AMENDED AND RESTATED MASTER LEASE

Lease Agreement

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HEALTH CARE PROPERTY INVESTORS, INC | WESTMINSTER HCP, LLC | LH ASSISTED LIVING, LLC, | SUMMERVILLE AT COBBCO, INC., | SUMMERVILLE AT HILLSBOROUGH, L.L.C., | SUMMERVILLE AT OCOEE, INC.,

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Title: AMENDED AND RESTATED MASTER LEASE
Governing Law: California Date: 11/9/2007
Industry: Healthcare Facilities Law Firm: Latham & Watkins LLP; Sector: Healthcare

AMENDED AND RESTATED MASTER LEASE, Parties: health care property investors inc , westminster hcp llc , lh assisted living llc , summerville at cobbco inc. , summerville at hillsborough l.l.c. , summerville at ocoee inc.

Exhibit 10.24.1

[Fairfield, CA]

[Hillsborough, NJ]

[Manahawkin, NJ]

[Ocoee, FL]

[Ontario, CA]

[Port Orange, FL]

[Torrington, CT]

[Voorhees, NJ]

[Westminster, MD]

[Woodbridge, VA]

AMENDED AND RESTATED MASTER LEASE

among

HEALTH CARE PROPERTY INVESTORS, INC., and

WESTMINSTER HCP, LLC

as their interests may appear, as Lessor

AND

LH ASSISTED LIVING, LLC,

SUMMERVILLE AT COBBCO, INC.,

SUMMERVILLE AT HILLSBOROUGH, L.L.C.,

SUMMERVILLE AT OCOEE, INC.,

SUMMERVILLE AT PORT ORANGE, INC.,

SUMMERVILLE AT PRINCE WILLIAM, INC.,

SUMMERVILLE AT STAFFORD, L.L.C.,

SUMMERVILLE AT VOORHEES, L.L.C.,

AND SUMMERVILLE AT WESTMINSTER, INC.

collectively, as Lessee

Dated as of April 20, 2005

TABLE OF CONTENTS

			Page

ARTICLE I.			1

	1.1	Leased Property; Term	1

ARTICLE II.			2

	2.1	Definitions	2

ARTICLE III			18

	3.1	Rent	18
	3.2	Additional Charges	19
	3.3	Late Payment of Rent	19
	3.4	Net Lease	21
	3.5	Separate Account	21

ARTICLE IV.			21

	4.1	Impositions	21
	4.2	Utilities	22
	4.3	Insurance	22
	4.4	Impound Account	22
	4.5	Tax Service	22

ARTICLE V.			23

	5.1	No Termination, Abatement, etc	23
	5.2	Termination with Respect to Fewer than All of the Facilities	23
	5.3	Abatement Procedures	23

ARTICLE VI.			24

	6.1	Ownership of the Leased Property	24
	6.2	Personal Property	24
	6.3	Transfer of Personal Property and Capital Additions to Lessor	24

ARTICLE VII.			24

	7.1	Condition of the Leased Property	24
	7.2	Use of the Leased Property	25
	7.3	Lessor to Grant Easements, etc	26
	7.4	Preservation of Facility Value	26

ARTICLE VIII.			27

	8.1	Compliance with Legal and Insurance Requirements, Instruments, etc.	27


ARTICLE IX.			27

	9.1	Maintenance and Repair	27
	9.2	Encroachments, Restrictions, Mineral Leases, etc	28
	9.3	Capital Projects	29
	9.4	Inspections; Due Diligence Fee	30

ARTICLE X			31

	10.1	Construction of Capital Additions to the Leased Property	31

ARTICLE XI.			31

	11.1	Liens	31

ARTICLE XII.			31

	12.1	Permitted Contests	31

ARTICLE XIII			32

	13.1	General Insurance Requirements	32
	13.2	Replacement Cost	33
	13.2	Replacement Cost	33
	13.3	Additional Insurance	33
	13.4	Waiver of Subrogation	34
	13.5	Policy Requirements	34
	13.6	Increase in Limits	34
	13.7	Blanket Policies and Policies Covering Muliple Locations	34
	13.8	No Separate Insurance	34

ARTICLE XIV			35

	14.1	Insurance Proceeds	35
	14.2	Insured Casualty	35
	14.3	Uninsured Casualty	36
	14.4	No Abatement of Rent	36
	14.5	Waiver	37

ARTICLE XIV			37

	15.1	Condemnation	37

ARTICLE XVI			38

	16.1	Events of Default	38
	16.2	Certain Remedies	40
	16.3	Damages	41
	16.4	Receiver	42
	16.5	Lessee's Obligation to Purchase	42
	16.6	Waiver	42
	16.7	Application of Funds	42
	16.8	Facility Operating Deficiencies	42
	16.9	Lessor's Right of Appraisal	44
	16.10	Lessor's Security Interest	44

ARTICLE XVII.			45

	17.1	Lessor's Right to Cure Lessee's Default	45

ARTICLE XVIII.			46

	18.1	Purchase of the Leased Property; Rights of Lessee Prior to Closing.	46

ARTICLE XIX			47

	19.1	Renewal Terms	47
	19.2	Lessor's Rights of Renewal and Early Termination	47

ARTICLE XX			48

	20.1	Holding Over	48

ARTICLE XXI			48

	21.1	Letters of Credit	48
	21.2	Times for Obtaining Letters of Credit	49
	21.3	Amounts for Letters of Credit	49
	21.4	Uses of Letters of Credit	49

ARTICLE XXII.			50

	22.1	Risk of Loss	50

ARTICLE XXIII.			50

	23.1	General Indemnification	50

iii

ARTICLE XXIV			51

	24.1	Transfers.	51

ARTICLE XXV.			60

	25.1	Officer's Certificates and Financial Statements	60

ARTICLE XXVI			62

	26.1	Lessor's Right to Inspect and Show the Leased Property	62

ARTICLE XXVII.			62

	27.1	No Waiver	62

ARTICLE XXVIII			62

	28.1	Remedies Cumulative	62

ARTICLE XXIX			63

	29.1	Acceptance of Surrender	63

ARTICLE XXX			63

	30.1	No Merger	63

ARTICLE XXXI			63

	31.1	Conveyance by Lessor	63
	31.2	New Lease	63

ARTICLE XXXII			65

	32.1	Quiet Enjoyment	65

ARTICLE XXXIII			65

	33.1	Notices	65

ARTICLE XXXIV			66

	34.1	Appraiser	66

ARTICLE XXXV			66

	35.1	Lessee’s Option to Purchase the Leased Property	66
	35.2	Defaults	67
	35.3	Escrow Provisions	69
	35.4	Assurances	70

ARTICLE XXXVI			70

	36.1	Lessor May Grant Liens	70
	36.2	Attornment	71

ARTICLE XXXVII.			71

	37.1	Hazardous Substances	71
	37.2	Notices	71
	37.3	Remediation	71
	37.4	Indemnity	72
	37.5	Environmental Inspection	73

ARTICLE XXXVIII.			73

	38.1	Memorandum of Lease	73

ARTICLE XXXIX			73

	39.1	Sale of Assets	73

ARTICLE XL			74

	40.1	Subdivision	74

ARTICLE XLI			74

	41.1	Authority	74

ARTICLE XLII			74

	42.1	Attorneys' Fee	74

ARTICLE XLIII.			75

	43.1	Brokers	75

ARTICLE XLIV.			75

	44.1	Submission to Arbitration	75

ARTICLE XLV			76

	45.1	Miscellaneous	76

ARTICLE XLVI.			81

	46.1	Restatement of Original Leases	81
	46.2	Original Guaranties	82


ARTICLE XLVII			82

	47.1	Provisions Relating to Master Lease	82
	47.2	Treatment of Lease	82

ARTICLE XLVIII.			82

	48.1	Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit	82

Exhibits:

Exhibit A		Legal Description of the Land
Exhibit B		List of Lessor's Personal Property
Exhibit C		Description of Facilities and Certain Material Terms
Exhibit D		Form of Letter of Credit
Exhibit E		[Intentionally Omitted]
Exhibit F		Original Leases

AMENDED AND RESTATED MASTER LEASE

THIS AMENDED AND RESTATED MASTER LEASE ("Lease") is dated as of the 20 ^th day of April, 2005 (the "Restatement Date"), and is among HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation, and WESTMINSTER HCP, LLC, a Delaware limited liability company (as their interests may appear, "Lessor") and LH ASSISTED LIVING, LLC, a Delaware limited liability company, SUMMERVILLE AT COBBCO, INC., a California corporation, SUMMERVILLE AT HILLSBOROUGH, L.L.C., a New Jersey limited liability company, SUMMERVILLE AT OCOEE, INC., a Delaware corporation, SUMMERVILLE AT PORT ORANGE, INC., a Delaware corporation, SUMMERVILLE AT PRINCE WILLIAM, INC., a Delaware corporation, SUMMERVILLE AT STAFFORD, L.L.C., a New Jersey limited liability company, SUMMERVILLE AT VOORHEES, L.L.C., a New Jersey limited liability company, and SUMMERVILLE AT WESTMINSTER, INC., a Maryland corporation (collectively, and jointly and severally, "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 with respect to each Facility (as defined below) (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 of each such Facility (collectively, the "Leased Improvements");

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

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

(e) the machinery, equipment, furniture and other personal property described on Exhibit B attached hereto, together with all replacements and substitutes therefor (collectively, "Lessor's Personal Property").

SUBJECT, HOWEVER, to the easements, encumbrances, covenants, conditions and restrictions and other matters which affect the Leased Property of each Facility as of (a) with respect to the Group 1 Facilities and Group 2 Facilities, the Original Lease Commencement Date and (b) with respect to the Group 3 Facilities, the Restatement Date, with respect to each portion of the Leased Property of such Facility or which are created thereafter as permitted under the Original Leases or hereunder to have and to hold for (1) a fixed term with respect to each Facility (with respect to each Facility, the "Fixed Term") commencing on the Restatement Date and ending at 11:59 p.m. Los Angeles time on the applicable Expiration Date (as defined below), and (2) the Extended Terms provided for in Article XIX unless this Lease is earlier terminated as hereinafter provided.

ARTICLE II.

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

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 of voting securities, partnership interests or other equity interests. 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 "Allocated Initial Investment" allocated to such Facility as set forth on Exhibit C attached hereto.

Allocated Minimum Rent: With respect to each Facility, the amount of Minimum Rent allocated to such Facility as set forth on Exhibit C attached hereto (subject to increase as set forth in Article III).

Allocated Value: As defined in the definition of Transfer Consideration in this Article II and as further determined in accordance with the appraisal procedures set forth in Article XXXIV.

Annual Minimum Capital Project Amount: With respect to each Group 3 Facility, during each Lease Year with respect to such Group 3 Facility, the following amounts:

(i) With respect to the Hillsborough Facility, Thirty Thousand Eight Hundred Dollars ($30,800.00).

(ii) With respect to the Manahawkin Facility, Thirty Thousand Eight Hundred Dollars ($30,800.00).

(iii) With respect to the Ocoee Facility, Thirty-Four Thousand Dollars ($34,000.00).

(iv) With respect to the Port Orange Facility, Thirty-Four Thousand Dollars ($34,000.00).

(v) With respect to the Torrington Facility, Twenty-Seven Thousand Two Hundred Dollars ($27,200.00).

Notwithstanding the foregoing, Lessor and Lessee acknowledge that the initial Annual Minimum Capital Project Amount for each Group 3 Facility represents an amount equal to (A) the number of licensed units located at such Group 3 Facility times (B) Four Hundred Dollars ($400.00). In the event that the number of licensed units for any Group 3 Facility is increased or decreased in accordance with the terms of this Lease, the Allocated Minimum Capital Project Amount for such Group 3 Facility shall be increased, or decreased, as applicable, by an amount equal to (1) the number of such licensed units increased or decreased at such Group 3 Facility times (2) Four Hundred Dollars ($400.00).

Annual Minimum Capital Project Amount Overage: With respect to each Group 3 Facility for any Lease Year, an amount equal to (i) the sum of (a) the Capital Project Costs incurred and paid by Lessee in funding Capital Projects for each Group 3 Facility in the immediately preceding two (2) Lease Years and for which Lessor has received paid invoices, receipts or other commercially reasonable evidence or supporting information as is customary to evidence such expenditures, verifying the cost and payment of funding such Capital Projects, and an Officer's Certificate certifying that the applicable item(s) of Capital Projects have been completed, less (b) the amounts disbursed by Lessor to Lessee from any Replacement Reserve on account of such Capital Projects to such Group 3 Facility in accordance with the terms of Section 9.3.1, in excess of (ii) the Annual Minimum Capital Project Amount for such Group 3 Facility for such prior two (2) Lease Year period.

Appraiser: As defined in Article XXXIV.

Appreciation Amount: With respect to any Group 1 Facility, the Fair Market Value of such Facility less the Minimum Repurchase Price for such Facility.

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.

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.

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 construction of a new wing or new story, or the renovation of existing improvements on the Leased Property of such Facility in order to provide a functionally new facility needed 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 Project: Repairs and replacements to the Leased Property, or any portion thereof, which are categorized under GAAP as a capital expense and not as an operating expense; provided, however, that in no event shall the term "Capital Project" be deemed to include any Capital Additions.

Capital Project Costs: All out-of-pocket costs reasonably incurred by Lessee in connection with a Capital Project, excluding, however, any amounts that are financed by Lessee and secured by a lien on the Personal Property relating thereto.

Cash Flow: With respect to each Facility, the net income from such Facility, determined on the basis of GAAP applied on a consistent basis, plus the sum of (i) depreciation and amortization expense; plus (ii) Allocated Minimum Rent payable hereunder for such Facility; plus (iii) management fees for such Facility; less the sum of (y) a management fee allowance of Five Percent (5%) of Gross Revenues for such Facility during the corresponding period plus (z) an annual Two Hundred Dollar ($200) per unit reserve for maintenance and other contingent expenses for such Facility, pro-rated for the corresponding period.

Cash Flow Coverage: With respect to each Facility, for any period, calculated as of the last day of the period, the ratio of Cash Flow for such Facility attributable to such period to the total Allocated Minimum Rent payable for such period under this Lease.

Close of Escrow: As defined in Article )00(V.

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

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

Collateral: As defined in Section 16.10.1.

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

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

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

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 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.

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

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

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

CPI Increase: The percentage increase, if any, in (i) the Cost of Living Index published for the month which is two (2) months prior to the commencement of the applicable Lease Year, over (ii) the Cost of Living Index published for the month which is fourteen (14) months prior to the commencement of the applicable Lease Year.

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

Deeds: As defined in the Group 3 Facility Contract of Acquisition.

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, 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.

Expiration Date: With respect to each Facility, the expiration date set forth on Exhibit C attached hereto.

Extended Term(s): With respect to each Facility, as defined in Article XIX and set forth on Exhibit C attached hereto.

Facility: Each facility being (and to be) operated or proposed to be operated on, the Leased Property and any Capital Additions, as more particularly described on Exhibit C attached hereto.

Facility Mortgage: As defined in Article XIII.

Facility Mortgagee: As defined in Article XIII.

Facility Operating Deficiency: A deficiency in the conduct of the operation of any 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:

(a) With respect to the Group 1 Facilities, the higher of the following (including any appropriate periodic escalations therein) determined in accordance with the appraisal procedures set forth in Article XXXIV and this definition: (i) the fair market rental value of the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, based upon the greater of (A) the Minimum Repurchase Price for such Facility and (B) Lessor's Shared Appreciation Purchase Price for such Facility, multiplied by the then current lease rate available in the open market for sale-leaseback transactions of similar facilities, and (ii) the fair market rental value of the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, assuming the same is exposed on the open market at the time of the appraisal and taking into account, among other relevant factors, the income generated from the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, but specifically excluding brokerage commissions and other similar payments by Lessor that do not directly inure to the benefit of lessees.

(b) With respect to the Group 2 Facilities and Group 3 Facilities, the higher of the following (including any appropriate periodic escalations therein) determined in accordance with the appraisal procedures set forth in Article XXXIV and this definition: (i) the fair market rental value of the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, based upon the Fair Market Value thereof multiplied by the then current lease rate available in the open market for sale-leaseback transactions of similar facilities, and (ii) the fair market rental value of the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, assuming the same is exposed on the open market at the time of the appraisal and taking into account, among other relevant factors, the income generated from the Leased Property and all Capital Additions of such Facility, or applicable portion(s) thereof, but specifically excluding brokerage commissions and other Lessor payments that do not directly inure to the benefit of lessees.

Fair Market Value: 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 Market Value shall be the higher value obtained by assuming that the Leased Property and all Capital Additions of such Facility 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 of such Facility for their highest and best use or as a fully-permitted Facility operated in accordance with the provisions of this Lease. In addition, the following specific matters shall be factored in or out, as appropriate, in determining Fair Market Value:

(i) The negative value of (a) the cost of any maintenance or other items of repair or replacement of the Leased Property or any Capital Additions of such Facility reasonably required to restore such Leased Property or Capital Additions to the condition required pursuant to Section 9.1.1 below, (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, and every part thereof, 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 such 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 XXXIV, (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 any Facility to Lessee pursuant to the terms of this Lease, the positive or negative effect on the value of the Leased Property and all Capital Additions of such Facility 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.

Fairfield Facility: That certain Facility located in Fairfield, California.

Fixed Term: As defined in Article I.

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

GAAP: Generally accepted accounting principles.

Gross Revenues: With respect to each Facility, all revenues received or receivable from or by reason of the operation of such Facility or any other use of the Leased Property of such Facility, Lessee's Personal Property and all Capital Additions, including all revenues received or receivable for the use of or otherwise attributable to units, rooms, beds and other facilities provided, meals served, services performed (including ancillary services), space or facilities subleased or goods sold on or from the Leased Property and all Capital Additions of such Facility; provided, however, that Gross Revenues shall not include:

(i) bad debt in accordance with GAAP;

(ii) non-operating revenues such as interest income or income from the sale of assets not sold in the ordinary course of business; and

(iii) federal, state or local excise taxes and any tax based upon or measured by such revenues, where any such federal, state or local excise tax is added to or made a part of the amount billed to the patient or other recipient of such services or goods, whether included in the billing or stated separately.

Gross Revenues for each Lease Year of such Facility shall include all cost report settlement amounts received in or payable during such Lease Year in accordance with GAAP relating to health care accounting, regardless of the year that such settlement amounts are applicable to; provided, however, that to the extent settlement amounts are applicable to years, or portions thereof, prior to the Restatement Date, such settlement amounts shall not be included in Gross Revenues for the Lease Year of such Facility in which such settlement amounts are received or paid. Gross Revenues shall also include the Gross Revenues of any Occupant under a Commercial Occupancy Arrangement, i.e., the Gross Revenues generated from the operations conducted on or from such subleased, licensed or other used or occupied portion of the Leased Property and all Capital Additions of such Facility shall be included directly in the Gross Revenues; provided, however, that the rent received or receivable by Lessee from or under such Commercial Occupancy Arrangement shall be excluded from Gross Revenues for such purpose.

Group 1 Facilities: Each of those Facilities identified as a Group 1 Facility on Exhibit C attached hereto.

Group 2 Facilities: Each of those Facilities identified as a Group 2 Facility on Exhibit C attached hereto.

Group 3 Facilities: Each of those Facilities identified as a Group 3 Facility on Exhibit C attached hereto.

Group 3 Facility Contract of Acquisition: The agreement of even date herewith by and between Lessor and Lessee, or Lessee's Affiliate(s), relative to the acquisition by Lessor of the Leased Property of the Group 3 Facilities.

Group 3 Facility Escalator: With respect to the Group 3 Facilities for any given Lease Year, an amount equal to the greater of (i) Seventy-Five Percent (75%) the applicable CPI Increase and (ii) Two and Three-Quarters Percent (2.75%).

Group 3 Facility Purchase Price: With respect to each Group 3 Facility, the sum of (a) the Minimum Repurchase Price for such Group 3 Facility, plus (b) an amount which, upon the closing, equals an annually compounded return equal to Three Percent (3%) per year on the Allocated Initial Investment for such Group 3 Facility accruing from and after the Restatement Date and any Capital Addition Costs funded by Lessor for such Group 3 Facility accruing from and after the date of funding.

Group 3 Facility Put Event Price: With respect to any Group 3 Facility, the sum of (a) the Minimum Repurchase Price for such Group 3 Facility, plus (b) an amount which, upon the closing, equals an annually compounded return equal to the Group 3 Facility Escalator per year on the Allocated Initial Investment for such Group 3 Facility accruing from and after the Restatement Date and any Capital Addition Costs funded by Lessor for such Group 3 Facility accruing from and after the date of funding.

Guarantor. Guarantor: Summerville Senior Living, Inc., a Delaware corporation.

Guaranty: The Guaranty of Obligations of even date herewith executed by

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.

HCP: Health Care Property Investors, Inc., a Maryland corporation. Hillsborough Facility: That certain Facility located in Hillsborough, New Jersey.

Impositions: Collectively, all taxes, including capital stock, franchise and other state taxes of Lessor (and, if Lessor is not HCP, of HCP as a result of its investment in Lessor), ad valorem, sales, use, single business, gross receipts, transaction privilege, rent or similar taxes; assessments including assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not to be completed within the Term; ground rents; water, sewer and other utility levies and charges; excise tax levies; fees including license, permit, inspection, authorization and similar fees; and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Leased Property, any Capital Additions and/or the Rent and all interest and penalties thereon attributable to any failure in payment by Lessee which at any time prior to, during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien upon (i) Lessor or Lessor's interest in the Leased Property or any Capital Additions, (ii) the Leased Property, any Capital Additions or any parts thereof or any rent therefrom or any estate, right, title or interest therein, or (iii) any occupancy, operation, use or possession of, or sales from or activity conducted on or in connection with the Leased Property, any Capital Additions or the leasing or use of the Leased Property, any Capital Additions or any parts thereof; provided, however, that nothing contained in this Lease shall be construed to require Lessee to pay (a) any tax based on net income (whether denominated as a franchise or capital stock or other tax) imposed on Lessor or any other Person, (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: With respect to each Facility, all accounts, proceeds of accounts, rents, profits, income or revenues derived from the use of rooms or other space within the Leased Property of such Facility or the providing of services in or from the Leased Property and all Capital Additions of such Facility; documents, chattel paper, instruments, contract rights, deposit accounts, general intangibles, causes of action, now owned or hereafter acquired by Lessee (including any right to any refund of any Impositions) arising from or in connection with Lessee's operation or use of the Leased Property and all Capital Additions of such Facility; 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 of such Facility for its 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 such Facility (excluding, however, the name "Summerville"); and any and all third-party provider agreements (including Medicare and Medicaid).

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

Lease: As defined in the preamble.

Lease Year:

(a) With respect to the Group 1 Facilities and Group 2 Facilities, the first Lease Year for such Facilities shall be the period commencing on the Restatement Date and ending on the day immediately prior to the next occurring Lease Year Reference Date, and each subsequent Lease Year for such Facilities 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 for any Group 1 Facility or Group 2 Facility 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 for such Facility.

(b) With respect to the Group 3 Facilities, the first Lease Year for such Facilities shall be the period of twelve (12) full calendar months from and after the Restatement Date, unless the Restatement Date is a day other than the first (1st) day of a calendar month, in which case the first Lease Year for such Facilities shall be the period commencing on the Restatement Date and ending on the last day of the eleventh (11th) month following the month in which the Restatement Date occurs and each subsequent Lease Year for such Facilities 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 for any Group 3 Facility 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 for such Facility.

Lease Year Reference Date: With respect to each Group 1 Facility and Group 2 Facility, the Lease Year Reference Date set forth on Exhibit C attached hereto.

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

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

Legal Requirements: 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 any of 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 (i) require repairs, modifications or alterations in or to the Leased Property, Lessee's Personal Property and all Capital Additions, (ii) in any way adversely affect the use and enjoyment thereof, or (iii) regulate the transport, handling, use, storage or disposal or require the cleanup or other treatment of any Hazardous Substance.

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

Lessor's Preferred Appreciation Amount: With respect to each Group 1 Facility, an amount which, upon the closing, equals an annually compounded return equal to Two and Fifty One-Hundredths Percent (2.50%) per year on the sum of (i) the Allocated Initial Investment accruing from and after the applicable Original Lease Commencement Date for such Group 1 Facility and (ii) all other Capital Addition Costs funded by Lessor for such Group 1 Facility accruing from and after the date of funding.

Lessor's Shared Appreciation Amount: With respect to each Group 1 Facility, an amount equal to (i) Lessor's Preferred Appreciation Amount plus (ii) Fifty Percent (50%) of the sum of (a) the Appreciation Amount, less (b) Lessor's Preferred Appreciation Amount.

Lessor's Shared Appreciation Purchase Price: With respect to each Group 1 Facility, an amount equal to the Minimum Repurchase Price plus Lessor's Shared Appreciation Amount.

Letter of Credit Amount: As defined in Section 21.3.

Letter of Credit Date: As defined in Section 21.2.

Manahawkin Facility: That certain Facility located in Manahawkin, New Jersey. Master Sublease: As defined in Article XXIV.

Minimum Rent: The sum of Allocated Minimum Rent for all of the Facilities.

Minimum Repurchase Price: At any given time with respect to a Facility, the sum of (i) the Allocated Initial Investment for such Facility plus (ii) all Capital Addition Costs funded by Lessor for such Facility.

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 under an Occupancy Arrangement.

Ocoee Facility: That certain Facility located in Ocoee, Florida.

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

Ontario Facility: That certain Facility located in Ontario, California.

Opening Deposit: As defined in Article XXXV.

Original Guaranties: Collectively, (i) that certain Guaranty of Obligations dated November 5, 1997 by Granger Cobb and Tina Cobb in favor of Lessor, (ii) that certain Guaranty of Obligations dated November 13, 1997 by Granger Cobb and Tina Cobb in favor of Lessor, (iii) that certain Guaranty of Obligations dated June 20, 1997 by Summerville Healthcare Group, Inc. in favor of Lessor, (iv) that certain Guaranty of Obligations dated February 11, 1998 by Summerville Healthcare Group, Inc. in favor of Lessor, (v) that certain Guaranty of Obligations dated May 26, 1998 by Summerville Healthcare Group, Inc. in favor of Lessor and (vi) that certain Guaranty of Obligations dated September 1, 1998 by Summerville Healthcare Group, Inc. in favor of Lessor.

Original Lease Commencement Date. With respect to each Group 1 Facility and Group 2 Facility, the "Original Lease Commencement Date" as defined in the applicable Original Lease and as set forth on Exhibit C attached hereto.

Original Leases: Those certain leases described in Exhibit F attached hereto.

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, 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, supplies and other personal property used or useful in the use of the Leased Property and any Capital Additions of such Facility for its Primary Intended Use, other than Fixtures.

Port Orange Facility: That certain Facility located in Port Orange, Florida.

Primary Intended Use: With respect to each Facility, the "Primary Intended Use" as set forth on Exhibit C attached hereto.

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.

Prohibited Area: With respect to each Facility, the "Prohibited Area" as set forth on Schedule 7.4.1 attached hereto.

Put Event: 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(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 or (ii) any other failure of Lessee to obtain and maintain all material licenses, permits and other authorizations to use and operate any Facility for its Primary Intended Use in accordance with all Legal Requirements), 16.1(j), 16.1(k) (arising out of a breach of any material representation or warranty of Lessee or any Guarantor in any such document), 16.1(1) and/or 16.1(o). 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.

Renewal Group: Those Facilities identified in the aggregate as a Renewal Group on Exhibit C attached hereto.

Rent: Collectively, the Minimum Rent and Additional Charges.

Replacement Reserve: As defined in Section 9.3.

Restatement Date: As defined in the preamble.

Sale of Business: A Transfer of the type described in any of clauses (iv), (v) or (vi) of Section 24.1 below, unless such Transfer involves only the stock and/or assets of Lessee and Lessee has no substantial assets other than its interests in (a) 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.

Separated Property: As defined in Section 31.2.

Shareholder's Equity: With respect to any Person, the shareholder's equity of such Person determined on a consolidated basis in accordance with GAAP.

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 50% of the voting stock or partnership, membership or other equity interest, respectively.

Term: Collectively, the Fixed Term and any Extended Term(s), as the context may require, unless earlier terminated.

Torrington Facility: That certain Facility located in Torrington, Connecticut.

Transaction Documents: Collectively, this Lease, the Group 3 Facility Contract of Acquisition, the Deeds, and the Guaranty.

Transfer: As defined in Article XXIV.

Transfer Consideration: With respect to any Transfer constituting a Master Sublease of a Transfer Consideration Facility (other than a Master Sublease entered into in connection with a Sale of Business), "Transfer Consideration" shall mean Fifty Percent (50%) of the positive difference, if any, between the Fair Market Rental and the Allocated Minimum Rent payable by Lessee under this Lease determined on a monthly basis with respect to such Transfer Consideration Facility, prorating such Minimum Rent, as appropriate, if less than all of the applicable Transfer Consideration Facility is Master Subleased. Fifty Percent (50%) of the difference shall be paid by Lessee to Lessor monthly when the Allocated Minimum Rent is due for such Transfer Consideration Facility; provided, however, that in no event shall the total Transfer Consideration to which Lessor is entitled in connection with any such Master Sublease exceed the total consideration given directly or indirectly (including through one or more intermediaries) to Lessee, to any Controlling Person(s) or to any other Person in exchange for, in connection with, related to or arising out of the transaction(s) as to which such Master Sublease is a part. With respect to any other Transfer relating to any Transfer Consideration Facility (i.e., a Transfer other than pursuant to a Master Sublease, but including a Master Sublease which is part of a Sale of Business) "Transfer Consideration" shall mean Fifty Percent (50%) of the sum of (a) any and all consideration given directly or indirectly (including through one or more intermediaries) to Lessee, to any Controlling Person(s) or to any other Persons in exchange for, in connection with, related to or arising out of such Transfer, less (b) the Net Book Value Adjustment (as hereinafter defined); provided, however, that if such Transfer constitutes a Sale of Business or is a Master Sublease of any Transfer Consideration Facility entered into in connection with a Sale of Business, then "Transfer Consideration" shall mean Fifty Percent (50%) of the Allocated Value (as hereinafter defined) of the sum of (i) any and all suchconsideration given directly or indirectly (including through one or more intermediaries) to Lessee, to any Controlling Person(s) or to any other Person in exchange for, in connection with, related to or arising out of such Sale of Business, less (ii) the Net Book Value Adjustment. As used herein, the term "Net Book Value Adjustment" shall mean the book value of any cash or cash equivalents, receivables and any other tangible assets of Lessee or of any Controlling Person(s) or other transferor(s), as the case may be, being transferred, conveyed or sold, directly or indirectly, in connection with such Transfer or Sale of Business, as the case may be, net of any liabilities relating to such transferred assets being assumed, directly or indirectly, by the transferee in connection with such Transfer (e.g., accounts payable, accrued vacation, equipment leases, etc., but specifically excluding, without limitation, the obligations under this Lease), all as determined in accordance with GAAP. As used herein, the term "Allocated Value" shall mean the sum of clauses (i) and (ii) above allocated to the Leased Property of the applicable Transfer Consideration Facility, any Capital Additions and Lessee's operations thereon (including any and all business, enterprise and goodwill value), determined by the appraisal procedures set forth in Article XXXIV and based upon (x) the present value of the then current earnings before interest, taxes, depreciation, amortization and rents (including Rents under this Lease) ("EBITDAR") of the applicable Transfer Consideration Facility over the remaining Term of this Lease with respect to such Transfer Consideration Facility (taking into account any unexercised Extended Term(s)), less the present value of the remaining Allocated Minimum Rent to be paid under this Lease for such Transfer Consideration Facility for such period(s), as compared to (y) the sum of the following with respect to all operations being transferred, conveyed or sold, directly or indirectly, in connection with a Sale of Business: (1) with respect to all operations conducted at leased facilities (including the applicable Transfer Consideration Facility), the present value of the then current EBITDAR of all such operations over the remaining terms of all such leases (taking into account any unexercised extension options thereunder), less the present value of the remaining rents to be paid under such leases for such period(s), and (2) with respect to any operations conducted at owned facilities, the EBITDAR of such operations capitalized at the appropriate market capitalization rate, less debt which is being assumed, directly or indirectly, by the transferee (taking into account the positive or negative value of such assumed debt attributable to the interest rate, amortization schedule, maturity date, prepayment penalties and other relevant terms thereof). As used herein, the term "consideration" shall mean and include money, services, property and other things of value, including payment of costs, cancellation or forgiveness of indebtedness, discounts, rebates, barter and the like. For purposes of Section 24.1.2.2 and the payment of Transfer Consideration to Lessor as provided in this Lease, if any such consideration given in exchange for, in connection with, related to or arising out of such Transfer is in a form other than cash (such as in kind, equity interests, indebtedness, earn-outs or other deferred payments, consulting or management fees, etc.), Lessor shall be entitled to receive the applicable Transfer Consideration on account thereof in cash based upon the present fair market value of such consideration at the time of the Transfer. Notwithstanding anything to the contrary contained in this Lease, Lessee shall have no obligation to pay Transfer Consideration in connection with any Transfer relating to any Facility that is not a Transfer Consideration Facility. Lessee acknowledges and agrees that the terms under which Lessor is entitled to the payment of Transfer Consideration pursuant to this Lease and the amount thereof has been freely negotiated and represents a fair and equitable division with Lessor of the consideration payable in connection with a Transfer taking into account, among other things, Lessor's investment in the Leased Property, the terms of this Lease and the inherent risks of owning and leasing real property.

Transfer Consideration Facilities: Each of those Facilities identified as a Transfer Consideration Facility on Exhibit C attached hereto.

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

3.1.1 Minimum Rent.

(a) Subject to upward adjustments as provided in subsections (b), (c) and (d) below, for the period from the Restatement Date through the expiration of the first Lease Year, Lessee shall pay to Lessor as monthly "Allocated Minimum Rent" for each Facility the amounts allocated to and set forth opposite such Facility on Exhibit C attached hereto and incorporated herein by this reference. The first monthly payment of Allocated Minimum Rent for each Facility shall be payable on the Restatement Date (prorated as to any partial calendar month at the beginning of the Term).

(b) With respect to the Group 1 Facilities, commencing upon the expiration of the first Lease Year for such Group 1 Facilities and upon the expiration of each Lease Year thereafter during the Term for such Group 1 Facilities (i.e., including the Extended Term), the monthly Allocated Minimum Rent in effect as of the expiration of the immediately preceding Lease Year for such Group 1 Facilities shall be increased by an amount equal to one-twelfth (1/12th) of the product of (i) Twenty-Five Hundredths Percent (.25%) times (ii) the Minimum Repurchase Price for such Group 1 Facilities.

( ^c ) With respect to the Group 2 Facilities, commencing upon the expiration of the first Lease Year for the Group 2 Facilities and upon the expiration of each Lease Year thereafter during the Term for such Group 2 Facilities (including each Extended Term, if either), the then current monthly Allocated Minimum Rent for such Group 2 Facilities for such Lease Year shall be adjusted by the applicable CPI Increase; provided, however, that in no event shall the monthly Allocated Minimum Rent for any Group 2 Facility after any such adjustment be less than One Hundred Two and One-Half Percent (102.5%) nor more than One Hundred Five Percent (105%) of the monthly Allocated Minimum Rent in effect for such Group 2 Facility immediately prior to such adjustment, notwithstanding the actual percentage change in the CPI Increase.

(d) With respect to the Group 3 Facilities, commencing upon the expiration of the first Lease Year for such Group 3 Facilities and upon the expiration of each Lease Year thereafter during the Fixed Term for such Group 3 Facilities, the then current monthly Allocated Minimum Rent for such Group 3 Facilities for such Lease Year shall be adjusted by an amount equal to the applicable Group 3 Facility Escalator. Upon the commencement of the first (1 ^st ) Lease Year of each Extended Term for the Group 3 Facilities, if any, the initial monthly Allocated Minimum Rent for each Group 3 Facility shall be equal to the greater of (a) the then current monthly Fair Market Rental for such Group 3 Facility and (b) the monthly Allocated Minimum Rent payable for such Group 3 Facility during the last Lease Year of the immediately preceding Term. Commencing upon the expiration of the first (1 ^st ) Lease Year of each Extended Term for the Group 3 Facilities, if any, and upon the expiration of each Lease Year thereafter during such Extended Term, the then-current monthly Allocated Minimum Rent for each Group 3 Facility shall be adjusted by an amount equal to the applicable Group 3 Facility Escalator.

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

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 nonpayment 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").

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 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. N 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: ________

(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.

(i) For purposes of this Section 3.3(b), the following terms and conditions shall apply:

(A) If at any given time Lessee shall be more than five (5) Business Days delinquent in the payment of any Rent due and payable hereunder with respect to more than one (1) Facility, such delinquency shall only constitute a single occasion of delinquency, despite the fact that such delinquency has occurred with respect to the payment of Rent for more than one (1) Facility.

(B) If the date upon which any Rent is due and payable hereunder is not a Business Day, such date shall be deemed to be the next Business Day following such date.

SIMILAR OR DISSIMILAR NATURE. ACCORDINGLY, IF ANY INSTALLMENT OF RENT OTHER THAN ADDITIONAL CHARGES PAYABLE TO A PERSON OTHER THAN LESSOR SHALL NOT BE PAID WITHIN 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: ___________

Lessee's Initials: /s/ GC

(i) For purposes of this Section 3.3(b), the following terms and conditions shall apply:

(B) If the date upon which any Rent is due and payable hereunder is not a Business Day, such date shall be deemed to be the next Business Day following such date.

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 of the installments of Minimum Rent and Additional Charges throughout the Term with respect to each Facility.

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

ARTICLE IV.

4.1 Impositions.

4.1.1 Subject to Article XII relating to permitted contests, Lessee shall pay, or cause to be paid, all Impositions before any fine, penalty, interest or cost may be added for non-payment. 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.

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

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.

4.1.7 Impositions imposed 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 before or after such termination.

4.2 Utilities. 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 with respect to any Facility may be imposed against Lessor by reason of any of the covenants, conditions and/or restrictions affecting the Leased Property of such Facility, any Capital Additions of such Facility 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 of such Facility, including any and all costs and expenses associated with any utility, drainage and parking easements.

4.3 Insurance. 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. 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 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, 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. Nothing contained in this Section 5.2 shall serve in any way to limit Lessor's ability, pursuant to Section 16.2 below, to terminate this Lease with respect to any or all of the Facilities if an Event of Default shall have occurred under this Lease, regardless of whether such Event of Default emanated primarily from a single Facility.

5.3 Abatement Procedures. In the event of a partial taking by Condemnation of any Facility as described in Section 15.1.2, which taking by Condemnation does not render the Leased Property of such Facility Unsuitable for its Primary Intended Use, this Lease shall not terminate with respect to the Leased Property of such Facility, but the monthly Allocated Minimum Rent for such Facility shall be abated in the manner and to the extent that is fair, just and equitable to both Lessee and Lessor, primarily taking into consideration, along with other relevant factors, the number of usable beds affected by such partial taking by Condemnation. If Lessor and Lessee are unable to agree upon the amount of such abatement within sixty (60) days after such partial taking by Condemnation, either party may submit the matter to arbitration as provided in Article XLIV below.

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 9.1.4.

6.2 Personal Property. During the Term, Lessee shall, as necessary and at its expense, install, affix or assemble or place on any parcels of the Land or in any of the Leased Improvements, any items of Lessee's Personal Property and replacements thereof which shall be the property of and owned by Lessee. Except as provided in Sections 6.3 and 16.10, Lessor shall have no rights to Lessee's Personal Property. 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 its 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 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.

ARTICLE VII.

7.1 Condition of the Leased Property. Lessee acknowledges receipt and delivery of possession of the Leased Property of each Facility and that Lessee has examined and otherwise has knowledge of the condition of the Leased Property of each Facility prior to the execution and delivery of this Lease and, as of (i) with respect to the Group 1 Facilities and Group 2 Facilities, the Original Lease Commencement Date and (ii) with respect to the Group 3 Facilities, the Restatement Date, 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 of each Facility "as is" in its present condition. Lessee waives any claim or action against Lessor in respect of the condition of the Leased Property of each Facility including any defects or adverse conditions not discovered or otherwise known by Lessee as of (a) with respect to the Group 1 Facilities and Group 2 Facilities, the Original Lease Commencement Date and (b) with respect to the Group 3 Facilities, the Restatement Date. 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, IT BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY LESSEE INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.

7.2 Use of the Leased Property

7.2.1 Lessee covenants that it will obtain and maintain all authorization 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 its Primary Intended Use. Lessee shall not use the Leased Property, any Capital Additions or any part(s) thereof for any other use without the prior written consent of Lessor, which consent Lessor may withhold in its sole discretion.

7.2.3 Lessee shall operate continuously the entire Leased Property and all Capital Additions of each Facility in accordance with its Primary Intended Use; provided, however, that Lessee shall be relieved of such obligation to continuously operate the Leased Property and all Capital Additions of each Facility to the extent reasonably necessary (a) to complete any repair or restoration of the Leased Property and Capital Additions of any Facility pursuant to the terms of Sections 14.2, 14.3 and 15.1.3, as applicable, (b) to complete any Capital Additions to the Leased Property or any Facility that are consented to by Lessor in accordance with the terms of Section 10.1 below, and (c) as a result of any cause described in Section 45.1.16 below. Lessee shall devote the entirety of each Facility and all Capital Additions thereto to the Primary Intended Use, except for areas reasonably required for office or storage space 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 any 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 such Facility. Lessee shall at all times maintain an adequate staff for the service of its residents and/or patients, in each case assuming an occupancy and/or use level for each Facility which is not less than the average occupancy and/or use level for similar facilities in the State. Lessee shall employ its best judgment, efforts and abilities to operate the entirety of each Facility in such a manner so as to maximize Gross Revenues and to enhance the reputation and attractiveness of each Facility.

7.2.4 Lessee shall conduct its business at each Facility in conformity with the highest standards of patient or resident care practice provided in similar facilities in the State.

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

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

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

7.4 Preservation of Facility Value. Lessee acknowledges that a fair return to Lessor on its investment in the Leased Property and all Capital Additions is dependent, in part, on the concentration on the Leased Property during the Term of the assisted living 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 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 During the Term with respect to each Facility and for a period of two (2) years thereafter, neither Lessee nor any of its Affiliates, directly or indirectly, shall operate, own, manage or have any interest in or otherwise participate in or receive revenues from any other facility or institution providing services or similar goods to those provided in connection with any Facility and the Primary Intended Use within the Prohibited Area. All distances shall be measured on a straight line rather than on a driving distance basis. In the event that any portion of such other facility or institution is located within such Prohibited Area the entire facility or institution shall be deemed located within such Prohibited Area.

7.4.2 [Intentionally Omitted]

7.4.3 Except as required for medically appropriate reasons, prior to and after the expiration or earlier termination of this Lease, Lessee shall not recommend or solicit the removal or transfer of any resident or patient from 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 Capital Additions thereto 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 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 thereto 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 Capital Additions thereto, 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 nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to (a) with respect to the Group 1 Facilities and Group 2 Facilities, the applicable Original Lease Commencement Date, and (b) with respect to the Group 3 Facilities, the Restatement 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 of any Facility or any part thereof or any Capital Addition thereto for its 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 nonstructural, 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 or any part thereof or any Capital Addition thereto; 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, or any portion thereof or any Capital Addition thereto.

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

9.2 Encroachments, Restrictions, Mineral Leases, etc. If any of the Leased Improvements or Capital Additions shall, at any time, encroach upon any property, street or right-of-way, or shall violate any restrictive covenant or other agreement affecting the Leased Property, or any part thereof or any Capital Addition thereto, 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 Addition thereto 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 thereto, 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 thereto, 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 thereto 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 Capital Projects.

9.3.1 Without in any way limiting Lessee's obligations under this Article IX, Lessee shall expend during each Lease Year for the Group 3 Facilities, no less than the Annual Minimum Capital Project Amount for each of the Group 3 Facilities for Capital Projects to such Group 3 Facilities. Such Capital Projects shall be performed and completed in compliance with the applicable provisions of this Lease, including the applicable provisions of Article X hereof. Promptly following the expiration of each Lease Year for the Group 3 Facilities, Lessee shall furnish to Lessor reasonable documentary evidence as to the completion of all Capital Projects for such Lease Year required pursuant to this Section 9.3, together with the costs thereof. If Lessee fails to expend during each Lease Year the applicable Annual Minimum Capital Project Amount for Capital Projects to any Group 3 Facility, then, without limiting any rights or remedies afforded Lessor pursuant to the terms of this Lease for a breach by Lessee of its obligation hereunder, Lessee shall promptly deposit with Lessor as a repair and replacement reserve with respect to such Group 3 Facility (a "Replacement Reserve") for Capital Projects to such Group 3 Facility, an amount equal to (a) the Annual Minimum Capital Project Amount for such Group 3 Facility less (b) the sum of (i) the amounts expended by Lessee during such Lease Year on account of Capital Projects to such Group 3 Facility and (ii) the Annual Minimum Capital Project Amount Overage for such Group 3 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, if (i) a Replacement Reserve has been established for any Group 3 Facility and (ii) Lessee expends in any Lease Year an amount in excess of the applicable Annual Minimum Capital Project Amount for Capital Projects for such Group 3 Facility, Lessor shall, to the extent funds are available for such purpose in such Replacement Reserve, disburse to Lessee the Capital Project Costs incurred and paid by Lessee during such Lease Year in performing such Capital Projects to such Group 3 Facility in excess of the applicable Annual Minimum Capital Project Amount for such Group 3 Facility for such Lease Year. Any such disbursement from any Replacement Reserve shall be paid by Lessor to Lessee within fifteen (15) days following: (a) receipt by Lessor of a written request from Lessee for disbursement from the Replacement Reserve for such Group 3 Facility and a certification by Lessee in form and substance reasonably satisfactory to Lessor that the applicable item of Capital Project for such Group 3 Facility has been completed; (b) delivery to Lessor of paid invoices, receipts or other evidence reasonably satisfactory to Lessor, verifying (1) the Capital Project Costs for such Capital Project and (2) that Lessee has expended in the applicable Lease Year an amount in excess of the applicable Annual Minimum Capital Project Amount for Capital Projects for such Group 3 Facility; and (c) delivery to Lessor of affidavits, lien waivers or other evidence satisfactory to Lessor showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Leased Property of such Group 3 Facility have been paid all amounts due for labor and materials furnished to the Leased Property of such Group 3 Facility. Lessor shall not be 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 any Group 3 Facility may not be used to pay for or reimburse Lessee for Capital Project Costs for any other Facility.

9.3.2 No Replacement Reserve shall 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 of the Group 3 Facilities and entail no responsibility on Lessor's part beyond the payment of the respective items for which they are held following receipt of bills, invoices or statements therefor in accordance with the terms of this Section 9.3 and beyond the allowing of due credit for the sums actually received. Upon assignment of this Lease by Lessor, any funds in any Replacement Reserve shall be turned over to the assignee and any responsibility of Lessor, as assignor, with respect thereto shall terminate.

9.3.3 If any funds remain in any Replacement Reserve upon the expiration or earlier termination of this Lease with respect to any Group 3 Facility, the same shall be paid over to Lessor as an Additional Charge and Rent under this Lease and shall be in addition to Minimum Rent and all other Additional Charges payable hereunder.

9.4 Inspections; Due Diligence Fee. Without limiting Lessor's rights pursuant to Section 26.1 hereof, from time to time during the Term, Lessor and its agents shall have the right to inspect the Leased Property and any portion thereof and all systems contained therein at any reasonable time to determine Lessee's compliance with its obligations under this Lease. Lessor shall provide Lessee with at least two (2) Business Days' prior written notice prior to any inspections of the Leased Property pursuant to the terms of this Section 9.4, except in the event of an emergency, in which case no prior notice shall be required. Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in connection with the inspections provided for in this Section 9.4 promptly following its receipt of Lessor's invoice therefore, which costs shall not exceed One Thousand Dollars ($1,000.00) annually.

ARTICLE X.

10.1 Construction of Capital Additions to the Leased Property. Without the prior written consent of Lessor which consent may be withheld or granted by Lessor in its sole and absolute discretion, Lessee shall make no Capital Additions on or structural alterations to the Leased Property and shall not enlarge or reduce the size of any Facility.

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 of any Facility or any Capital Addition thereto or any attachment, levy, claim or encumbrance in respect of the Rent, excluding, however, (i) this Lease; (ii) the matters that existed as of (a) with respect to the Group 1 Facilities and Group 2 Facilities, the Original Lease Commencement Date, with respect to such Group 1 Facility or Group 2 Facility and (b) with respect to the Group 3 Facilities, the Restatement Date, with respect to such Group 3 Facility; (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; and (viii) any liens which are the responsibility of Lessor pursuant to the provisions of Article XXXVI.

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 Addition thereto; (ii) neither the Leased Property or any Capital Addition thereto, 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), 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 Addition thereto 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 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 Capital Additions, the Fixtures and the Personal Property, insured with the kinds and amounts of insurance described below. Each element of insurance described in this Article shall be maintained with respect to the Leased Property of each Facility, including the Capital Additions, Fixtures, Personal Property and operations thereon. This insurance shall be written by companies authorized to do insurance business in the State in which the Leased Property is located. All liability type policies must name Lessor as an "additional insured." 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 le

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