVE PERCENT (5%) OF THE AMOUNT OF SUCH INSTALLMENT OR
(II) THE MAXIMUM AMOUNT PERMITTED BY LAW. THE PARTIES AGREE THAT THIS LATE CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COSTS THAT LESSOR WILL INCUR BY REASON OF LATE PAYMENT BY
LESSEE. THE PARTIES FURTHER AGREE THAT SUCH LATE CHARGE IS RENT AND NOT INTEREST AND SUCH ASSESSMENT DOES NOT CONSTITUTE A LENDER OR BORROWER/CREDITOR RELATIONSHIP BETWEEN LESSOR AND LESSEE. IN
ADDITION, THE AMOUNT UNPAID, INCLUDING ANY LATE CHARGES, SHALL BEAR INTEREST AT THE OVERDUE RATE COMPOUNDED MONTHLY FROM THE DUE DATE OF SUCH INSTALLMENT TO THE DATE OF PAYMENT THEREOF, AND LESSEE
SHALL PAY SUCH INTEREST TO LESSOR ON DEMAND. THE PAYMENT OF SUCH LATE CHARGE OR SUCH INTEREST SHALL NOT CONSTITUTE WAIVER OF, NOR EXCUSE OR CURE, ANY DEFAULT UNDER THIS LEASE, NOR PREVENT LESSOR FROM
EXERCISING ANY OTHER RIGHTS AND REMEDIES AVAILABLE TO LESSOR. 

        Lessor's
Initials:                         /s/
EJH                         

        Lessee's
Initials:                         /s/
CRC                         

        (b)   If
Lessee shall, during any six (6) month period, be more than five (5) Business Days delinquent in the payment of any Rent due and payable by Lessee
hereunder on three (3) or more occasions then, notwithstanding anything herein to the contrary, Lessor may, by written notice to Lessee, elect to require Lessee to pay all Minimum Rent payable
hereunder quarterly in advance. Such right of Lessor shall be in addition to and not in lieu of any other right of remedy available to Lessor hereunder or at law on account of an Event of Default by
Lessee hereunder. 

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

ARTICLE IV.  

        4.1    Impositions.    

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

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

        4.1.3 Any
refund due from any taxing authority in respect of any Imposition paid by Lessee shall be paid over to or retained by Lessee if no Event of Default shall have
occurred hereunder and be 

17

 

continuing.
Any other refund shall be paid over to or retained by Lessor and applied to the payment of Lessee's obligations under this Lease in such order of priority as Lessor shall determine. 

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

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

        4.1.6 Lessor
shall give prompt notice to Lessee of all Impositions payable by Lessee hereunder of which Lessor has knowledge, but Lessor's failure to give any such notice
shall in no way diminish Lessee's obligations hereunder to pay such Impositions; provided, however, that Lessee shall not be in default of its obligation hereunder nor shall Lessee be responsible for
any late fees, penalties or interest imposed or charged by the taxing authority if Lessor had actual knowledge of notice of such Impositions and any such Impositions are not timely paid as a result of
Lessor's failure to timely provide such notice to Lessee and Lessee does not have actual knowledge of the obligation to pay the same. 

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

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

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

        4.4    Impound Account.    If Lessee, on more than one (1) occasion during any twenty-four
(24) consecutive month period, does not timely make payment of any Impositions required pursuant to Section 4.1 (whether or not the same constitutes an Event of Default), Lessor may, at
its option to be exercised by thirty (30) days' written notice to Lessee, require Lessee to deposit, at the time of any payment of Minimum Rent, an amount equal to one-twelfth of
Lessee's estimated annual taxes, of 

18

 

every
kind and nature, required pursuant to Section 4.1 plus one-twelfth of Lessee's estimated annual insurance premiums required pursuant to Section 4.3 into an impound
account as directed by Lessor. Such amounts shall be applied to the payment of the obligations in respect of which said amounts were deposited in such order of priority as Lessor shall determine, on
or before the respective dates on which the same or any of them would become delinquent. The cost of administering such impound account shall be paid by Lessee. Nothing in this Section 4.4
shall be deemed to affect any right or remedy of Lessor hereunder. 

        4.5    Tax Service.    If requested by Lessor, Lessee shall, at its sole cost and expense, cause to be furnished to
Lessor a tax reporting service, to be designated by Lessor, covering the Leased Property and all Capital Additions. 

ARTICLE V.  

        5.1    No Termination, Abatement, etc.    Except as otherwise specifically provided in this Lease, Lessee shall remain
bound by this Lease in accordance with its terms and shall not seek or be entitled to any abatement, deduction, deferment or reduction of Rent, or set-off against the Rent. The respective
obligations of Lessor and Lessee shall not be affected by reason of (i) any damage to or destruction of the Leased Property, any Capital Additions and/or any part(s) thereof from whatever cause
and/or any Condemnation of the Leased Property, any Capital Additions and/or any part(s) thereof; (ii) the lawful or unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, any Capital Additions and/or any part(s) thereof, or the interference with such use by any Person or by reason of eviction by paramount title; (iii) any claim that Lessee has or might
have against Lessor by reason of any default or breach of any warranty by Lessor hereunder or under any other agreement between Lessor and Lessee or to which Lessor and Lessee are parties;
(iv) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (v) for any other cause, whether similar or dissimilar to any of the foregoing, other than a discharge of Lessee from any such obligations as a matter of law. Lessee hereby specifically
waives all rights arising from any occurrence whatsoever which may now or hereafter be conferred upon it by law (a) to modify, surrender or terminate this Lease or quit or surrender the Leased
Property, any Capital Additions and/or any part(s) thereof; or (b) which may entitle Lessee to any abatement, reduction,, suspension or deferment of the Rent or
other sums payable by Lessee hereunder, except as otherwise specifically provided in this Lease. The obligations of Lessor and Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of an Event of Default. 

        5.2    Termination with Respect to Fewer than All of the Facilities.    Wherever in this Lease the action of
terminating the Lease with respect to a Facility (or action of similar import) is discussed, such action shall mean the termination of Lessee's rights in and to the Leased Property relating to such
Facility. Notwithstanding anything in this Lease to the contrary, if this Lease shall be terminated by Lessor or Lessee pursuant to rights granted hereunder with respect to any Facility, such
termination shall not affect the applicable Term of this Lease with respect to the balance of the Facilities not so terminated by Lessor, and this Lease shall continue in full force and effect with
respect to each other such Facility, except that the total Minimum Rent payable hereunder shall be reduced by the amount of Allocated Minimum Rent with respect to such Facility as to which this Lease
has so terminated, subject, however, to Lessor's right, in the event of a termination because of an Event of Default, to recover damages with respect to any such Facility as to which this Lease has
been terminated as provided in Article XVI. 

19

 

ARTICLE VI.  

        6.1    Ownership of the Leased Property.    Lessee acknowledges that the Leased Property is the property of Lessor and
that Lessee has only the right to the exclusive possession and use of the Leased Property upon the terms and conditions of this Lease. Upon the expiration or earlier termination of this Lease with
respect to any Facility Lessee shall, at its expense, repair and restore the Leased Property relating to such Facility to the condition required by Section 9.14. 

        6.2    Personal Property.    During the Term, Lessee shall, as necessary and at its expense, install, affix or
assemble or place on any parcels of the Land or in any of the Leased Improvements, any items of Lessee's Personal Property and replacements thereof which shall be the property of and owned by Lessee.
Except as provided in Sections 6.3, 6.4 and 16.10, Lessor shall have no rights to Lessee's Personal Property. With respect to each Facility, Lessee shall provide and maintain during the entire
Term applicable to such Facility all Personal Property necessary in order to operate such Facility in compliance with all licensure and certification requirements, all Legal Requirements and all
Insurance Requirements and otherwise in accordance with customary practice in the industry for the Primary Intended Use. 

        6.3    Transfer of Personal Property and Capital Additions to Lessor.    Upon the expiration or earlier termination of
this Lease with respect to a Facility, all Capital Additions not owned by Lessor and Lessee's Personal Property (including all motor vehicles used to transport residents/patients) relating to such
Facility shall become the property of Lessor, free of any encumbrance, and Lessee shall execute all documents and take any actions reasonably necessary to evidence such ownership and discharge any
encumbrance; provided, however, that subject to Section 6.4 below, Lessee shall be entitled to remove all Removable Personal Property from the Leased Property at the end of the Term for such
Facility so long as Lessee repairs any damage to the Leased Property of such Facility caused by such removal. Notwithstanding anything to the contrary in this Lease, upon the expiration or earlier
termination of this Lease with respect to any Facility, Lessor shall not be obligated to reimburse Lessee for any replacements, rebuildings, alterations, additions, substitutions, and/or improvements
that are surrendered as part of or with the Leased Property or Capital Additions of such Facility. 

        6.4    Option to Purchase Removable Personal Property.    Notwithstanding anything to the contrary in this Lease,
Lessor shall have the option, exercisable by written notice to the Lessee, not less than thirty (30) days prior to the end of the Term or within thirty (30) days after the earlier
termination of this Lease with respect to each Facility, to purchase all or any portion of the Removable Personal Property relating to such Facility at the greater of (a) then book value of
each item of such Removable Personal Property as reflected on Lessee's books and records maintained in accordance with GAAP, or if no book value, then for an amount equal to the then unamortized
original cost thereof or (b) the then outstanding principal balance of any purchase money debt secured by and properly allocable to such Removable Personal Property. The foregoing amortization
rate, if applicable, shall be in accordance with the useful life of the particular item of Removable Personal Property as reasonably determined by Lessee in accordance with GAAP. Within ten
(10) days after Lessor's exercise of its option to purchase any Removable Personal Property Lessee shall notify Lessor in writing of Lessee's determination of the purchase price therefor based
upon the foregoing formula. Upon receipt of Lessee's purchase price notice, Lessor shall have five (5) days within which to cancel and rescind in writing to Lessee Lessor's exercise of its
purchase option with respect to all or any portion of the Removable Personal Property. If Lessor does not so elect to cancel and terminate such purchase option, Lessor shall proceed to purchase those
items of Removable Personal Property as to which Lessor has exercised its purchase option. Upon payment of the purchase price therefor, Lessee shall convey such items of Removable Personal Property
free of any encumbrance and shall execute all documents and take any other actions reasonably necessary to evidence the transfer and conveyance of ownership of the Removable Personal Property to
Lessor and the discharge of any encumbrance thereon. 

20

 

ARTICLE VII.  

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

        7.2    Use of the Leased Property.    

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

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

        7.2.3 Lessee
shall operate continuously the entire Leased Property and all Capital Additions of each Facility in accordance with the Primary Intended Use of such Facility.
Lessee shall devote the entirety of each Facility and all Capital Additions to the Primary Intended Use, except for areas reasonably required for office, storage space or ancillary service uses
incidental to the Primary Intended Use. Lessee shall not modify the services offered or take any other action (e.g., removing patients or residents from a Facility or directing patients or residents,
or prospective patients or residents, to another facility) which would materially reduce gross revenues or the fair market value of any Facility. 

        7.2.4 Lessee
shall conduct its business at each Facility in conformity with the customary standards of patient or resident care practice provided in similar
good-quality facilities in the State. Without limiting the generality of the foregoing, Lessee shall at all times exercise commercially reasonable efforts to maintain an adequate staff for
the service of its residents and/or patients in compliance with all Legal Requirements and otherwise consistent with such standards of patient or resident care practice customarily provided in other
similar facilities operated by Lessee. 

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

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

21

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

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

        7.4.1 [intentionally
omitted]. 

        7.4.2 For
a period of one (1) year following the Term, neither Lessee nor any of its Affiliates shall, without the prior written consent of Lessor, which consent may
be given or withheld in Lessor's sole discretion, solicit for employment any management or supervisory personnel working on or in connection with the Facility; provided, however, that the foregoing
shall not prohibit Lessee from soliciting for employment and/or otherwise employing any such management or supervisory personnel during such one (1) year period, if such management or
supervisory personnel has not been working on or in connection with the Facility for ninety (90) or more consecutive days. As used herein, "solicit" shall not include an advertisement for
employment opportunities placed by Lessee in a newspaper or other periodical of general circulation. 

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

ARTICLE VIII.  

        8.1    Compliance with Legal and Insurance Requirements, Instruments, etc.    Subject to Article XII regarding
permitted contests, Lessee, at its expense, shall promptly (i) comply with all Legal Requirements and Insurance Requirements regarding the use, operation, maintenance, repair and restoration of
the Leased Property, Lessee's Personal Property and all Capital Additions whether or not compliance therewith may require structural changes in any of the Leased Improvements or any Capital Additions
or interfere with the use and enjoyment of the Leased Property and (ii) procure, maintain and comply with all licenses, certificates of need, provider agreements and other authorizations
required for the use of the Leased Property, Lessee's Personal Property and all Capital Additions for the applicable Primary Intended Use and any other use of the Leased Property, Lessee's Personal 

22

 

Property
and all Capital Additions then being made, and for the proper erection, installation, operation and maintenance of the Leased Property, Lessee's Personal Property and all Capital Additions.
Lessor may, but shall not be obligated to, enter upon the Leased Property and all Capital Additions and take such actions and incur such costs and expenses to effect such compliance as it deems
advisable to protect its interest in the Leased Property and all Capital Additions, and Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in connection with such actions.
Lessee covenants and agrees that the Leased Property, Lessee's Personal Property and all Capital Additions shall not be used for any unlawful purpose. 

ARTICLE IX.  

        9.1    Maintenance and Repair.    

        9.1.1 Lessee,
at its expense, shall maintain the Leased Property, and every portion thereof, Lessee's Personal Property and all Capital Additions, and all private roadways,
sidewalks and curbs appurtenant to the Leased Property, and which are under Lessee's control in good order and repair whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of the Leased Property, Lessee's Personal Property and all Capital Additions, and, with reasonable promptness, make all necessary and appropriate repairs thereto of
every kind and nature, including those necessary to comply with changes in any Legal Requirements, whether interior or exterior, structural or non-structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior to the Commencement Date. All repairs shall be at least equivalent in quality to the original work. Lessee will not take or
omit to take any action the taking or omission of which might materially impair the value or the usefulness of the Leased Property, any Capital Additions, or any part(s) thereof for the Primary
Intended Use. 

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

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

        9.1.4 Unless
Lessor shall convey any of the Leased Property to Lessee pursuant to the provisions of this Lease, Lessee shall, upon the expiration or earlier termination of
the Term, vacate and surrender the Leased Property, Lessee's Personal Property, other than the Removable Personal Property, which is subject to the option granted to Lessor pursuant to
Section 6.4, and all Capital Additions to Lessor in the condition in which the Leased Property was originally received from Lessor and Lessee's Personal Property and any Capital Additions were
originally introduced to each Facility, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Lease and except for ordinary wear and tear. 

23

 

        9.2    Encroachments, Restrictions, Mineral Leases, etc.    If any of the Leased Improvements or Capital Additions
shall, at any time, encroach upon any property, street or right-of-way, or shall violate any restrictive covenant or other agreement affecting the Leased Property, any Capital
Additions or any parts thereof, or shall impair the rights of others under any easement or right-of-way to which the Leased Property is subject, or the use of the Leased
Property or any Capital Additions is impaired, limited or interfered with by reason of the exercise of the right of surface entry or any other provision of a lease or reservation of any oil, gas,
water or other minerals, then promptly upon the request of Lessor or any Person affected by any such encroachment, violation or impairment, Lessee, at its sole cost and expense, but subject to its
right to contest the existence of any such encroachment, violation or impairment, shall protect, indemnify, save harmless and defend Lessor from and against all losses, liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys', consultants' and experts' fees and expenses) based on or arising by reason of any such encroachment,
violation or impairment. In the event of an adverse final determination with respect to any such encroachment, violation or impairment, Lessee shall either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation or impairment, whether the same shall affect Lessor or Lessee; or (ii) make such
changes in the Leased Improvements and any Capital Addition, and take such other actions, as Lessee in the good faith exercise of its judgment deems reasonably practicable, to remove such encroachment
or to end such violation or impairment, including, if necessary, the alteration of any of the Leased Improvements or any Capital Addition, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements and any Capital Addition for the Primary Intended Use substantially in the manner and to the extent the Leased Improvements and
Capital Additions were operated prior to the assertion of such encroachment, violation or impairment. Lessee's obligations under this Section 9.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or other insurance and, to the extent the recovery thereof is not necessary to compensate Lessor for any damages incurred
by any such encroachment, violation or impairment, Lessee shall be entitled to a credit for any sums recovered by Lessor under any such policy of title or other insurance. 

        9.3    Replacement Reserve.    

        9.3.1 As
additional consideration for Lessor's lease of the Leased Property to Lessee hereunder, Lessee shall establish and maintain at all times during the Term a repair
and replacement reserve with respect to each Facility (with respect to each Facility, a "Replacement Reserve") with Lessor for Capital Repairs to the Facility as provided in this Section 9.3. 

        9.3.2 Commencing
on the Commencement Date and on the first (1st) day of each month throughout the Term thereafter, Lessee shall deposit with Lessor into the
Replacement Reserve for each Facility an amount equal to one-twelfth (1/12th) of the annual Reserve Amount for such Facility. So long as no Event of Default or an event or
circumstance has occurred which with notice or passage of time, or both, would constitute an Event of Default hereunder has occurred, Lessor shall, to the extent funds are available for such purpose
in such Replacement Reserve for a Facility, disburse to Lessee the Capital Repair Costs incurred and paid by Lessee in performing Capital Repairs for such Facility within fifteen (15) days
following: (a) receipt by Lessor of a written request from Lessee for disbursement from the Replacement Reserve for such Facility and a certification by Lessee in form and substance
satisfactory to Lessor that the applicable item of Capital Repair for such Facility has been completed; (b) delivery to Lessor of paid invoices, receipts or other evidence satisfactory to
Lessor, verifying the Capital Repair Costs for such Capital Repairs; and (c) delivery to Lessor of affidavits, lien waivers or other evidence satisfactory to Lessor showing that all
materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Leased Property of such
Facility have been paid all amounts due for labor and materials furnished to the Leased Property of such Facility. Lessor shall not be 

24

 

required
to make advances from any Replacement Reserve more frequently than once in any thirty (30) day period. Amounts held in the Replacement Reserve for a Facility may not be used to pay for
or reimburse Lessee for Capital Repair Costs for any other Facility. In addition, if a Facility is comprised of a mixed use or contains multiple buildings for which the applicable Reserve Amount is
calculated or determined separately, the amount held in such Replacement Reserve for such Facility and allocated to a building or particular component of the Leased Property of a Facility may not be
used to pay for or reimburse Lessee for Capital Repair Costs for any other component of such Facility. 

        9.3.3 Lessor
may, at Lessee's expense, make or cause to be made during the Term an annual inspection of the Leased Property of each Facility to determine the need, as
determined by Lessor, for further Capital Repairs of the Leased Property of such Facility to maintain the same in accordance with the requirements of this Lease. If such inspection reveals that
further Capital Repairs of the Leased Property of such Facility are reasonably required, Lessor may provide Lessee with a written description of the required Capital Repairs of such Facility and
Lessee shall complete such Capital Repairs of such Facility to the satisfaction of Lessor within ninety (90) days after the receipt of such description from Lessor, or such later date as may be
approved by Lessor. 

        9.3.4 The
Replacement Reserve shall not be or be deemed to be escrow or trust funds, but, at Lessor's option and in Lessor's discretion, may either be held in a separate
account or be commingled by Lessor with the general funds of Lessor. Lessee shall not be entitled to any interest on any funds contained in any Replacement Reserve. The Replacement Reserves are solely
for the protection of Lessor and the Leased Property and entail no responsibility on Lessor's part beyond the payment of the respective items for which they are held following receipt of bills,
invoices or statements therefor in accordance with the terms of this Section 9.3 and beyond the allowing of due credit for the sums actually received. Upon assignment of this Lease by Lessor,
any funds in the Replacement Reserve shall be turned over to the assignee and any responsibility of Lessor, as assignor, with respect thereto shall terminate. 

        9.3.5 Notwithstanding
anything to the contrary in this Lease, if, upon the expiration of any Lease Year, any funds remain in any Replacement Reserve (with respect to each
Facility, the "Carryover Reserve Funds"), such Carryover Reserve Funds with respect to such Facility shall remain in the applicable Replacement Reserve for one additional Lease Year. If, upon the
expiration of such subsequent Lease Year, such Carryover Reserve Funds still remain in the applicable Replacement Reserve, then the same shall be paid over to Lessor as an Additional Charge and Rent
under this Lease and shall be in addition to Minimum Rent and all other Additional Charges payable hereunder; provided, however, that such Carryover Reserve Funds may remain in the applicable
Replacement Reserve for one additional Lease Year if Lessee submits a written request to Lessor detailing specific major or long-term capital improvements and Lessor, in its reasonable
discretion, approves such request. If any funds remain in any Replacement Reserve upon the expiration or earlier termination of this Lease, the same shall similarly be paid over to Lessor as an
Additional Charge and Rent under this Lease and shall be in addition to Minimum Rent and all other Additional Charges payable hereunder. 

ARTICLE X.  

        10.1    Construction of Capital Additions and Other Alterations to the Leased Property.    Without the prior written
consent of Lessor, which consent may be given or withheld in Lessor's sole and absolute discretion, Lessee shall not (a) make any Capital Additions on or structural alterations to the Leased
Property, (b) enlarge or reduce the size of any Facility or otherwise materially alter or affect (other than replacement thereof) any main Facility systems, including any main plumbing,
electrical or heating, ventilating and air conditioning systems of any Facility and/or (c) make any Capital Additions or other alterations which would tie in or connect with any improvements on
property adjacent to the Land. Lessee may, without Lessor's prior written consent, make any alterations, additions, or improvements (collectively, "alterations") to the Leased Property if such
alterations are not of the type described in 

25

 

either
clause (a), (b) or (c) above, so long as in each case: (i) the same do not (A) decrease the value of the Leased Property, (B) affect the exterior
appearance of the Leased Property, or (C) adversely affect the structural components of the Leased Improvements or the main electrical, mechanical, plumbing or ventilating and air conditioning
systems for any Facility, (ii) the same are consistent in terms of style, quality and workmanship to the original Leased Improvements and Fixtures, (iii) the same are constructed and
performed in accordance with the provisions of Section 10.2 below and (iv) the cost thereof does not exceed, in the aggregate, $50,000.00 for any twelve (12) month period with
respect to any single Facility. Any other alterations (i.e., other than alterations described in clauses (a), (b) or (c) above, and other than alterations which meet the foregoing
requirements of clauses (i), (ii), (iii) and (iv) above) shall be subject to Lessor's prior written consent, which consent shall not be unreasonably withheld. To the extent Lessor's
prior written consent shall be required in connection with any alterations or Capital Additions, Lessor may impose such conditions thereon in connection with its approval thereof as Lessor deems
appropriate. Notwithstanding the foregoing, Lessor agrees that painting, landscaping, and replacement of floor, wall and window coverings shall be deemed alterations which do not require Lessor's
consent, regardless of the cost thereof, so long as the same meet the requirements of clauses (ii) and (iii) above. 

        10.2    Construction Requirements for all Alterations.    Whether or not Lessor's review and approval is required, for
all Capital Additions and other alterations of the Leased Property, the following shall apply (except to the extent Lessor reasonably determines that, because of the nature or extent of the
alteration, any such requirement is not applicable): 

        (a)   Such
construction shall not commence until Lessee shall have procured and paid for all municipal and other governmental permits and authorizations required therefor, and
Lessor shall join in the application for such permits or authorizations whenever such action is necessary; provided, however, that (i) any such joinder shall be at no cost or expense to Lessor;
and (ii) any plans required to be filed in connection with any such application which require the approval of Lessor as hereinabove provided shall have been so approved by Lessor; 

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

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

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

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

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

26

 

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

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

ARTICLE XI.  

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

ARTICLE XII.  

        12.1    Permitted Contests.    Lessee, upon prior written notice to Lessor, on its own or in Lessor's name, at
Lessee's expense, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any licensure or
certification decision, Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim; subject, however, to the further requirement that (i) in the
case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the commencement and continuation of such proceedings shall suspend the collection thereof from Lessor and from the
Leased Property or any Capital Additions; (ii) neither the Leased Property nor any Capital Additions, the Rent therefrom nor any part or interest in either thereof would be in any danger of
being sold, forfeited, attached or lost pending the outcome of such proceedings; (iii) in the case of a Legal Requirement, neither Lessor nor Lessee would be in any danger of civil or criminal
liability for failure to comply therewith pending the outcome of such proceedings; (iv) if any such contest shall involve a sum of money or potential loss in excess of Fifty Thousand Dollars
($50,000), upon request of Lessor, Lessee shall deliver to Lessor and its counsel an opinion of legal counsel reasonably acceptable to Lessor to the effect set forth in clauses (i), (ii) and
(iii) above, to the extent applicable; (v) in the case of a Legal Requirement, Imposition, lien, encumbrance or charge, Lessee shall give such reasonable security as may be required by
Lessor to insure ultimate payment of the same and to prevent any sale or forfeiture of the Leased Property or any Capital Additions or the Rent by reason of such nonpayment or noncompliance; and
(vi) in the case of an Insurance Requirement, the coverage required by Article XIII shall be maintained. If any such contest is finally resolved against Lessor or Lessee, Lessee shall
promptly pay the amount required to be paid, together with all interest and penalties accrued thereon, or comply with the applicable Legal Requirement or Insurance Requirement. Lessor, at Lessee's
expense, shall execute and deliver to Lessee such authorizations and other documents as may reasonably be required in any such contest, and, if reasonably requested by Lessee or if Lessor so desires,
Lessor shall join as a party therein. The provisions of this Article XII shall not be construed to permit Lessee to contest the payment of Rent or any other amount payable by Lessee to Lessor
hereunder. Lessee shall indemnify, defend, protect and save Lessor harmless from and against any 

27

 

liability,
cost or expense of any kind that may be imposed upon Lessor in connection with any such contest and any loss resulting therefrom. 

ARTICLE XIII.  

        13.1    General Insurance Requirements.    During the Term, Lessee shall at all times keep the Leased Property, and
all property located in or on the Leased Property, including all Capital Additions, the Fixtures and the Personal Property, insured with the kinds and amounts of insurance described below. Each
element of the insurance described in this Article shall be maintained with respect to the Leased Property of each Facility and the Personal Property and operations thereon. This insurance shall be
written by companies authorized to do insurance business in the State in which the Leased Property is located. All liability type policies must name Lessor as an "additional insured." All property,
loss of rental and business interruption type policies shall name Lessor as "loss payee." Losses shall be payable to Lessor and/or Lessee as provided in Article XIV. In addition, the policies,
as appropriate, shall name as an "additional insured" or "loss payee" the holder of any mortgage, deed of trust or other security
agreement ("Facility Mortgagee") securing any indebtedness or any other Encumbrance placed on the Leased Property in accordance with the provisions of Article XXXVI ("Facility Mortgage") by way
of a standard form of mortgagee's loss payable endorsement. Any loss adjustment shall require the written consent of Lessor, Lessee, and each Facility Mortgagee. Evidence of insurance shall be
deposited with Lessor and, if requested, with any Facility Mortgagee(s). If any provision of any Facility Mortgage requires deposits of insurance to be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required and Lessor shall transfer such amounts to each Facility Mortgagee, or, pursuant to written direction by Lessor, Lessee shall make such deposits
directly with such Facility Mortgagee. The policies shall insure against the following risks with respect to each Facility: 

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

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

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

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

        1.3.1.5 Claims
for bodily injury or property damage under a policy of commercial general liability insurance with amounts not less than One Million and No/100 Dollars
($1,000,000.00) combined single limit and in the annual aggregate, including blanket contractual liability (including Lessee's indemnification obligations under this Lease), in each case with respect
to each Facility; and 

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

28

 

        13.1.7 If
and to the extent such coverage is commercially reasonably available, as reasonably determined by Lessor and Lessee, excess liability coverage for all liabilities
and covering each Facility in an amount not less than $2,000,000 in the annual aggregate. If such excess liability insurance is not commercially reasonably available in such amount, Lessee shall
obtain and maintain such excess liability insurance in such lesser amount or such other insurance as reasonably approximates the excess liability insurance and in such amounts as is commercially
reasonably available. Such insurance shall be deemed commercially reasonably available if the cost thereof together with the insurance required pursuant to Sections 13.1.5 and 1.3.1.6 above does not
exceed Six Hundred Dollars ($600.00) per unit, per year (adjusted to equate to constant 2000 U.S. Dollar values). In the event any such insurance is not deemed commercially reasonable herein, the
parties shall cooperate in good faith to locate suitable equivalent insurance, if any. 

        In
the event Lessee elects to maintain blanket excess liability coverage for any Facility and other facilities operated by Lessee or an Affiliate of Lessee, Lessor agrees to permit
Lessee to maintain excess liability coverage for any Facility in connection with one or more other facilities operated by Lessee or an Affiliate of Lessee so long as the available coverage is in an
amount and at a level so as to reasonably approximate the insurance coverage required hereby for the benefit of each Facility as reasonably determined by Lessor. 

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

        13.3    Additional Insurance.    In addition to the insurance described above, Lessee shall maintain such additional
insurance as may be reasonably required from time to timeby any Facility Mortgagee, provided the same can be obtained at no material additional expense to Lessee, and shall further at all times
maintain adequate workers' compensation coverage and any other coverage required by Legal
Requirements for all Persons employed by Lessee on the Leased Property and any Capital Additions in accordance with Legal Requirements. 

        13.4    Waiver of Subrogation.    All insurance policies carried by either party covering the Leased Property and any
Capital Additions and Lessee's Personal Property including contents, fire and casualty insurance, shall expressly waive any right of subrogation on the part of the insurer against the other party.
Each party waives any claims it has against the other party to the extent such claim is covered by insurance. 

        13.5    Policy Requirements.    All of the policies of insurance referred to in this Article shall be written in form
satisfactory to Lessor and by insurance companies with a policyholder rating of "A" and a financial rating of "VIII" in the most recent version of Best's Key Rating Guide. Additionally, except as
otherwise provided in this Lease, all of the insurance referred to in this Article shall be on an occurrence (rather than a claims-made) basis. With respect to the insurance referenced in
Sections 13.1.5 (general liability), 13.1.6 (medical professional liability) and 13.1.7 (excess liability), Lessee shall be permitted to use a claims made policy form if an occurrence based policy is
not available on 

29

 

commercially
reasonable terms; provided, however, that Lessee shall secure so-called "tail coverage" (i.e., coverage extended beyond the occurrence of the claim) for not less than the
applicable statute of limitations for such claim following the termination of any claims made coverage (in other words, such "tail coverage" shall reasonably approximate the coverage provided by
occurrence coverage for the period from the date of termination of the policy through the applicable statute of limitations). Lessee shall pay all of the premiums therefor, and deliver such policies
or certificates thereof to Lessor prior to their effective date (and with respect to any renewal policy, at least thirty (30) days prior to the expiration of the existing policy), and in the
event of the failure of Lessee either to effect such insurance in the names herein called for or to pay the premiums therefor, or to deliver such policies or certificates thereof to Lessor, at the
times required, Lessor shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor, in which event the cost thereof, together with interest thereon at the
Overdue Rate, shall be repayable to Lessor upon demand therefor. Each insurer shall agree, by endorsement on the policy or policies issued by it, or by independent instrument furnished to Lessor, that
it will give to Lessor thirty (30) days' written notice before the policy or policies in question shall be altered, allowed to expire or canceled. Each policy shall have a deductible or
deductibles, if any, which are no greater than those normally maintained for similar facilities in the State. 

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

        13.7    Blanket Policies and Policies Covering Multiple Locations.    Notwithstanding anything to the contrary
contained in this Article, Lessee's obligations to carry the casualty insurance provided for herein may be brought within the coverage of a blanket policy or policies of insurance carried and
maintained by Lessee; provided, however, that the coverage afforded Lessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policy for each
Facility meeting all other requirements of this Lease by reason of the use of such blanket policy of insurance, and provided further that the requirements of this Article XIII are otherwise
satisfied. For any liability policies covering one or more of the Facilities or any other facilities in addition to the Facilities, Lessor may require excess limits as Lessor reasonably determines,
subject to the provisions of Section 13.1.7 above. 

        13.8    No Separate Insurance.    Lessee shall not, on Lessee's own initiative or pursuant to the request or
requirement of any third party, (i) take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article to be furnished by, or which may
reasonably be required to be furnished by, Lessee or (ii) increase the amounts of any then existing insurance by securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including in all cases Lessor and all Facility Mortgagees, are included therein as additional insured and the loss is payable under such
insurance in the same manner as losses are payable under this Lease. Lessee shall immediately notify Lessor of the taking out of any such separate insurance or of the increasing of any of the amounts
of the then existing insurance by securing an additional policy or additional policies. 

30

   ARTICLE XIV.  

        14.1    Insurance Proceeds.    All proceeds payable by reason of any loss or damage to the Leased Property, any
Capital Additions or any part(s) or portion(s) thereof, under any policy of insurance required to be carried hereunder shall be paid to Lessor and made available by Lessor to Lessee from time to time
for the reasonable costs of reconstruction or repair, as the case may be, of any damage to or destruction of the Leased Property, any Capital Additions or any part(s) or portion(s) thereof; provided,
however, that if the total amount of proceeds payable is $50,000 or less, then the proceeds shall be paid directly to Lessee and shall be used for the repair of any damage to the Leased Property, or
any portion thereof. Any excess proceeds of insurance remaining after the completion of the restoration or reconstruction of the Leased Property and any Capital Additions (or in the event neither
Lessor nor Lessee is required or elects to repair and restore, all such insurance proceeds) shall be retained by Lessor except as otherwise specifically provided below in this Article XIV. All
salvage resulting from any risk covered by insurance shall belong to Lessor. 

        14.2    Insured Casualty.    

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

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

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

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

        14.3    Uninsured Casualty.    If the Leased Property and/or any Capital Additions of a Facility is/are damaged or
destroyed from a risk not covered by insurance carried by Lessee, whether or not such 

31

 

damage
or destruction renders such Facility Unsuitable for its Primary Intended Use, Lessee at its expense shall restore the Leased Property and Capital Additions of such Facility to substantially the
same condition it was in immediately before such damage or destruction and such damage or destruction shall not terminate this Lease with respect to such Facility or any other Facility. 

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

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

ARTICLE XV.  

        15.1    Condemnation.    

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

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

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

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

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

        15.1.6 Sale Under Threat of Condemnation. A sale by Lessor to any Condemnor, either under threat of Condemnation or while
Condemnation proceedings are pending, shall be deemed a Condemnation for purposes of this Lease. Lessor may, without any obligation to Lessee, agree to sell and/or convey to any Condemnor all or any
portion of the Leased Property free from this Lease and the rights of Lessee hereunder without first requiring that any action or proceeding be instituted or pursued to judgment, provided that Lessor
agrees to permit Lessee to participate in any condemnation proceedings affecting the Facility or Lessee's interest therein in order to preserve Lessee's rights hereunder, and any sale or other
proceeds in lieu of condemnation shall be distributed as set forth in Section 15.1.4 above. 

32

 

ARTICLE XVI.  

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

        (a)   a
default shall occur under any other lease or other agreement or instrument, including the Contract of Acquisition, now or hereafter with or in favor of Lessor or any
Affiliate of Lessor and made by or with Lessee or any Affiliate of Lessee where the default is not cured within any applicable grace period set forth therein; 

        (b)   a
default shall occur under any New Lease hereafter with or in favor of Lessor or any Affiliate of Lessor and made by or with Lessee or any Affiliate of Lessee where the
default is not cured within any applicable grace period set forth therein; 

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

        (d)   Lessee
shall fail to obtain a letter of credit or cash security deposit as required by Article XXI; 

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

        (f)    Lessee
or any Guarantor shall: 

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

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

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

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

	(v)
	file a
petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of
America or any state thereof; 

        (g)   Lessee
or any Guarantor shall be adjudicated as bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of Lessee, a
receiver of Lessee or of the whole or substantially all of its property, or approving a petition filed against it seeking reorganization or arrangement of Lessee under the Federal bankruptcy laws or
any other applicable law or statute of the United States of America or any state thereof, and such judgment, order or decree shall not be vacated or set aside or stayed within sixty (60) days
from the date of the entry thereof; 

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

        (i)    the
estate or interest of Lessee in the Leased Property, any Capital Additions or any part(s) thereof shall be levied upon or attached in any proceeding and the same
shall not be 

33

 

vacated
or discharged within the later of ninety (90) days after commencement thereof or thirty (30) days after receipt by Lessee of notice thereof from Lessor; provided, however, that
such notice shall be in lieu of and not in addition to any notice required under applicable law; 

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

        (k)   any
of the representations or warranties made by Lessee, Seller or any Guarantor in the Contract of Acquisition, the Guaranty or otherwise proves to be untrue when made
in any material respect which materially and adversely affects Lessor; 

        (l)    any
Facility's applicable license or third-party provider reimbursement agreements material to such Facility's operation for its Primary Intended Use are at any time
terminated or revoked or suspended for more than twenty (20) days; 

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

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

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

        (p)   Lessee
fails to notify Lessor within two (2) business days after receipt of any notice from any governmental agency terminating or suspending or threatening
termination or suspension, of any material license or certification relating to any Facility (provided that this requirement shall not extend to "boilerplate" certification or revocation threats
routinely contained in citations and surveys which are not, based upon the deficiency(s) cited, reasonably likely to result in actual action against the license or certification of a Facility); 

        (q)   any
proceedings are instituted against Lessee by any governmental authority which are reasonably likely to result in (i) the revocation of any license granted to
Lessee for the operation of any Facility, (ii) the decertification of any Facility from participation in the Medicare or Medicaid reimbursement program, or (iii) the issuance of a stop
placement order against Lessee; 

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

        (s)   any
default shall occur under any Guaranty. 

        16.2    Certain Remedies.    If an Event of Default shall have occurred, Lessor may terminate this Lease with respect
to any one or more (including all, if so elected by Lessor) of the Facilities, regardless of whether such Event of Default emanated primarily from a single Facility, by giving Lessee notice of such
termination and the Term shall terminate and all rights of Lessee under this Lease shall cease with respect to all such Facilities as to which Lessor has elected to so terminate this Lease. Lessor
shall have all rights at law and in equity available to Lessor as a result of any Event of Default. Any such notice of termination may, at Lessor's option, be given and exercised concurrently with any
notice of Event of Default given by Lessor to Lessee hereunder. In such event, such termination shall be effective immediately upon the occurrence of the Event of Default. Lessee shall pay as
Additional Charges all costs and expenses incurred by or on behalf of Lessor, including reasonable attorneys' fees and expenses, as a result of any Event of Default hereunder. If an Event of Default
shall have occurred and be continuing, whether or not this Lease has been terminated with respect to any one or more 

34

 

(including
all, if so elected by Lessor) of the Facilities pursuant to this Section 16.2, Lessee shall, to the extent permitted by law, if required by Lessor so to do, immediately surrender to
Lessor possession of the Leased Property and any Capital Additions of the Facilities as to which Lessor has so elected to terminate this Lease and quit the same and Lessor may enter upon and repossess
such Leased Property and such Capital Additions by reasonable force, summary proceedings, ejectment or otherwise, and may remove Lessee and all other Persons and any of Lessee's Personal Property from
such Leased Property and such Capital Additions. 

        16.3    Damages.    (i) The termination of this Lease with respect to any one or more of the Facilities;
(ii) the repossession of the Leased Property and Capital Additions of any Facility; (iii) the failure of Lessor, notwithstanding reasonable good faith efforts, to relet the Leased
Property or any portion thereof; (iv) the reletting of all or any portion of the Leased Property; or (v) the failure or inability of Lessor to collect or receive any rentals due upon any
such reletting, shall not relieve Lessee of its liabilities and obligations hereunder, all of which shall survive any such termination, repossession or reletting. If any such termination occurs,
Lessee shall forthwith pay to Lessor all Rent due and payable with respect to the Facility terminated to and including the date of such termination. Thereafter, following any such
termination, Lessee shall forthwith pay to Lessor, at Lessor's option, as and for liquidated and agreed current damages for an Event of Default by Lessee, the sum of: 

        (a)   the
worth at the time of award of the unpaid Rent which had been earned at the time of termination with respect to the terminated Facility, 

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

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

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

        As
used in clauses (a) and (b) above, the "worth at the time of award" shall be computed by allowing interest at the Overdue Rate. As used in clause (c) above, the
"worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus One Percent (1%). 

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

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

        16.5    Lessee's Obligation to Purchase.    Upon the occurrence of a Put Event with respect to any Facility, Lessor
shall be entitled to require Lessee to purchase the Leased Property of such Facility on 

35

 

the
first Minimum Rent Payment Date occurring not less than sixty (60) days after the date specified in a notice from Lessor requiring such purchase for an amount equal to the greater of
(i) the Fair Market Value of such Facility, or (ii) the Minimum Repurchase Price of such Facility, plus, in either event, all Rent then due and payable (excluding the installment of
Minimum Rent due on the purchase date) with respect to such Facility. If Lessor exercises such right, Lessor shall convey the Leased Property of such Facility to Lessee on the date fixed therefor in
accordance with the provisions of Article XVIII upon receipt of the purchase price therefor and this Lease shall thereupon terminate with respect to such Facility. Any purchase by Lessee of the
Leased Property of a Facility pursuant to this Section shall be in lieu of the damages specified in Section 16.3 with respect to such Facility. 

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

        16.7    Application of Funds.    Any payments received by Lessor under any of the provisions of this Lease during the
existence or continuance of any Event of Default which are made to Lessor rather than Lessee due to the existence of an Event of Default shall be applied to Lessee's obligations in the order which
Lessor may determine or as may be prescribed by the laws of the State. 

        16.8    Facility Operating Deficiencies.    

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

        16.8.2 Without
limiting Lessor's rights in Section 16.8.1 above, if there is a deficiency or an event that is reasonably likely to result in (a) the imminent
loss of Lessee's license or certification necessary to operate any Facility for its Primary Intended Use, or (b) the Facility being shut down, and for a period equal to the greater of six
(6) months or the time necessary fully to remedy the situation in (a) or (b) above, Lessee shall engage the services of a management company, unaffiliated with Lessee and approved
by Lessor, to assume responsibility for management of such Facility for the purpose of taking all steps reasonably necessary to remedy the Facility Operating Deficiency(ies). Pursuant to a written
agreement among the management company, Lessee and Lessor, the management company will have complete responsibility for operation of such Facility, subject to Lessee's retaining only such power and
authority as shall be required by the State as the minimum level of power and authority to 

36

 

be
possessed by the licensed operator of a facility of the type of such Facility in the State. The management company shall provide the following services: 

        (a)   furnish
an on-site, full-time licensed administrator and controller approved by Lessor who shall be an employee of the management company; 

        (b)   take
all steps reasonably necessary to keep such Facility fully licensed by the State, certified as a provider under applicable government reimbursement programs and
duly accredited by applicable agencies and bodies; 

        (c)   perform
all of Lessee's obligations hereunder with respect to maintenance and repair of such Facility; 

        (d)   conduct
at the onset of the management company's engagement, and monthly thereafter, reviews and/or audits of operations at such Facility in at least the following
departments and services: patient and resident care, activities and therapy, dietary, medical records, drugs and medicines, supplies, housekeeping and maintenance, and report the results of such
reviews and/or audits in writing to Lessor no later than five (5) days after the end of each calendar month; 

        (e)   immediately
upon receipt thereof, deliver to Lessor by overnight courier copies of all communications received from any regulatory agency with respect to such Facility;
and 

        (f)    with
respect to the Facility Operating Deficiency(ies) which gave rise to the request to Lessee to engage the management company, prepare and deliver to Lessor within
five (5) days after the commencement of the management company's responsibilities at such Facility a comprehensive written report of the nature and extent of the Facility Operating
Deficiency(ies) and advise Lessor orally by telephone no later than noon local time on each Friday thereafter as to steps being taken by the management company to remedy the same and the status of any
threatened or actual governmental administrative action with respect thereto. 

        The
management company shall have complete access to such Facility, its records, offices and facilities, in order that it may carry out its duties. If Lessee shall fail to designate a
management company acceptable to Lessor within five (5) days after receipt of the notice of request therefor, Lessor may designate such management company by further notice to Lessee. Lessee
shall be responsible for payment of all fees and expenses reasonably charged and incurred by the management company in carrying out its duties, provided that the management fee chargeable by a
management company designated by Lessor, as hereinabove provided, shall not exceed Five Percent (5%) of Gross Revenues. 

        16.9    Lessor's Right of Appraisal.    Without limiting any other right or remedy of Lessor hereunder, upon the
expiration or earlier termination of this Lease, and whether or not Lessor has ever declared or given notice to Lessee of an Event of Default, Lessor shall have the right to conduct an appraisal of
the Leased Property and all Capital Additions of each Facility or any portion thereof in accordance with the appraisal procedures set forth in Article XXXIV in order to determine the negative
value, if any, upon the Fair Market Value of such Facility by reason of any of the following (the "Negative FMV"): (a) any deferred maintenance or other items of repair or replacement of the
Leased Property of such Facility which Lessee has failed to perform or observe in accordance with the terms of this Lease; (b) any then current or prior licensure or certification violations
and/or admission holds; and/or (c) any other breach or failure of Lessee to perform or observe its obligations under this Lease; and/or (d) the occupancy level and/or resident mix,
patient mix, case mix, or diagnostic related group or acuity mix, as applicable, of the Facility as of the date of termination as compared to the average occupancy level or mix of facilities similar
to the Facility and in the same general geographic location. In the event of any such Negative FMV, the cash value thereof, together with the costs and expenses incurred by Lessor in connection with
the appraisal procedures pursuant to Article XXXIV, shall be paid by Lessee 

37

 

to
Lessor upon demand as an Additional Charge hereunder. The obligation of Lessee to pay such amount, if any, shall survive the expiration or earlier termination of this Lease. 

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

        16.10.1 Lessee,
as debtor, hereby grants to Lessor, as secured party, a security interest and an express contractual lien upon all of Lessee's right, title and interest in
and to Lessee's Personal Property and in and to the Intangible Property and any and all products, rents, proceeds and profits thereof in which Lessee now owns or hereafter acquires an interest or
right, including any leased Lessee's Personal Property (collectively, the "Collateral"). This Lease constitutes a security agreement covering all such Lessee's Personal Property and the Intangible
Property. The security interest granted to Lessor with respect to Lessee's Personal Property in this Section 16.10 is intended by Lessor and Lessee to be subordinate to any security interest
granted in connection with the financing or leasing of all or any portion of the Lessee's Personal Property so long as the lessor or financier of such Lessee's Personal Property agrees to give Lessor
written notice of any default by Lessee under the terms of such lease or financing arrangement, to give Lessor a reasonable time following such notice to cure any such default and consents to Lessor's
written assumption of such lease or financing arrangement upon Lessor's curing of any such defaults. The security interest granted to Lessor with respect to Lessee's Personal Property in this
Section 16.10 is also intended by Lessor and Lessee to be subordinate to any security interest granted by Lessee to any institutional credit facility lender of Lessee in and to Lessee's
accounts receivable, and Lessor hereby confirms that Lessor claims no right or interest in or to Lessee's accounts or the proceeds thereof. This security agreement and the security interest created
herein shall survive the expiration or earlier termination of this Lease. 

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

38

  

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

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

ARTICLE XVII.  

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

ARTICLE XVIII.  

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

ARTICLE XIX.  

        19.1    Renewal Terms.    Provided that no Event of Default, or event which, with notice or lapse of time or both,
would constitute an Event of Default, has occurred and is continuing, either at the date of exercise or upon the commencement of an Extended Term (as hereunder defined), then Lessee shall have the
right to renew this Lease for two (2) five year renewal terms (each an "Extended Term"), upon (i) giving written notice to Lessor of such renewal not less than eighteen
(18) months and not more than twenty seven (27) months prior to the expiration of the then current Term and (ii) delivering to Lessor concurrent with such notice a reaffirmation
of the Guaranty executed by Guarantor stating, in substance, that Guarantor's obligations under the Guaranty shall extend to this Lease, as extended by the Extended Term. During each Extended Term,
all of the terms and conditions of this Lease shall continue in full force and effect. 

39

 

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

        19.2    Lessor's Rights of Renewal and Early Termination.    In order to facilitate the transfer of the operations of
the Facilities to a third party and/or to locate a replacement lessee, Lessor shall have the one time right with respect to each Facility to either (i) terminate this Lease with respect to any
Facility up to four (4) months early or (ii) extend the Term of this Lease with respect to such Facility for up to one (1) year. Such right of early termination shall be exercised
by Lessor, if at all, by written notice from Lessor to Lessee given not less than sixty (60) days prior to the date Lessor desires to terminate this Lease with respect to such Facility and
stating the date of such termination (which date shall not be earlier than four (4) months prior to the expiration of the Term). In the event that Lessor shall exercise
such night of early termination within the time and in the manner herein provided, this Lease shall terminate with respect to the specified Facility on the date of termination specified in Lessor's
notice. Such right of extension shall be exercised by Lessor, if at all, by written notice from Lessor to Lessee given not less than four (4) months prior to the expiration of the Term and
stating the date through which Lessor is extending the Term of this Lease for such Facility (which date shall not be later than one (1) year after the originally scheduled expiration date). In
the event that Lessor shall exercise such right of extension, all of the terms and conditions of this Lease shall continue in full force and effect with respect to each Facility as to which Lessor has
elected to so extend the applicable Term pursuant to this Section 19.2, and Lessee shall continue to pay Rent applicable to such Facility for and during such extension period at the lesser of
(a) the same Minimum Rent rates as were in effect upon the expiration of the originally scheduled Term for such Facility, or (b) Fair Market Rental; provided, however, that Lessor shall
have the right to terminate this Lease with respect to such Facility during any such extension period upon not less than sixty (60) days prior written notice to Lessee. In such event, this
Lease, as previously extended, shall terminate with respect to such Facility upon the date specified in Lessor's notice of termination. 

ARTICLE XX.  

        20.1    Holding Over.    Except as provided in Section 19.2, if Lessee shall for any reason remain in
possession of the Leased Property and/or any Capital Additions of a Facility after the expiration or earlier termination of the Term, such possession shall be as a
month-to-month tenant during which time Lessee shall pay as Minimum Rent each month 150% of the monthly Minimum Rent applicable to the prior Lease Year for such Facility,
together with all Additional Charges and all other sums payable by Lessee pursuant to this Lease; provided, however, in the event that Lessee holds over in the Leased Property and/or any Capital
Additions as a result of the failure or inability of Lessor to identify a new or replacement operator for the Facility as of the expiration or earlier termination of this Lease, then to and until the
earlier of (A) the date Lessor identifies in writing to Lessee such new operator and such new operator has either procured its own licenses and provider agreements to operate the Facility or
has executed and delivered to Lessee, in form reasonably acceptable to Lessee, an agreement permitting such new operator to operate under Lessee's license, provider agreements and other authorizations
until such new operator obtains the same in its own name, and (B) seventy-five (75) days after written notice from Lessor to Lessee to close down the Facility and cause the
patients to be transferred therefrom, the monthly Minimum Rent payable by Lessee during such holdover period shall be equal to the monthly Minimum Rent in effect as of the expiration or earlier
termination of this Lease. During such period of month-to-month tenancy, Lessee shall be obligated to perform and observe all of the terms, covenants and conditions of this
Lease, but shall have no rights hereunder other than the right, to the extent given by law to month-to-month tenancies, to continue its occupancy and use of the Leased Property
and/or any Capital Additions of such Facility. Nothing contained herein 

40

 

shall
constitute the consent, express or implied, of Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease. 

ARTICLE XXI.  

        21.1    Letters of Credit.    During the entire Term and for sixty (60) days after the expiration or earlier
termination of this Lease, Lessee shall have obtained letters of credit from a financial institution satisfactory to Lessor, naming Lessor as beneficiary to secure Lessee's obligations hereunder and
Lessee's and any Affiliate of Lessee's obligations under any other lease or other agreement or instrument with or in favor of Lessor or any Affiliate of Lessor, at the times, in the amounts and for
the purposes set forth below. Each letter of credit shall be in substantially the form of Exhibit E hereto. Each letter of credit shall be for a term of not less than one (1) year and
irrevocable during that term. Each letter of credit shall provide that it will be honored upon a signed statement by Lessor that Lessor is entitled to draw upon any letter of credit under this Lease,
and shall require no signature or statement from any party other than Lessor. No notice to Lessee shall be required to enable Lessor to draw upon the letter of credit. Each letter of credit shall also
provide that following the honor of any drafts in an amount less than the aggregate amount of the letter of credit, the financial institution shall return the original letter of credit to Lessor and
Lessor's rights as to the remaining amount of the letter of credit will not be extinguished. In the event of a transfer of Lessor's interest in the Leased Property, Lessor shall have the right to
transfer the letter of credit to the transferee and thereupon shall, without any further agreement between the parties, be released by Lessee from all liability therefor, and it is agreed that the
provisions hereof shall apply to every transfer or assignment of the letter of credit to a new Lessor. The letter of credit may be assigned as security in connection with a Facility Mortgage. If the
financial institution from which Lessee has obtained a letter of credit shall admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a
petition to take advantage of any insolvency act, make an assignment for the benefit of its creditors consent to the appointment of a receiver of itself or of the whole or any substantial part of its
property, or file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any
state thereof, then Lessee shall obtain a replacement letter of credit within thirty (30) days of such act from another financial institution satisfactory to Lessor. 

        21.2    Times for Obtaining Letters of Credit.    The initial letter of credit shall be obtained and delivered to
Lessor on or prior to the Commencement Date. The letters of credit covering subsequent periods shall be obtained and delivered to Lessor not less than thirty (30) days prior to the expiration
of the then existing letter of credit ("Letter of Credit Date"). The term for each such letter of credit shall begin no later than the expiration date of the previous letter of credit and shall comply
with all requirements of this Article XXI. 

        21.3    Amounts for Letters of Credit.    

        21.3.1 Letters
of credit shall be in an amount equal to three (3) months Minimum Rent (estimated for the first Lease Year if not yet fixed) payable by Lessee under
this Lease for the applicable Lease Year (the "Letter of Credit Amount"). 

        21.4    Uses of Cash Security Deposit or Letter of Credit.    Lessor shall have the right to draw upon a letter of
credit up to its full amount or apply all or any portion of the Cash Security Deposit up to its full amount, as applicable, whenever (a) an Event of Default hereunder has occurred,
(b) an event of default under any other lease or agreement between Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee or under any other letter of credit, guaranty, mortgage,
deed of trust, or other instrument now or hereafter executed by Lessee or an Affiliate of Lessee in favor of Lessor or an Affiliate of Lessor has occurred or (c) an event or circumstance has
occurred which with notice or passage of time, or both, would constitute an Event of Default hereunder or an event of default under 

41

 

any
such other lease, agreement, letter of credit, guaranty, mortgage, deed of trust or other instrument, notwithstanding that transmittal of any such notice may be barred by applicable law. In
addition, if Lessee fails to obtain a satisfactory letter of credit prior to the applicable Letter of Credit Date, Lessor may draw upon the full amount of the then existing letter of credit without
giving any notice or time to cure to Lessee. No such draw upon the letter of credit or application of the Cash Security Deposit, as applicable, shall (i) cure or constitute a waiver of an Event
of Default, (ii) be deemed to fix or determine the amounts to which Lessor is entitled to recover under this Lease or otherwise, or (iii) be deemed to limit or waive Lessor's right to
pursue any remedies provided for in this Lease. If all or any portion of a letter of credit is drawn against or Cash Security Deposit applied by Lessor, Lessee shall, within two (2) business
days after demand by Lessor, cause the issuer of such letter of credit to issue Lessor, at Lessee's expense, a replacement or supplementary letter of credit in substantially the form attached hereto
as Exhibit E such that at all times during the Term, Lessor shall have the ability to draw on one or more letters of credit totaling, in the aggregate, the amount required pursuant to this
Article XXI. If any portion of the Cash Security Deposit is applied by Lessor, Lessee shall, within two (2) business days after demand by Lessor, cause an amount equal to the amount of
Cash Security Deposit previously applied to be paid to Lessor. 

        21.5    Cash Security Deposit.    For the period from the Commencement Date through April 30, 2003, Lessee
shall have the option to deposit with Lessor cash (the "Cash Security Deposit") in the Letter of Credit Amount in lieu of obtaining a letter of credit; provided however, that nothing herein shall
relieve Lessee of its obligation to provide a letter of credit in accordance with Article XXI after April 30, 2003. Lessor shall not be required to keep the Cash Security Deposit
separate from its general funds, and Lessee shall not be entitled to interest on such Cash Security Deposit. Lessee acknowledges that Lessor may invest and reinvest the Cash Security Deposit for
Lessor's own account. No notice to Lessee shall be required to enable Lessor to draw upon such Cash Security Deposit. In the event of a transfer of Lessor's interest in the Leased Property, Lessor
shall have the right to transfer the Cash Security Deposit to the transferee and thereupon shall, without any further agreement between the parties, be released by Lessee from all liability therefor,
and it is agreed that the provisions hereof shall apply to every transfer or assignment of such Cash Security Deposit to a new Lessor. The Cash Security Deposit may be assigned as security in
connection with a Facility Mortgage. Provided that no Event of Default has occurred and is continuing, and that Lessee has obtained the letter of credit required by this Article XXI, Lessor
shall return to Lessee all portions of the Cash Security Deposit not applied by Lessor in accordance with this Article XXI. 

        21.6    WAIVER.    LESSEE WAIVES THE PROVISIONS OF ANY APPLICABLE LAWS NOW IN FORCE OR THAT BECOME IN FORCE AFTER THE
DATE OF EXECUTION OF THIS LEASE, THAT PROVIDE IN SUBSTANCE THAT LESSOR MAY CLAIM FROM A CASH SECURITY DEPOSIT ONLY THOSE SUMS REASONABLY NECESSARY TO REMEDY DEFAULTS IN THE PAYMENT OF RENT, TO REPAIR
DAMAGE CAUSED BY LESSEE, OR TO CLEAN THE LEASED PROPERTY. LESSOR AND LESSEE AGREE THAT LESSOR MAY, IN ADDITION, CLAIM THOSE SUMS NECESSARY TO COMPENSATE LESSOR FOR ANY OTHER FORESEEABLE OR
UNFORESEEABLE ACTUAL LOSS OR DAMAGE CAUSED BY THE ACT OR OMISSION OF LESSEE OR LESSEE'S OFFICERS, AGENTS, EMPLOYEES, INDEPENDENT CONTRACTORS, OR INVITEES, INCLUDING, BUT NOT LIMITED TO THOSE DAMAGES
TO WHICH LESSOR IS ENTITLED PURSUANT TO ARTICLE XVI. 

Lessee's
Initials:                         /s/
CRC                         

ARTICLE XXII.  

        22.1    Risk of Loss.    The risk of loss or of decrease in the enjoyment and beneficial use of the Leased Property
and any Capital Additions as a consequence of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures, 

42

 

attachments,
levies or executions (other than by Lessor and Persons claiming from, through or under Lessor) is assumed by Lessee, and no such event shall entitle Lessee to any abatement of Rent. 

ARTICLE XXIII.  

        23.1    General Indemnification.    In addition to the other indemnities contained herein, and notwithstanding the
existence of any insurance carried by or for the benefit of Lessor or Lessee, and without regard to the policy limits of any such insurance, Lessee shall protect, indemnify, save harmless and defend
Lessor from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses, including reasonable attorneys', consultants' and experts' fees and expenses,
imposed upon or incurred by or asserted against Lessor by reason of: (i) any accident, injury to or death of Persons or loss of or damage to property occurring on or about the Leased Property,
or any Capital Additions or adjoining sidewalks thereto; (ii) any use, misuse, non-use, condition, maintenance or repair by Lessee of the Leased Property or any Capital Additions;
(iii) any failure on
the part of Lessee to perform or comply with any of the terms of this Lease; (iv) the non-performance of any of the terms and provisions of any and all existing and future subleases
of the Leased Property or any Capital Additions to be performed by any party thereunder; (v) any claim for malpractice, negligence or misconduct committed by any Person on or working from the
Leased Property or any Capital Additions; and (vi) the violation of any Legal Requirement. Any amounts which become payable by Lessee under this Article shall be paid within ten
(10) days after liability therefor is determined by litigation or otherwise, and if not timely paid shall bear interest at the Overdue Rate from the date of such determination to the date of
payment. Lessee, at its sole cost and expense, shall contest, resist and defend any such claim, action or proceeding asserted or instituted against Lessor or may compromise or otherwise dispose of the
same as Lessee sees fit; provided, however, that any legal counsel selected by Lessee to defend Lessor shall be reasonably satisfactory to Lessor. All indemnification covenants are intended to apply
to losses, damages, injuries, claims, etc. incurred directly by the indemnified parties and their property, as well as by the indemnifying party or third party, and their property. For purposes of
this Article XXIII, any acts or omissions of Lessee, or by employees, agents, assignees, contractors, subcontractors or others acting for or on behalf of Lessee (whether or not they are
negligent, intentional, willful or unlawful), shall be strictly attributable to Lessee. It is understood and agreed that payment shall not be a condition precedent to enforcement of the foregoing
indemnification obligations. Nothing contained in this Lease shall be deemed or construed as imposing any obligation on Lessee to indemnify or hold harmless Lessor from and against any liabilities,
obligations, claims, damages, penalties or causes of action arising out of the gross negligence or willful misconduct of Lessor 

ARTICLE XXIV.  

        24.1    Transfers.    

        24.1.1 Prohibition. Except as provided in Section 24.1.10, Lessee shall not, without Lessor's prior written consent,
which may be given or withheld in Lessor's sole and absolute discretion, either directly or indirectly or through one or more step transactions or tiered transactions, voluntarily or by operation of
law, (i) assign, convey, sell, pledge, mortgage, hypothecate or otherwise encumber, transfer or dispose of all or any part of this Lease or Lessee's leasehold estate hereunder,
(ii) Master Sublease all or any part of the Leased Property and/or any Capital Additions of such Facility, (iii) engage the services of any Person for the management or operation of all
or any part of the Leased Property and/or any Capital Additions of such Facility, (iv) convey, sell, assign, transfer or dispose of any stock or partnership, membership or other interests
(whether equity or otherwise) in Lessee (which shall include any conveyance, sale, assignment, transfer or disposition of any stock or partnership, membership or other interests (whether equity or
otherwise) in any Controlling Person(s)), if such conveyance, sale, assignment, transfer or disposition results, directly or indirectly, in a change in control 

43

 

of
Lessee (or in any Controlling Person(s)), (v) dissolve, merge or consolidate Lessee (which shall include any dissolution, merger or consolidation of any Controlling Person) with any other
Person, if such dissolution, merger or consolidation, directly or indirectly, results in a change in control of Lessee or in any Controlling Person(s), (vi) sell, convey, assign, or otherwise
transfer all or substantially all of the assets of Lessee (which shall include any sale, conveyance, assignment, or other transfer of all or substantially all of the assets of any Controlling
Person(s)), (vii) sell, convey, assign, or otherwise transfer any of the assets of Lessee (which shall include any sale, conveyance, assignment, or other transfer of any of the assets of any
Controlling Person) if the Consolidated Net Worth of Lessee (or such Controlling Person, as the case may be) immediately following such transaction is not at least equal to seventy-five
percent (75%) of the Consolidated Net Worth of Lessee (or such Controlling Person) immediately prior to such transaction, or (viii) enter into or permit to be entered into any agreement or
arrangement to do any of the foregoing or to grant any option or other right to any Person to do any of the foregoing (each of the aforesaid acts referred to in clauses (i) through
(viii) being referred to herein as a "Transfer"). Any Commercial Occupancy Arrangement with respect to more than Ten Percent (10%) of any Facility in the aggregate to any Person and/or its
Affiliates, directly or indirectly, or through one or more step transactions or tiered transactions, shall be deemed to be a "Master Sublease" hereunder. For any Commercial Occupancy Arrangement
transaction not requiring the consent of Lessor hereunder (i.e., a Commercial Occupancy Arrangement not constituting a Master Sublease), Lessee shall, within ten (10) days of entering into any
such Commercial Occupancy Arrangement, notify Lessor of the existence of such Commercial Occupancy Arrangement and the identity of the Occupant and supply Lessor with a copy of the agreement relating
to such Commercial Occupancy Arrangement and any other related documentation, materials or information reasonably requested by Lessor. 

        24.1.2 Consent.

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

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

        24.1.3 Attornment and Related Matters. Any Commercial Occupancy Arrangement (whether or not the same constitutes a Master
Sublease) shall be expressly subject and subordinate to all applicable terms and conditions of this Lease and provide that upon the expiration or earlier termination of this Lease Lessor, at its
option and without any obligation to do so, may require any Occupant to attorn to Lessor, in which event Lessor shall undertake the obligations of Lessee, as sublessor, licensor or otherwise under
such Commercial Occupancy Arrangement from the time of the exercise of such option to the termination of such Commercial Occupancy Arrangement; provided, however, that in such case Lessor shall not be
liable for any prepaid rents, fees or other charges or for any prepaid security deposits paid by such Occupant to Lessee or for any other prior defaults of Lessee under such Commercial Occupancy
Arrangement. In the event that Lessor shall not require such attornment with respect to any Commercial Occupancy Arrangement, then such Occupancy Arrangement shall automatically terminate upon the
expiration or earlier termination of this Lease, including any early 

44

 

termination
by mutual agreement of Lessor and Lessee. In addition, any such Commercial Occupancy Arrangement shall provide that in the event that the Occupant or other transferee receives a written
notice from Lessor stating that an Event of Default has occurred or that an event or circumstance has occurred which with notice and/or passage of time would constitute an Event of Default, such
Occupant or other transferee thereafter shall without further consent or instruction of Lessee pay all rentals accruing under such Commercial Occupancy Arrangement directly to Lessor or as Lessor may
direct; provided however that (i) as and to the extent that the amounts so paid to Lessor, together with other amounts paid to or received by Lessor on account of this Lease, exceed the amounts
then due Lessor from Lessee under this Lease, the excess shall be promptly remitted to Lessee, and (ii) at such time as the Event of Default has been cured and this Lease reinstated (if ever),
Lessor shall notify and direct the Occupant(s) in writing to resume making payments of rentals under their Commercial Occupancy Arrangement(s) directly to Lessee or as Lessee may direct. Any such
rentals collected from such Occupant or other transferee by Lessor shall be credited against the amounts owing by Lessee under this Lease in such order of priority as Lessor shall reasonably
determine. Furthermore, any Commercial Occupancy Arrangement or other agreement regarding a Transfer shall expressly provide that the Occupant, assignee, manager or other transferee shall furnish
Lessor with such financial, operational and other information about the physical condition of the applicable Facility, including the information required by Section 25.1.2 herein, as Lessor may
request from time to time. 

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

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

        (ii)   Without
limiting the generality of the foregoing, Lessor shall be permitted (by assignment of a cause of action or otherwise) to institute an action or proceeding
against such Occupant in the name of Lessee in order to enforce Lessee's rights under the Master Sublease, and also shall be permitted to take all ancillary actions (e.g., serve default notices and
demands) in the name of Lessee as Lessor reasonably shall determine to be necessary. 

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

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

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

        24.1.6 No Release of Lessee's Obligations. No Transfer shall relieve Lessee of its obligation to pay the Rent and to perform
all of the other obligations to be performed by Lessee hereunder. The liability of Lessee named herein and any immediate and remote successor in interest of Lessee (i.e., by means of any Transfer),
and the due performance of the obligations of this Lease on Lessee's part to be performed or observed, shall not in any way be discharged, released or impaired by any (i) agreement which
modifies any of the rights or obligations of the parties under this Lease, (ii) stipulation which extends the time within which an obligation under this Lease is to be performed,
(iii) waiver of the performance of an obligation required under this Lease, or (iv) failure to enforce any of the obligations 

45

 

set
forth in this Lease. If any Occupant, assignee, manager or other transferee defaults in any performance due hereunder, Lessor may proceed directly against the Lessee named herein and/or any
immediate and remote successor in interest of Lessee without exhausting its remedies against such Occupant, assignee, manager or other transferee. 

        24.1.7 REIT Protection. Anything contained in this Lease to the contrary notwithstanding, (i) no Transfer shall be
consummated on any basis such that the rental or other amounts to be paid by the Occupant, assignee, manager or other transferee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of the Occupant, assignee, manager or other transferee; (ii) Lessee shall not consummate a Transfer with any Person in which Lessee or Lessor owns an
interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Code); and (iii) Lessee shall not consummate a Transfer with any Person
or in any manner which could cause any portion of the amounts received by Lessor pursuant to this Lease or any Occupancy Arrangement to fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or any similar or successor provision thereto or which could cause any other income of Lessor to fail to qualify as income described in Section 856(c)(2)
of the Code. 

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

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

        24.1.10 Affiliate Transactions. Notwithstanding anything to the contrary contained in this Article XXIV, Lessor's
consent shall not be required in connection with any assignment of Lessee's entire interest in this Lease or a Master Sublease of any Facility or of the entire Leased Property to an Affiliate or
Affiliates of Lessee, so long as in connection therewith, each of the following conditions is met: 

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

46

 

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

        (c)   Any
Master Subletting shall be subject to the provisions of Sections 24.1.3, 24.1.4 and 24.1.7 above. 

        (d)   The
original Lessee shall not be released from any of the obligations of the Lessee hereunder, whether occurring prior to or after the effective date of such
transaction, and if requested by Lessor, shall execute a written guaranty of the "Lessee's" obligations under this Lease in a form satisfactory to Lessor. 

        (e)   Within
ten (10) days after the effectiveness of such transaction, Lessee shall notify Lessor in writing of the occurrence of such event, the effective date
thereof, the facts placing the same within the provisions of this Section 24.1.10 and any other change in the address for billings and notices to the
Lessee pursuant to this Lease, accompanied by an executed copy of the assumption, Master Sublease (if any) or written guaranty as required pursuant to this Lease. 

        24.1.11 Certain Sale of Business Type Transactions. Notwithstanding anything to the contrary in this Article XXIV, but
subject to the provisions of Section 24.1.7 above, so long The Ensign Group, Inc. ("Ensign") has other significant assets other than its interest (whether direct or indirect) in this
Lease and the Facility, Lessor shall consent to any Transfer resulting from (a) a sale or transfer of all or substantially all of the outstanding capital stock of Ensign or a sale or transfer
of all or substantially all of the assets of Ensign, in each case to a single purchaser or transferee in a single transaction or (b) a merger, consolidation or stock exchange to which Ensign is
a party, so long as each of the following conditions is met: 

        (i)    The
Consolidated Net Worth of the purchaser or transferee resulting from a Transfer pursuant to clause (a) above or the surviving party resulting from a Transfer
pursuant to clause (b) above, as the case may be, following the effectiveness of such event shall be equal to or greater than the average Consolidated Net Worth of Ensign for the twelve
(12) month period immediately prior to the effectiveness of such event, as determined in accordance with GAAP. 

        (ii)   The
debt to equity ratio of the purchaser or transferee resulting from a Transfer pursuant to clause (a) above or the surviving party resulting from a Transfer
pursuant to clause (b) above, as the case may be, following the effectiveness of such event shall be equal to or less than the average debt to equity ratio of Ensign for the twelve
(12) month period immediately prior to the effectiveness of such event, as determined by GAAP. For purposes of this clause (ii), "debt" shall include the capitalized value of any leases
required to be capitalized in accordance with GAAP to which Ensign and/or such transferee or surviving entity (and/or their consolidated Subsidiaries) are parties and the same shall be demonstrated by
financial statements prepared in accordance with GAAP. 

        (iii)  The
purchaser or transferee resulting from a Transfer pursuant to clause (a) above or the other party(s) to the Transfer pursuant to clause (b) above, as
the case may be, shall have sufficient operating experience and history with respect to a business of the nature, type and size of the business of Ensign as the same exists immediately prior to the
effectiveness of such event, as reasonably determined by Lessor. Such purchaser or transferee or other party to such Transfer, as the case may be, shall be deemed to have "sufficient operating
experience and history" if immediately prior to the effectiveness of such Transfer, such purchaser or transferee or other party, as the case may be, operated or managed (whether directly or through
its operating Subsidiary(ies)), facilities of the type and of a number equal to or greater than the number of the facilities operated and/or managed by Ensign and its Subsidiary(ies), or
twenty-five (25) whichever is less, and has been in the business of operating or managing such facilities for a period not less than the period in which Ensign has been in business,
or three (3) years whichever is less. 

47

  

        (iv)  Except
in the case of a Transfer as to which such transferee or purchaser or surviving party, as the case may be, assumes the obligations of Ensign under this Lease or
any Guaranty as a matter of law, such transferee or purchaser or surviving party shall execute a written assumption of this Lease or Guaranty, as the case may be, in form and substance reasonably
acceptable to Lessor. 

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

        (vi)  Lessor
shall receive the applicable information required by Section 24.1.2.1 with respect to each such proposed Transfer and the proposed purchaser or transferee
resulting therefrom. 

        As
used in this Section 24.1.11, "other significant assets" shall mean that Ensign has either (1) at least twenty-five (25) long-term care
facilities under lease, ownership or management, other than the Facility or (2) other net current assets, whether direct or indirect, other than its interests (whether direct or indirect) in
this Lease, which in the aggregate total not less than $50 Million. 

        24.1.12 Capitalization Transactions. Notwithstanding anything to the contrary in this Article XXIV, so long as no
Event of Default or event or circumstance which, with notice or lapse of time or both, would constitute an Event of Default under this Lease, shall have occurred and be continuing, then Lessor's
consent shall not be required in connection with any sale, conveyance, transfer or new issuance of equity or other interests in Ensign to a third Person in a bona fide arms length transaction as part
of the current and ongoing capitalization of Ensign, whether or not the same results in a "change in control" so long as (a) Ensign provides written notice of any such transaction to Lessor
(which notice shall include the name of the purchaser and the quantity of the purchase or issuance), (b) the proceeds of such transaction are used only for proper corporate purposes,
(c) none of the shareholders of Ensign immediately prior to such transaction shall sell, pledge, encumber, grant an option, or otherwise transfer any of the shares held by such shareholder in
connection with such transaction, and (d) the then current officers and directors of Ensign remain as officers and directors of Ensign following such transaction. 

        24.1.13    Transfer of All Facilities in the State.    Notwithstanding anything to the contrary in this
Article XXIV, Lessor agrees not to unreasonably withhold its consent to Lessee's assignment of this Lease or a Master Sublease of all of the Leased Property and Capital Additions relating to
Facilities in a state to a single assignee/Occupant if simultaneously therewith Lessee and/or its Affiliates is selling or otherwise transferring to one or more non-Affiliated third
parties its/their entire interests in all
long-term care facilities owned, leased, managed or operated by Lessee or its Affiliates in such state. In exercising its right of reasonable approval or disapproval to such a proposed
assignment or Master Sublease, Lessor shall be entitled to take into account any fact or factor which Lessor reasonably deems relevant to such decision, including the following, all of which are
agreed to be reasonable factors for Lessor's consideration: 

        (a)   The
financial strength of the proposed Occupant or assignee, as the case may be, including the adequacy of its working capital. 

        (b)   The
operating experience of the proposed Occupant or assignee, as the case may be with respect to a business of the type, size and number of the affected Facility and
the other facilities in the State. 

        (c)   Violation
of any agreements to which Lessee is a party. 

        (d)   Whether
there then exists any Event of Default by Lessee pursuant to this Lease. 

        Moreover,
Lessor shall be entitled to be reasonably satisfied that each and every covenant, condition or obligation imposed upon Lessee by this Lease and each and every right, remedy or
benefit afforded Lessor by this Lease is not impaired or diminished by such assignment or Master Sublease. In 

48

 

addition,
Lessor shall be entitled to impose reasonable conditions in connection with granting its consent to any such transaction, including the condition that the obligations of any Occupant or
assignee, as the case may be, which is an Affiliate or Subsidiary of another Person be guaranteed by its parent or Controlling Person. 

ARTICLE XXV.  

        25.1 Officer's Certificates and Financial Statements. 

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

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

        (a)   within
120 days after the end of each of Lessee's and Guarantor's fiscal years, a copy of the unaudited (or if available, audited) balance sheets of Lessee, its
operating Affiliate(s) and Guarantor and its consolidated Subsidiaries, as of the end of such fiscal year, and related unaudited (or if available, audited) statements of income, changes in common
stock and other stockholders' equity and changes in the financial position of Lessee, its operating Affiliate(s) and Guarantor and its consolidated Subsidiaries for such fiscal year, prepared in
accordance with GAAP applied on a basis consistently maintained throughout the period involved, such consolidated financial statements to be certified by nationally recognized certified public
accountants; and within 180 days after the end of Guarantor's fiscal years, a copy of the audited consolidated balance sheets of Guarantor and its Subsidiaries, as of the end of such fiscal
year, and related audited statements of income, changes in common stock and other stockholders' equity and changes in the financial position 

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

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

49

 

detailed
statements of income and detailed operational statistics regarding occupancy rates, patient and resident mix and patient and resident rates by type for each Facility; 

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

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

        (f)    within
five (5) days after Lessee's receipt thereof, copies of all written communications received by Lessee from any regulatory agency relating to
(i) surveys of each Facility for purposes of licensure, Medicare and Medicaid certification and accreditation and (ii) any proceeding, formal or informal, with respect to cited
deficiencies with respect to services and activities provided and performed at each Facility, including patient and resident care, patient and resident activities, patient and resident therapy,
dietary, medical records, drugs and medicines, supplies, housekeeping and maintenance, or the condition of each Facility, and involving an actual or threatened warning, imposition of a fine or a
penalty in excess of Ten Thousand Dollars ($10,000), or likely to actually result in a suspension, termination or revocation of any Facility's license to be operated in accordance with its Primary
Intended Use; 

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

        (h)   immediately
upon Lessee's receipt thereof, copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Leased Property
or any Capital Additions or Lessee's use thereof not previously disclosed pursuant to subsection 25.1.2(f) above; and 

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

        25.1.3    Charges.    Lessee acknowledges that the failure to furnish Lessor with any of the certificates or
statements required by this Article XXV will cause Lessor to incur costs and expenses not contemplated hereunder, the exact amount of which is presently anticipated to be extremely difficult to
ascertain. Accordingly, if Lessee fails to furnish Lessor with any of the certificates or statements required by this Article XXV, Lessee shall pay to Lessor upon demand $1,000 for each such
failure as Additional Charges. The parties agree that this charge represents a fair and reasonable estimate of the costs that Lessor will incur by reason of Lessee's failure to furnish Lessor with
such certificates and statements; provided, however, that with respect to the first three (3) times in any thirty-six (36) consecutive month period when Lessee fails to
furnish Lessor with any such certificate or statement required by Article XXV, Lessee shall not be required to pay such $1,000 additional charge 

50

 

thereon
if Lessee delivers such certificate or statement required within five (5) Business Days after receipt of written notice from Lessor of Lessee's failure to deliver the same. 

ARTICLE XXVI.  

        26.1    Lessor's Right to Inspect and Show the Leased Property and Capital Additions.    Lessee shall permit Lessor
and its authorized representatives to (i) inspect the Leased Property and any Capital Additions and (ii) exhibit the same to prospective purchasers and lenders, and during the last
twelve (12) months of the Term applicable to each portion of the Leased Property and Capital Additions, to prospective lessees or managers, in each instance during usual business hours and
subject to any reasonable security, health, safety or confidentiality requirements of Lessee or any Legal Requirement or Insurance Requirement. Lessee shall cooperate with Lessor in exhibiting the
Leased Property and any Capital Additions to prospective purchasers, lenders, lessees and managers. 

ARTICLE XXVII.  

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

ARTICLE XXVIII.  

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

ARTICLE XXIX.  

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

ARTICLE XXX.  

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

ARTICLE XXXI.  

        31.1    Conveyance by Lessor.    Lessor may, without the consent or approval of Lessee, sell, transfer, assign, convey
or otherwise dispose of any or all of the Leased Property. If Lessor or any successor owner of the Leased Property shall sell, transfer, assign, convey or otherwise dispose of the Leased Property
other than as security for a debt, and the grantee or transferee of the Leased Property shall assume in writing all obligations of Lessor hereunder arising or accruing from and after the date of such
conveyance or transfer (which writing may be in the form of a general assumption of lease 

51

 

obligations
rather than a specific assumption of obligations under this Lease), Lessor or such successor owner, as the case may be, shall thereupon be released from all future liabilities and
obligations of Lessor with respect to such Leased Property under this Lease arising or accruing from and after the date of such sale, transfer, assignment or other disposition and all such future
liabilities and obligations with respect to such Leased Property shall thereupon be binding upon such purchaser, grantee, assignee or transferee. In the event of any such sale, transfer, assignment,
conveyance or other disposition (other than as security for a debt) of less than all of the Leased Property then subject to this Lease, the provisions of Section 31.2 hereof shall apply. 

        31.2    New Lease.    Lessor shall have the right, at any time and from time to time during the Term for any purpose,
by written notice to Lessee, to require Lessee to execute an amendment to this Lease whereby the Leased Property of one or more Facilities (individually, a "Separated Property" or collectively, the
"Separated Properties") is separated and removed from this Lease, and to simultaneously execute a substitute lease with respect to such Separated Property(ies), in which case: 

        31.2.1 Lessor
and Lessee shall execute a new lease (the "New Lease") for such Separated Property(ies), effective as of the date specified in Section 31.2.3 below (the
"New Lease Effective Date"), in the same form and substance as this Lease, but with such changes thereto as necessary to reflect the separation of the Separated Property(ies) from the balance of the
Leased Property, including specifically the following: 

        (a)   The
total monthly Minimum Rent payable under such New Lease shall be the total applicable monthly Allocated Minimum Rent with respect to such Separated Property(ies); 

        (b)   All
Minimum Rent rental escalations under the New Lease shall be at the times and in the amounts set forth in this Lease for Minimum Rent increases; and 

        (c)   The
New Lease shall provide that the lessee thereunder shall be responsible for the payment, performance and satisfaction of all duties, obligations and liabilities
arising under this Lease, insofar as they relate to the Separated Property(ies), that were not paid, performed and satisfied in full prior to the effective date of the New Lease (and Lessee under this
Lease shall also be responsible for the payment, performance and satisfaction of the aforesaid duties, obligations and liabilities not paid, performed and satisfied in full prior to the effective date
of such New Lease). 

        31.2.2 Lessor
and Lessee shall also execute an amendment to this Lease effective as of the New Lease Effective Date reflecting the separation of the Separated Property(ies)
from the balance of the Leased Property and making such modifications to this Lease as are necessitated thereby. 

        31.2.3 In
the case of any New Lease that is entered into in accordance with this Section 31.2 such New Lease shall be effective on the date which is the earlier of
(i) the date the New Lease is fully executed and delivered by the parties thereto and (ii) the date specified in the written notice from Lessor to Lessee requiring a New Lease as
described above, which date shall be no sooner than ten (10) days after the date such notice is issued. 

        31.2.4 Lessee
and Lessor shall take such actions and execute and deliver such documents, including without limitation the New Lease and an amendment to this Lease, as are
reasonably necessary and appropriate to effectuate the provisions and intent of this Section 31.2. 

        31.2.5 Each
party shall bear its own costs and expenses in connection with any New Lease entered into in accordance with this Section 31.2. 

ARTICLE XXXII.  

        32.1    Quiet Enjoyment.    So long as Lessee shall pay the Rent as the same becomes due and shall fully comply with
all of the terms of this Lease and fully perform its obligations hereunder, Lessee shall 

52

 

peaceably
and quietly have, hold and enjoy the Leased Property for the Term, free of any claim or other action by Lessor or anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances of record as of the date hereof, or the Commencement Date or created thereafter as permitted hereunder or thereafter consented to by Lessee. No failure by Lessor to comply with the
foregoing covenant shall give Lessee any right to cancel or terminate this Lease or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Lease, or to
fail to perform any other obligation of Lessee hereunder. Notwithstanding the foregoing, Lessee shall have the right, by separate and independent action to pursue any claim it may have against Lessor
as a result of a breach by Lessor of the covenant of quiet enjoyment contained in this Article. 

ARTICLE XXXIII.  

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

	If to Lessor:	 	Health Care Property Investors, Inc.

4675 MacArthur Court, Suite 900

Newport Beach, California 92660

Attn: Legal Department

Fax: (949) 221-0607
	

with a copy to:	
 	

Latham & Watkins

650 Town Center Drive, Suite 2000

Costa Mesa, California 92626

Attn: David C. Meckler, Esq.

Fax: (714) 755-8290
	

If to Lessee:	
 	

Moenium Holdings LLC

c/o Ensign Facility Services, Inc.

32232 Paseo Adelanto, Suite 100

San Juan Capistrano, CA 92675

Phone: (949) 487-9500, ext. 114

Fax: (949) 487-9300

Attn. General Counsel

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

ARTICLE XXXIV.  

        34.1    Appraiser.    If it becomes necessary to determine the Fair Market Value or Fair Market Rental of any Facility
for any purpose of this Lease or the Negative FMV of any Facility for purposes of Section 16.9, the same shall be determined by an independent appraisal firm, in which one or more 

53

 

of
the members, officers or principals of such firm are Members of the Appraisal Institute (or any successor organization thereto), as may be reasonably selected by Lessor (the "Appraiser"). Lessor
shall cause such Appraiser to determine the Fair Market Value, Fair Market Rental or Negative FMV of such Facility as of the relevant date (giving effect to the impact, if any, of inflation from the
date of the Appraiser's decision to the relevant date) and the determination of such Appraiser shall be final and binding upon the parties. A written report of such Appraiser shall be delivered and
addressed to each of Lessor and Lessee. To the extent consistent with sound appraisal practice as then existing at the time of any such appraisal, an appraisal of Fair Market Value for purposes of
this Lease shall take into account and shall give appropriate consideration to all three customary methods of appraisal (i.e., the cost approach, the sales comparison approach and the income
approach), and no one method or approach shall be deemed conclusive simply by reason of the nature of Lessor's business or because such approach may have been used for purposes of determining the fair
market value of the applicable Facility at the time of acquisition thereof by Lessor. This provision for determination by appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final and binding upon the parties except as otherwise provided by applicable law. Except as otherwise provided in
Section 16.9, Lessor and Lessee shall each pay one-half of the fees and expenses of the Appraiser and one-half of all other costs and expenses incurred in connection
with such appraisal. 

ARTICLE XXXV.  

        35.1    Lessee's Option to Purchase the Leased Property.    Provided no Event of Default, or event which, with notice
or lapse of time or both, would constitute an Event of Default, has occurred and is continuing hereunder, Lessee shall have the option to purchase the Leased Property of the Grand Court Facility upon
the expiration of the Fixed Term or the Extended Terms, if any, as the case may be, at the greater of (i) the Minimum Repurchase Price or (ii) the Fair Market Value. Lessee may exercise
such option to purchase the Leased Property of the Grand Court Facility by (i) opening an escrow (the "Escrow") with and by depositing 5% of the applicable purchase price (the "Opening Deposit)
and a copy of this Lease with a national title company reasonably acceptable to Lessor ("Escrow Holder") and giving written notice to Lessor of such deposit with Escrow Holder no earlier than eighteen
(18) months and not less than twelve (12) months prior to the expiration of the Fixed Term or the Extended Term, as applicable, and (ii) delivering to Lessor concurrent with such
notice a reaffirmation of the Guaranty executed by Guarantor stating, in substance, that Guarantor's obligations under the Guaranty shall extend to the purchase contract formed by Lessor and Lessee
upon proper and timely exercise of such option. If Lessee shall not be entitled to exercise such option (e.g., by reason of an Event of Default) or shall be entitled to exercise the same but shall
fail to do so within the time and in the manner herein provided, such option shall lapse and thereafter not be exercisable by Lessee. No failure by Lessor to notify Lessee of any defect in any
attempted exercise of the foregoing option shall be deemed a waiver by Lessor of the right to insist upon Lessee's exercise of such option in strict
accordance with the provisions hereof. In the event that Lessee shall properly and timely exercise such option, then such transaction shall be consummated on or within ten (10) days after the
expiration of the Fixed Term or Extended Term, as applicable (the "Outside Closing Date"). 

54

   
        35.2    Defaults.    

        35.2.1    Liquidated Damages.    IF, FOLLOWING A VALID AND PROPER EXERCISE OF THE FOREGOING OPTION, LESSEE FAILS TO
COMPLETE THE PURCHASE OF THE LEASED PROPERTY OF THE GRAND COURT FACILITY AND SUCH FAILURE CONSTITUTES A BREACH HEREOF, THEN LESSOR, AT ITS OPTION, MAY TERMINATE THE PURCHASE CONTRACT FORMED BY
LESSEE'S EXERCISE OF SUCH OPTION AND THE ESCROW BY GIVING WRITTEN NOTICE TO LESSEE AND ESCROW HOLDER AND, THEREUPON, THE ESCROW SHALL BE CANCELLED, ALL DOCUMENTS SHALL BE RETURNED TO THE RESPECTIVE
PARTIES WHO DEPOSITED THE SAME, AND LESSEE SHALL PAY ALL TITLE AND ESCROW CANCELLATION CHARGES AND ALL OF LESSOR'S LEGAL FEES AND COSTS. IN ADDITION, LESSOR AND LESSEE AGREE THAT, BASED ON THE
CIRCUMSTANCES NOW EXISTING, KNOWN OR UNKNOWN, IT WOULD BE EXCESSIVELY COSTLY AND IMPRACTICABLE TO ESTABLISH LESSOR'S DAMAGES BY REASON OF LESSEE'S DEFAULT RESULTING IN A FAILURE OF THE ESCROW TO
CLOSE, AND, THEREFORE, LESSOR AND LESSEE AGREE THAT IT WOULD BE REASONABLE TO AWARD LESSOR LIQUIDATED DAMAGES IN THE AMOUNT OF THE OPENING DEPOSIT PLUS ANY ACCRUED INTEREST ON THE OPENING DEPOSIT. BY
THEIR RESPECTIVE INITIALS SET FORTH BELOW, LESSOR AND LESSEE ACKNOWLEDGE AND AGREE THAT THE OPENING DEPOSIT, PLUS ANY INTEREST ACCRUED ON THE OPENING DEPOSIT, TOGETHER WITH PAYMENT OF LESSOR'S LEGAL
FEES AND COSTS, IS REASONABLE AS LIQUIDATED DAMAGES FOR A DEFAULT OF LESSEE UNDER THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE OF SUCH OPTION THAT RESULTS IN A FAILURE OF THE ESCROW TO CLOSE AND
SHALL BE IN LIEU OF ANY OTHER RELIEF, RIGHT OR REMEDY, AT LAW OR IN EQUITY, TO WHICH LESSOR MIGHT OTHERWISE BE ENTITLED BY REASON OF A LESSEE'S DEFAULT THAT RESULTS IN A FAILURE OF THE ESCROW TO
CLOSE, BUT NOTHING CONTAINED HEREIN SHALL LIMIT LESSOR'S RIGHTS AND REMEDIES FOR LESSEE'S DEFAULT OCCURRING AFTER THE CLOSE OF ESCROW OR FOR LESSEE'S DEFAULT UNDER THIS LEASE. ESCROW HOLDER IS HEREBY
AUTHORIZED AND INSTRUCTED TO RELEASE THE OPENING DEPOSIT PLUS ACCRUED INTEREST THEREON TO LESSOR UPON THE DELIVERY OF UNILATERAL WRITTEN INSTRUCTIONS THEREOF TO ESCROW HOLDER BY LESSOR, AND ESCROW
HOLDER IS HEREBY RELIEVED OF ALL LIABILITY THEREFOR. IF LESSEE ATTEMPTS TO INTERFERE WITH THE RELEASE OF ANY SUCH SUMS BY ESCROW HOLDER TO LESSOR, OR COMMENCES ANY ACTION AGAINST LESSOR OR THE GRAND
COURT FACILITY ARISING OUT OF THIS ARTICLE, THEN LESSOR SHALL NOT BE LIMITED IN THE AMOUNT OF DAMAGES IT MAY RECOVER FROM LESSEE. 

        Lessor's
Initials:                         /s/
EJH                         

        Lessee's
Initials:                         /s/
CRC                         

        35.2.2    Other Defaults.    A default under any other lease or other agreement or instrument, including any purchase
contract formed upon exercise of any other option, with or in favor of Lessor or any Affiliate of Lessor and made by or with Lessee or any Affiliate of Lessee where such default is not cured within
the applicable time period, if any, shall be deemed a default under this Article XXXV and the purchase contract formed upon proper exercise by Lessee of the option herein provided, entitling
Lessor, as seller, at its option, to terminate such purchase contract and the Escrow upon (i) written notice to Lessee explicitly stating its intent to terminate the purchase contract (in
addition to any notice required to be given in connection with such other default), (ii) the expiration of the longer of two (2) business days or the applicable cure period for such
default, and (iii) Lessee's failure to cure such other default within such time period; and upon any such termination the Opening Deposit plus all accrued interest thereon shall be paid over to
Lessor as provided in Section 35.2.1 above. 

55

 

        35.3    Escrow Provisions.    

        35.3.1    Opening of Escrow.    Escrow shall be deemed open when the Opening Deposit and a copy of this Lease are
delivered to Escrow Holder. 

        35.3.2    General and Supplemental Instructions.    Lessee and Lessor each shall execute, deliver and be bound by such
further escrow instructions or other instruments as may be reasonably requested by the other party or by Escrow Holder from time to time, so long as the same are consistent with the provisions of this
Lease. 

        35.3.3    Disposition of Opening Deposit.    Escrow Holder shall hold the Opening Deposit in interest-bearing
accounts. All interest earned on the Opening Deposit shall accrue to Lessee's benefit unless Lessor is entitled thereto under Section 35.2.1. With full knowledge that Escrow shall not have
closed, Lessee nevertheless agrees to relieve Escrow Holder of all liabilities in making such payment and for any failure to recover said sum in the event that Escrow does not close at anytime
thereafter. The Opening Deposit plus interest thereon shall be (i) applied against the purchase price (as herein determined) if Escrow closes, (ii) returned to Lessee in full if Escrow
does not close for any reason other than Lessee's default, or (iii) be paid to Lessor as nonrefundable liquidated damages under Section 35.2.1, if Escrow fails to close under the
provisions of hereof as a result of Lessee's default. 

        35.3.4    Closing Funds.    At least one (1) business day before the Close of Escrow (as hereinafter defined),
Escrow Holder shall calculate and Lessee shall wire cash into Escrow (using wiring instructions reasonably satisfactory to Escrow Holder) in an amount which, when added to the Opening Deposit
and all accrued interest shall equal the purchase price for the Leased Property of the Grand Court Facility plus any other sums payable by Lessee pursuant to the provisions hereof. 

        35.3.5    Close of Escrow.    Escrow shall close on the Outside Closing Date. The term "Close of Escrow" as used in
this Article shall mean the time and date that an appropriate deed or other conveyance document conveying Lessor's entire interest in the Leased Property of the Grand Court Facility, subject to the
permitted liens and encumbrances described in Article XVIII hereof, is recorded in appropriate records of the county in which the Leased Property of the Grand Court Facility is located. The
Outside Closing Date shall not be extended for any reason. 

        35.3.6    Closing Costs.    The closing costs of consummating the purchase of the Leased Property of the Grand Court
Facility shall be paid by Lessee as provided in Article XVIII. 

        35.3.7    Assurances.    At any time prior to Close of Escrow, Lessor may request Lessee to provide reasonable
assurances that it will be able to consummate the purchase of the Leased Property of the Grand Court Facility, including that Lessee has a firm, written commitment from a reputable lending institution
to finance such purchase and/or has sufficient liquidity to pay any balance of the purchase price owing by Lessee on the date of the Close of Escrow; provided, however, that in no event shall Lessee
be entitled to exercise such option conditioned upon Lessee obtaining any such financing. If Lessee does not provide such assurances to Lessor within fifteen (15) days of request therefor, such
event shall be considered a default under this Article rendering the exercise of the option to purchase null and void, causing any such option to lapse and entitling Lessor to the liquidated damages
set forth in Section 35.3. 

        35.4    Lessor's Election of 1031 Exchange.    

        35.4.1    In
the event that Lessee exercises its option to purchase as provided in this Article XXXV, Lessor may elect to sell the Leased Property of the Grand Court
Facility to Lessee in the form of a tax-deferred exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended 

56

 

("1031
Exchange"). In the event that Lessor shall so elect, Lessor shall give written notice to Lessee and Escrow Holder of such election and the following shall apply: 

        35.4.1.1    Simultaneous Exchange.    Lessor may attempt to identify before the Close of Escrow other property which
qualifies as "like-kind" property for a 1031 Exchange (the "Target Property") by giving written notice to Lessee and Escrow Holder and identifying to Escrow Holder the Target Property
prior to the Close of Escrow. 

        35.4.1.2    Non-simultaneous Exchange.    If Lessor has not so identified the Target Property before the
Close of Escrow, then Lessor shall proceed with the Close of Escrow unless Lessor at its option enters into an exchange agreement with an accommodation party ("Accommodator") in order to facilitate a
non-simultaneous or so-called "Starker deferred" exchange. If an Accommodator is so designated, Lessor shall cause the Accommodator (i) to acquire title to the Leased
Property of the Grand Court Facility from Lessor at or before the Close of Escrow and, (ii) to transfer title in the Leased Property of the Grand Court Facility to Lessee on the Close of Escrow
for the Minimum Purchase Price. 

        35.4.1.3    Expenses and Documents.    Lessee shall fully cooperate with any such 1031 Exchange, including but not
limited to executing and delivering additional documents requested or approved by Lessor; provided, that Lessee shall not be required to incur any additional costs or liabilities or financial
obligation as a consequence of any of the foregoing exchange transactions. 

ARTICLE XXXVI.  

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

        36.2    Attornment.    If Lessor's interest in the Leased Property and/or any Capital Additions is sold or conveyed
upon the exercise of any remedy provided for in any Facility Mortgage, or otherwise by operation of law: (i) at the new owner's option, Lessee shall attorn to and recognize the new owner as
Lessee's Lessor under this Lease or enter into a new lease substantially in the form of this Lease with the new owner, and Lessee shall take such actions to confirm the foregoing within ten
(10) days after request; and (ii) the new owner shall not be (a) liable for any act or omission of Lessor under this Lease occurring prior to such sale or conveyance, or
(b) subject to any offset, abatement or reduction of rent because of any default of Lessor under this Lease occurring prior to such sale or conveyance; provided, however, that in no event shall
any modifications increase Lessee's monetary obligations hereunder or decrease any of Lessee's rights under this Lease. 

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ARTICLE XXXVII.  

        37.1    Hazardous Substances and Mold.    

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

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

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

        37.3    Remediation.    If Lessee becomes aware of a violation of any Legal Requirement relating to any Hazardous
Substance in, on, under or about the Leased Property or any Capital Additions or any adjacent property thereto, or if Lessee, Lessor or the Leased Property or any Capital Additions becomes subject to
any order of any federal, state or local agency to repair, close, detoxify, decontaminate or otherwise remediate the Leased Property and any Capital Additions, Lessee shall immediately notify Lessor
of such event and, at its sole cost and expense, cure such violation or effect such repair, closure, detoxification, decontamination or other remediation. Upon the discovery of any Mold or Mold
Conditions in or about the Leased Property or any Capital Additions, Lessee shall also 

58

 

immediately
notify Lessor of such event and, its sole cost and expense, hire a trained and experienced Mold remediation contractor(s) to completely clean-up and remove from the Leased
Property and any Capital Additions all Mold or Mold Conditions in strict compliance with all Mold Remediation Requirements. If Lessee fails to implement and diligently pursue any such cure, repair,
closure, detoxification, decontamination or other remediation, Lessor shall have the right, but not the obligation, to carry out such action and to recover from Lessee all of Lessor's costs and
expenses incurred in connection therewith. 

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

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

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

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

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

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

        37.5    Inspection.    Lessor shall have the right, from time to time, and upon not less than five (5) days'
written notice to Lessee, except in the case of an emergency in which event no notice shall be required, to conduct an inspection of the Leased Property and all Capital Additions to determine the
existence or presence of Hazardous Substances, Mold or any Mold Condition on or about the Leased Property or any such Capital Additions. Lessor shall have the right to enter and inspect the Leased 

59

 

Property
and all Capital Additions, conduct any testing, sampling and analyses it deems necessary and shall have the right to inspect materials brought into the Leased Property or any such Capital
Additions. Lessor may, in its discretion, retain such experts to conduct the inspection, perform the tests referred to herein, and to prepare a written report in connection therewith. All costs and
expenses incurred by Lessor under this Section shall be paid on demand as Additional Charges by Lessee to Lessor. Failure to conduct an inspection or to detect unfavorable conditions if such
inspection is conducted shall in no fashion be intended as a release of any liability for conditions subsequently determined to be associated with or to have occurred during Lessee's tenancy. Lessee
shall remain liable for any environmental condition, Mold or Mold Condition related to or having occurred during or prior to its tenancy regardless of when such conditions are discovered and
regardless of whether or not Lessor conducts an inspection at the termination of this Lease. The obligations set forth in this Article shall survive the expiration or earlier termination of the Lease. 

ARTICLE XXXVIII.  

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

ARTICLE XXXIX.  

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

ARTICLE XL.  

        40.1    Subdivision.    If the Land is in excess of that which is required to operate the Facilities in accordance
with the Primary Intended Use, Lessor may subdivide the Land and amend this Lease to include only so much of the Land as is necessary to operate each Facility in accordance with its Primary Intended
Use. If Lessor subdivides the Land there shall be no change in the Rent payable hereunder. After any such subdivision, Lessee shall have no rights to any land which is no longer part of the Leased
Property and Lessor may sell, lease or develop any land which is no longer part of the Leased Property. If Lessor elects to subdivide the Land Lessee shall cooperate with Lessor and take all actions
reasonably requested by Lessor to effect such subdivision. 

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ARTICLE XLI.  

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

ARTICLE XLII.  

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

        42.2    Administrative Expenses.    In addition to the provisions of Section 42.1 above, and any other
provisions of this Lease that specifically require Lessee to reimburse, pay or indemnify against Lessor's attorneys' fees, Lessee shall pay, as Additional Charges, all costs and expenses (including
attorneys' fees and costs) incurred by Lessor in connection with (a) the administration of this Lease, including all costs and expenses incurred by Lessor in connection with responding to
requests by Lessee for Transfers (including the review, negotiation or documentation thereof) or any other matters over which Lessor has review or approval rights, the review of any letters of credit,
but excluding ordinary day-to-day costs and expenses such as generating billing statements and general lease maintenance, (b) any revisions, extensions, renewals or
"workouts" of this Lease, (c) the exercise of any right or enforcement of any obligation of Lessee to purchase the Leased Property, or any portion thereof, and (d) the enforcement or
satisfaction by Lessor of any other obligations of Lessee under this Lease, including preparation of notices of an Event of Default and the collection of past due Rent. 

        42.3    Annual Inspection Costs.    Pursuant to Section 26.1 of this Lease, Lessor has the right (but not the
obligation) to enter upon the Leased Property of each Facility for purposes of inspecting the same and any Capital Additions. In addition to any other provisions of this Lease requiring Lessee to
reimburse Lessor the costs of performing an inspection of the Leased Property or any Capital Additions thereon, including pursuant to Section 37.5, in the event that Lessor (or its
representative) shall make an inspection of the Leased Property of any Facility or any Capital Additions thereto, Lessee shall reimburse to Lessor within ten (10) days after Lessor's written
request therefor, as an Additional Charge hereunder, the costs incurred by Lessor in connection with any such inspection of a Facility, including the costs or fees of any consultant engaged by Lessor
to conduct such inspection and reasonable travel expenses; provided, however, that such reimbursement pursuant to this Section 42.3 shall not exceed One Thousand Dollars ($1,000.00) per
Facility per Lease Year. 

ARTICLE XLIII.  

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

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ARTICLE XLIV.  

        44.1    Submission to Arbitration.    

        44.1.1    Except
as provided in Section 44.1.2 below, any controversy, dispute or claim of whatsoever nature arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Lease, including any claim based on contract, tort or statute, shall be determined by final and binding, confidential arbitration in accordance with the
then current CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration of Business Disputes ("CPR"), by a sole arbitrator selected from among the CPR Panel of
Distinguished Neutrals; provided, however, that if the CPR (or any successor organization thereto) no longer exists, then such arbitration shall be administered by the American Arbitration Association
("AAA") in accordance with its then-existing Commercial Arbitration Rules, and the sole arbitrator shall be selected in accordance with such AAA rules. Any arbitration hereunder shall be
governed by the United States Arbitration Act, 9 U.S.C. 1-16 (or any successor legislation thereto), and judgment upon the award rendered by the arbitrator may be entered by any state or
federal court having jurisdiction thereof. Neither Lessor, Lessee nor the arbitrator shall disclose the existence, content or results of any arbitration hereunder without the prior written consent of
all parties; provided, however, that either party may disclose the existence, content or results of any such arbitration to its partners, officers, directors, employees, agents, attorneys and
accountants and to any other Person to whom disclosure is required by applicable Legal Requirements, including pursuant to an order of a court of competent jurisdiction. Unless otherwise agreed by the
parties, any arbitration hereunder shall be held at a neutral location selected by the arbitrator in the major metropolitan area in the State closest in proximity to the Leased Property. The cost of
the arbitrator and the expenses relating to the arbitration (exclusive of legal fees) shall be borne equally by Lessor and Lessee unless otherwise specified in the award of the arbitrator. Such fees
and costs paid or payable to the arbitrator shall be included in "costs and reasonable attorneys' fees" for purposes of Article XLII and the arbitrator shall specifically have the power to award to
the prevailing party pursuant to such Article XLII such party's costs and expenses incurred in such arbitration, including fees and costs paid to the arbitrator. 

        44.1.2    The
provisions of this Article XLIV shall not apply to: 

        (a)   Any
unlawful detainer or other similar summary or expedited proceeding for ejectment or recovery of possession of the Leased Property and Capital Additions of any
Facility instituted by Lessor in accordance with applicable Legal Requirements as the result of an Event of Default or alleged Event of Default by Lessee pursuant to this Lease. In addition, if
permitted by applicable Legal Requirements, Lessor shall be entitled in connection with any such proceeding to seek any damages to which it is entitled at law, including those set forth in
Article XVI. 

        (b)   Any
specific controversy, dispute, question or issue as to which this Lease specifically provides another method of determining such controversy, dispute, question or
issue and provides that a determination pursuant to such method is final and binding, unless both Lessor and Lessee agree in writing to waive such procedure and proceed instead pursuant to this
Article XLIV. 

        (c)   Any
request or application for an order or decree granting any provisional or ancillary remedy (such as a temporary restraining order or injunction) with respect to any
right or obligation of either party to this Lease, and any preliminary determination of the underlying controversy, dispute, question or issue as is required to determine whether or not to grant such
relief. A final and binding determination of such underlying controversy, dispute, question or issue shall be made by an arbitration conducted pursuant to this Article XLIV after an appropriate
transfer or reference to the arbitrator selected pursuant to this Article XLIV upon motion or application of either party hereto. Any ancillary or provisional relief which is granted pursuant to this
clause (c) shall continue in effect pending an arbitration determination and entry of judgment thereon pursuant to this Article XLIV. 

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   ARTICLE XLV.  

        45.1    Miscellaneous.    

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

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

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

        45.1.4    Licenses and Operation Transfer Agreements.    Upon the expiration or earlier termination of the Term
applicable to any Facility, Lessee shall use its best efforts to transfer to Lessor or Lessor's nominee such Facility in a fully operational condition and shall cooperate with Lessor or Lessor's
designee or nominee in connection with the processing by Lessor or Lessor's designee or nominee of any applications for all licenses, operating permits and other governmental authorization, all
contracts, including contracts with governmental or quasi-governmental entities, business records, data, patient and resident records, and patient and resident trust accounts, which may be necessary
or useful for the operation of such Facility; provided that the costs and expenses of any such transfer or the processing of any such application shall be paid by Lessor or Lessor's designee or
nominee. Lessee shall not commit any act or be remiss in the undertaking of any act that would jeopardize the licensure or
certification of such Facility, and Lessee shall comply with all requests for an orderly transfer of the same upon the expiration or early termination of the Term applicable to such Facility. Without
limiting the generality of the foregoing, if requested by Lessor or a proposed replacement operator for such Facility, Lessee hereby agrees to enter into a reasonable operations transfer agreement
with such replacement operator as is customary in the transfer to a new operator of the operations of a facility similar to such Facility. Lessee shall not unreasonably withhold, condition or delay
its consent to entering into any interim subleases or management agreements as may be necessary to effectuate an early transfer of the operations of such Facility prior to the time that such
replacement operator holds all licenses and permits from all applicable governmental authorities with jurisdiction necessary to operate such Facility for its Primary Intended Use. In addition, upon
request, Lessee shall promptly deliver copies of all books and records relating to the Leased Property and all Capital Additions of such Facility and operations thereon to Lessor or Lessor's designee
or nominee. Lessee shall indemnify, defend, protect and hold harmless Lessor from and against any loss, damage, cost or expense incurred by Lessor or Lessor's designee or nominee in connection with
the correction of any and all deficiencies of a physical nature identified by any governmental authority responsible for licensing the Leased Property and all Capital Additions in the course of any
change of ownership inspection and audit. 

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

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        45.1.6    Termination Date.    If this Lease is terminated by Lessor or Lessee under any provision hereof with respect
to any one or more (including all, if applicable) of the Facilities, and upon the expiration of the Term applicable to a Facility (collectively, the "termination date"), the following shall pertain: 

        (a)   Lessee
shall vacate and surrender the Leased Property, Lessee's Personal Property other than the Removable Personal Property, which is subject to the option granted to
Lessor pursuant to Section 6.4 and all Capital Additions relating to the applicable Facility to Lessor in the condition required by Section 9.1.4. Prior to such vacation and surrender,
Lessee shall remove any items which Lessee is permitted or required to remove hereunder. Lessee shall, at Lessee's cost, repair any damage to such Leased Property, any Lessee's Personal Property as to
which Lessor has exercised its purchase option pursuant to Section 6.4, and any Capital Additions caused by such vacation and/or removal of any items which Lessee is required or permitted
hereunder to remove. Any items which Lessee is permitted to remove but fails to remove prior to the surrender to Lessor of such Leased Property, Lessee's Personal Property and Capital Additions shall
be deemed abandoned by Lessee, and Lessor may retain or dispose of the same as Lessor sees fit without claim by Lessee thereto or to any proceeds thereof. If Lessor elects to remove and dispose of any
such items abandoned by Lessee, the cost of such removal and disposal shall be an Additional Charge payable by Lessee to Lessor upon demand. 

        (b)   Without
limiting the provisions of Section 45.1.1 above, upon any such termination or expiration of this Lease with respect to a Facility, the following shall
pertain: 

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

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

        (iii)  Lessee
shall remain responsible for any and all Impositions imposed against the Leased Property, the Personal Property and any Capital Additions with a lien date prior
to the termination date (irrespective of the date of billing therefor) and for its pro rata share of any Impositions imposed in respect of the tax-fiscal period during which the Term
terminates as provided in Section 4.1.7, and Lessee shall indemnify and hold Lessor harmless with respect to any claims for such Impositions or resulting from nonpayment thereof. 

        (iv)  Lessee
shall (y) execute all documents and take any actions reasonably necessary to (1) cause the transfer to Lessor of all of Lessee's Personal Property
(other than the 

64

 

Removable
Personal Property) and any Capital Additions not owned by Lessor, as provided in Section 6.3 and any Removable Personal Property upon exercise by Lessor of the purchase option set
forth in Section 6.4 and upon payment of the purchase price therefor, in each case free of any encumbrance, as provided in Section 6.3 and (2) remove this Lease and/or any
memorandum hereof as a matter affecting title to the Leased Property as provided in Article XXXVIII and (z) comply with its covenants set forth in Section 45.1.4. 

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

        (vi)  Lessee
shall remain responsible for and shall promptly pay to Lessor any Additional Charge owed to Lessor pursuant to Section 1.6.9. 

        45.1.7    Governing Law.    THIS LEASE (AND ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE (WITHOUT REGARD OF PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. 

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

        LESSOR'S
INITIALS:                         /s/
EJH                         

        LESSEE'S
INITIALS:                         /s/
CRC                         

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

65

 

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

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

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

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

        45.1.16    Interpretation.    Both Lessor and Lessee have been represented by counsel and this Lease and every
provision hereof has been freely and fairly negotiated. Consequently, all provisions of this Lease shall be interpreted according to their fair meaning and shall not be strictly construed against any
party. 

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

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

ARTICLE XLVI.  

        46.1    Provisions Relating to Master Lease.    Lessor and Lessee hereby acknowledge and agree that, except as
otherwise expressly provided herein to the contrary, this Lease is and the parties intend the same for all purposes to be treated as a single, integrated and indivisible agreement. Lessee acknowledges
that in order to induce Lessor to lease the Leased Property of each Facility to Lessee and as a condition thereto, Lessor insisted that the parties execute this Lease covering all of the Facilities in
a single, integrated and indivisible agreement. 

ARTICLE XLVII.  

        47.1    Conditions t Continued Effectiveness of Lease.    The continued effectiveness of this Lease and the
obligations of Lessor and Lessee hereunder are expressly conditioned upon Lessor's acquisition of the Grand Court Facility, which such acquisition (or decision, not to acquire the Grand Court
Facility) shall be at Lessor's sole and absolute discretion. If such acquisition does not occur on or before February 21, 2003 for any reason whatsoever, Lessor shall have the right to
terminate this Lease. Upon any termination of this Lease pursuant to this Article XLVII, neither party shall have any further obligation to the other hereunder. 

[Signature
Page Follows] 

66

 

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

	LESSEE:	 	LESSOR:
	

MOENIUM HOLDINGS LLC, a Nevada limited liability company	
 	

HEALTH CARE PROPERTY INVESTORS, INC., Maryland corporation, d/b/a in the State of Arizona under the fictitious name of HC PROPERTIES, INC.
	By: The Ensign Group, Inc., a Delaware corporation, its sole Member	 	 	 
	By:	/s/  CHRISTOPHER R. CHRISTENSEN      	 	By:	/s/  EDWARD J. HENNING      
	 	
	 	 	

	 	Christopher R. Christensen	 	Name:	Edward J. Henning
	 	President	 	Title:	Senior Vice President

67

 
EXHIBIT A  

[Legal
Description of the Land] 

68

   EXHIBIT B-1  

List of Facilities, Facility Description and Primary Intended Use,

Allocated Initial Investment, and Reserve Amount  

	Facility
 
	 	Facility Description

and Primary Intended Use
	 	Allocated Initial

Investment
	 	Reserve Amount

	Grand Court Mesa

262 East Brown Road

Mesa, Arizona

(Grand Court Facility)	 	Supervisory care facility consisting of 50 supervisory care units and an independent living facility consisting of 127 units	 	$4,500,000; plus Buyer's Excess Transaction costs	 	An annual amount equal to Two Hundred Fifty Dollars ($250.00) per unit

B-1

 
EXHIBIT B-2  

MINIMUM RENT SCHEDULE

(GRAND COURT FACILITY)  

        1.     Monthly
Minimum Rent for the Grand Court Facility for the Term (including the Extended Terms, if any) shall be as follows: 

        (a)   For
the period from the Commencement Date of this Lease with respect to the Grand Court Facility through the expiration of the first (1st) Lease Year, monthly "Allocated
Minimum Rent" shall be equal to One-Twelfth (1/12th) of the product of (i) the Lease Rate, times (ii) the Allocated Initial Investment as of the Commencement Date for the
Grand Court Facility. The first monthly payment of Allocated Minimum Rent for the Grand Court shall be payable on the Commencement Date for the Grand Court Facility (prorated as to any partial
calendar month at the beginning of the Term). 

        (b)   The
monthly Allocated Minimum Rent determined pursuant to subsection (a) above shall be increased from time to time on the date of any payment, funding, accrual,
reimbursement or crediting of any of Buyer's Excess Transaction Costs by Lessor, as Buyer, under the Contract of Acquisition following the Commencement Date for the Grand Court Facility by an amount
equal to One-Twelfth (1/12th) of the product of (i) the amount of such post-Commencement Date payment, funding, accrual, reimbursement or crediting by Lessor of any such
Buyer's Excess Transaction Costs, times (ii) the Lease Rate. 

        (c)   In
addition to the increases provided for in clause (b) above, commencing upon the expiration of the first (1st) Lease Year of the Fixed Term, and upon the
expiration of each Lease Year thereafter during the Term (including the Extended Terms, if any) for the Grand Court Facility, the then current monthly Allocated Minimum Rent shall be increased for the
ensuing Lease Year by a percentage equal to the lesser of (i) three percent or (ii) the applicable CPI Increase. 

        2.     If
any adjustment or calculation provided for in either subparagraphs 1(b) or 1(c) shall not have been made as of the commencement of the applicable Lease Year, Lessee
shall continue to pay monthly Allocated Minimum Rent at the last rate applicable until Lessee receives Lessor's notice as to such adjustment. Within ten (10) days after Lessee's receipt of
Lessor notice, Lessee shall pay to Lessor an amount equal to the new monthly Allocated Minimum Rent times the number of months since the commencement of the applicable Lease Year to the date of
receipt of Lessor's notice, less the aggregate amount paid by Lessee on account of monthly Allocated Minimum Rent for the same period. Thereafter, Lessee shall pay monthly Allocated Minimum Rent for
the applicable period at the new rate set forth in Lessor's notice. 

B-2

   EXHIBIT C  

List of Lessor's Personal Property  

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

C-1

Schedule 1

Itemization of Lessor's Personal Property  

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

        Schedule 1
to Exhibit C 

   EXHIBIT D  

Form of Amendment to Lease  

 FIRST AMENDMENT TO LEASE  

        This First Amendment to Lease ("Amendment") is dated as of
                                         
       , 200     by and
between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation ("Lessor"), and
                                         
       , a
                                         
        ("Lessee"). 

RECITALS  

        A.    Lessor
and Lessee entered into a Master Lease dated as of
                                         
        200     (the "Lease") for
the
                                         
        facility located in
                                         
       . 

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

AGREEMENT  

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

        1.     The
Commencement Date of the Lease is                         ; 

        2.     The
Term of the Lease shall end on                         ; 

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

        4.     Subject
to further upward adjustments as provided in Section 3.1 of the Lease, the initial monthly Minimum Rent payable under the Lease shall be the sum of
$            . 

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

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

	HEALTH CARE PROPERTY INVESTORS, INC., a	 	 	 	 	 
	Maryland corporation	 	 	 	 	,
	 	 	 	 	
	 	 
	 	 	 	a	 	 	 
	 	 	 	 	
	 	 
	

By:	

 	
 	

By:	

 	
 	

 
	 	
	 	 	
	 	 
	Name:	 	 	Name:	 	 	 
	 	
	 	 	
	 	 
	Title:	 	 	Title:	 	 	 
	 	
	 	 	
	 	 

D-1

 

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

	 	 	 	 	 	 	,
	 	 	 	
	 	 
	 	 	 	a	 	 
	 	 	 	 	
	 	 
	

 	

 	
 	

By:	

 	
 	

 
	 	 	 	 	
	 	 
	 	 	 	Name:	 	 	 
	 	 	 	 	
	 	 
	 	 	 	Title:	 	 	 
	 	 	 	 	
	 	 

D-2

EXHIBIT E  

 Form Of

Irrevocable Standby Letter Of Credit  

Health
Care Property Investors, Inc.

4675 MacArthur Boulevard, Suite 900

Newport Beach, California 92660 

	Date:	 
	 	Letter of Credit No.:	 

	

 	

 	
 	

Expiration Date:	

 

GENTLEMEN:

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

	1)
	A
certificate purported to be executed by a representative of Health Care Property Investors, Inc. ("Lessor") stating the amount for which a draw under this letter of credit is
made and that: (a)                          ("Lessee") has committed an Event of Default under the lease dated
                        , between Lessor
and Lessee; or (b) that Lessee or an affiliate of Lessee has committed an event of default under any other lease or agreement or other instrument now or hereafter made with or in favor of
Lessor or an affiliate of Lessor; or (c) an event or circumstance has occurred which with notice or passage of time, or both, would constitute an Event of Default or an event of default under
any such other lease or agreement or instrument, notwithstanding that transmittal of any such notice may be barred by applicable law; or (d) that a replacement letter of credit for this
instrument has not been supplied prior to thirty (30) days in advance of the expiration of this instrument for the account of Lessor.

	2)
	The
original letter of credit must accompany all drafts unless a partial draw is presented, in which case the original must accompany the final draft. 

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

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

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

        Any
draft drawn hereunder must bear the legend "Drawn under                          Letter of Credit Number
                         dated
                        . Except so far as otherwise expressly stated, this letter of credit is subject to the "Uniform
Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Brochure No. 500." We hereby agree with you and all persons negotiating such drafts that all drafts drawn and negotiated in compliance with the
terms of this letter of credit will be duly honored upon presentment and delivery of the documents specified above by 

 

certified
or registered mail to                          located at
                         if negotiated not later that 2:00 p.m. on or before the
expiration date shown above. Very truly yours, 

	By	 
	 	 
	

Its	

 
	
 	

 

2

QuickLinks

MASTER LEASE between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation, d/b/a in the State of Arizona under the fictitious name of HC PROPERTIES, INC. as Lessor AND MOENIUM HOLDINGS LLC, as Lessee Dated
as of January , 2003

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]