MASTER LEASE AGREEMENT

Exhibit 10.56

MASTER LEASE AGREEMENT

BETWEEN

HEALTH CARE REIT, INC.

HCRI PENNSYLVANIA PROPERTIES, INC.

AND

TANDEM HEALTH CARE, INC.

January 1, 2002

TABLE OF CONTENTS

SECTION		PAGE
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS			1
1.1 Leased Property			1
1.2 Indivisible Lease			1
1.3 Term			2
1.4 Definitions			2
1.5 Landlord As Agent			10
ARTICLE 2: RENT			10
2.1 Base Rent			10
2.2 Increase of Lease Rate and Base Rent			11
2.3 Additional Rent			11
2.4 Place of Payment of Rent			11
2.5 Net Lease			11
2.6 No Termination, Abatement, Etc			11
2.7 Computational Method			12
ARTICLE 3: IMPOSITIONS AND UTILITIES			12
3.1 Payment of Impositions			12
3.2 Definition of Impositions			13
3.3 Escrow of Impositions			13
3.4 Utilities			13
3.5 Discontinuance of Utilities			14
3.6 Business Expenses			14
3.7 Permitted Contests			14
ARTICLE 4: INSURANCE			15
4.1 Property Insurance			15
4.2 Liability Insurance			16
4.3 Builder’s Risk Insurance			16
4.4 Insurance Requirements			16
4.5 Replacement Value			17
4.6 Blanket Policy			17
4.7 No Separate Insurance			17
4.8 Waiver of Subrogation			18
4.9 Mortgages			18
4.10 Escrows			18
ARTICLE 5: INDEMNITY			18
5.1 Tenant’s Indemnification			18
5.1.1 Notice of Claim			19
5.1.2 Survival of Covenants			19
5.1.3 Reimbursement of Expenses			19

SECTION		PAGE
5.2 Environmental Indemnity; Audits			19
5.3 Limitation of Landlord’s Liability			20
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES			20
6.1 Use of Leased Property			20
6.2 Acceptance of Leased Property			20
6.3 Conditions of Use and Occupancy			21
ARTICLE 7: MAINTENANCE AND MECHANICS’ LIENS			21
7.1 Maintenance			21
7.2 Required Alterations			22
7.3 Mechanic’s Liens			22
7.4 Replacements of Fixtures and Landlord’s Personal Property			22
ARTICLE 8: DEFAULTS AND REMEDIES			23
8.1 Events of Default			23
8.2 Remedies			25
8.3 Right of Set-Off			28
8.4 Performance of Tenant’s Covenants			28
8.5 Late Payment Charge			28
8.6 Interest			28
8.7 Litigation; Attorneys’ Fees			28
8.8 Escrows and Application of Payments			29
8.9 Remedies Cumulative			29
8.10 Intentionally Omitted			29
8.11 Obligations Under the Bankruptcy Code			29
ARTICLE 9: DAMAGE AND DESTRUCTION			30
9.1 Notice of Casualty			30
9.2 Substantial Destruction			30
9.3 Partial Destruction			31
9.4 Restoration			31
9.5 Insufficient Proceeds			32
9.6 Not Trust Funds			32
9.7 Landlord’s Inspection			32
9.8 Landlord’s Costs			33
9.9 No Rent Abatement			33
ARTICLE 10: CONDEMNATION			33
10.1 Total Taking			33
10.2 Partial Taking			34
10.3 Condemnation Proceeds Not Trust Funds			34
ARTICLE 11: TENANT’S PROPERTY			34
11.1 Tenant’s Property			34
11.2 Requirements for Tenant’s Property			34

(ii)

SECTION		PAGE
ARTICLE 12: RENEWAL OPTIONS			36
12.1 Renewal Options			36
12.2 Effect of Renewal			36
12.3 Effect of Non-Renewal or Expiration of Lease			36
ARTICLE 13: OPTION TO PURCHASE			37
13.1 Option to Purchase			37
13.2 Option Price			37
13.3 Fair Market Value			38
13.4 Closing			39
13.5 Failure to Close Option			39
13.6 Failure to Exercise Option to Purchase and Renewal Option			40
ARTICLE 14: NEGATIVE COVENANTS			40
14.1 No Debt			40
14.2 No Liens			40
14.3 No Guaranties			40
14.4 No Transfer			40
14.5 No Dissolution			40
14.6 No Change in Management or Operation			40
14.7 No Investments			41
14.8 Contracts			41
14.9 Subordination of Payments to Affiliates			41
14.10 Change of Location or Name			41
ARTICLE 15: AFFIRMATIVE COVENANTS			41
15.1 Perform Obligations			41
15.2 Proceedings to Enjoin or Prevent Construction			41
15.3 Documents and Information			42
15.3.1 Furnish Documents			42
15.3.2 Furnish Information			42
15.3.3 Further Assurances and Information			42
15.3.4 Material Communications			43
15.3.5 Requirements for Financial Statements			43
15.4 Compliance With Laws			43
15.5 Broker’s Commission			43
15.6 Existence and Change in Ownership			43
15.7 Financial Covenants			44
15.7.1 Definitions			44
15.7.2 Coverage Ratio			45
15.7.3 Net Worth			45
15.7.4 Current Ratio			45
15.8 Facility Licensure and Certification			45
15.9 Transfer of License and Facility Operations			45
15.9.1 Licensure			45
15.9.2 Facility Operations			46
15.10 Bed Operating Rights			46

(iii)

SECTION		PAGE
15.11 Power of Attorney			46
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS			47
16.1 Prohibition on Alterations and Improvements			47
16.2 Approval of Alterations			47
16.3 Permitted Alterations			47
16.4 Requirements for Permitted Alterations			47
16.5 Ownership and Removal of Permitted Alterations			48
16.6 Minimum Qualified Capital Expenditures			48
16.7 Signs			48
ARTICLE 17: [RESERVED]			49
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY			49
18.1 Prohibition on Assignment and Subletting			49
18.2 Requests for Landlord’s Consent to Assignment, Sublease or Management Agreement			49
18.3 Agreements with Residents			50
18.4 Sale of Leased Property			50
18.5 Assignment by Landlord			50
ARTICLE 19: HOLDOVER AND SURRENDER			51
19.1 Holding Over			51
19.2 Surrender			51
ARTICLE 20: LETTER OF CREDIT			51
20.1 Terms of Letter of Credit			51
20.2 Replacement Letter of Credit			51
20.3 Draws			52
20.4 Partial Draws			53
20.5 Substitute Letter of Credit			53
20.6 Retention of Letter of Credit			53
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES			53
21.1 Quiet Enjoyment			53
21.2 Subordination			53
21.3 Attornment			54
21.4 Estoppel Certificates			54
ARTICLE 22: REPRESENTATIONS AND WARRANTIES			55
22.1 Organization and Good Standing			55
22.2 Power and Authority			55
22.3 Enforceability			55
22.4 Government Authorizations			55
22.5 Financial Statements			56
22.6 Condition of Facility			56

 

SECTION		PAGE
22.7 Compliance with Laws			56
22.8 No Litigation			56
22.9 Consents			57
22.10 No Violation			57
22.11 Reports and Statements			57
22.12 ERISA			57
22.13 Chief Executive Office			57
22.14 Other Name or Entities			58
22.15 Parties in Possession			58
22.16 Access			58
22.17 Utilities			58
22.18 Condemnation and Assessments			58
22.19 Zoning			58
22.20 Pro Forma Statement			58
22.21 Environmental Matters			59
22.22 Leases and Contracts			59
22.23 No Default			59
22.24 Tax Status			59
ARTICLE 23: FUTURE PROJECTS			60
23.1 Project Submissions			60
ARTICLE 24: SECURITY INTEREST			60
24.1 Collateral			60
24.2 Additional Documents			61
24.3 Notice of Sale			61
24.4 Subordination of Receivables			61
24.5 Recharacterization			61
ARTICLE 25: MISCELLANEOUS			61
25.1 Notices			61
25.2 Advertisement of Leased Property			62
25.3 Entire Agreement			62
25.4 Severability			62
25.5 Captions and Headings			62
25.6 Governing Law			62
25.7 Memorandum of Lease			62
25.8 Waiver			62
25.9 Binding Effect			63
25.10 No Offer			63
25.11 Modification			63
25.12 Landlord’s Modification			63
25.13 No Merger			63
25.14 Laches			63
25.15 Limitation on Tenant’s Recourse			64
25.16 Construction of Lease			64
25.17 Counterparts			64

 

SECTION		PAGE
25.18 Lease Guaranty			64
25.19 Custody of Escrow Funds			64
25.20 Landlord’s Status as a REIT			64
25.21 Exhibits			64
25.22 WAIVER OF JURY TRIAL			64
25.23 CONSENT TO JURISDICTION			65
25.24 Attorney’s Fees and Expenses			65
25.25 Survival			66
25.26 Time			66
25.27 Subtenant			66
25.28 Radon Gas			66
25.29 Warrants			66

EXHIBIT A:		LEGAL DESCRIPTIONS
EXHIBIT B:		PERMITTED EXCEPTIONS
EXHIBIT C:		FACILITY INFORMATION
EXHIBIT D:		LANDLORD’S PERSONAL PROPERTY
EXHIBIT E:		DOCUMENTS TO BE DELIVERED
EXHIBIT F:		TENANT’S CERTIFICATE AND FACILITY FINANCIAL REPORTS
EXHIBIT G:		GOVERNMENT AUTHORIZATIONS TO BE OBTAINED; ZONING PERMITS
EXHIBIT H:		PENDING LITIGATION
EXHIBIT I:		LIST OF LEASES AND CONTRACTS

(vi)

MASTER LEASE AGREEMENT

     This Master Lease Agreement (“Lease”) is made effective as of January 1, 2002 (the “Effective Date”) between Health Care REIT, Inc. , a corporation organized under the laws of the State of Delaware (“HCRI” and a “Landlord” as further defined in §1.4 below), having its principal office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475, HCRI Pennsylvania Properties, Inc. , a corporation organized under the laws of the Commonwealth of Pennsylvania (“HCRI-PA” and a “Landlord” as further defined in §1.4 below), having its principal office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475, and Tandem Health Care, Inc. , a corporation organized under the laws of the Commonwealth of Pennsylvania (“Tenant”), having its chief executive office located at Cherrington Corporate Center, 200 Corporate Center Drive, Suite 360, Moon Township, Pennsylvania 15108.

RECITALS

     A. Landlord desires to lease the Leased Property to Tenant and Tenant desires to lease the Leased Property from Landlord upon the terms set forth in this Lease.

     NOW, THEREFORE, Landlord and Tenant agree as follows:

ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS

     1.1 Leased Property . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Leased Property, subject, however, to the Permitted Exceptions and subject to the terms and conditions of this Lease.

     1.2 Indivisible Lease . This Lease constitutes one indivisible lease of the entire Leased Property. The Leased Property constitutes one economic unit and the Base Rent and all other provisions have been negotiated and agreed to based on a lease of all of the Leased Property as a single, composite, inseparable transaction and would have been materially different had separate leases or a divisible lease been intended. Except as expressly provided herein for specific, isolated purposes (and then only to the extent expressly otherwise stated), all provisions of this Lease shall apply equally and uniformly to all the Leased Property as one unit and any Event of Default under this Lease is an Event of Default as to the entire Leased Property. The parties intend that the provisions of this Lease shall at all times be construed, interpreted and applied so as to carry out their mutual objective to create a single indivisible lease of all the Leased Property and, in particular but without limitation, that for purposes of any assumption, rejection or assignment of this Lease under the Bankruptcy Code, this is one indivisible and non-severable lease and executory contract dealing with one legal and economic unit which must be assumed, rejected or assigned as a whole with respect to all (and only all) the Leased Property covered hereby. The parties agree that the existence of more than one Landlord under this Lease does not affect the indivisible, non-severable nature of this Lease. The parties may amend this Lease from time to time to include one or more additional Facility Properties as part of the Leased Property and such future addition to the Leased Property shall not in any way change the

indivisible and non-severable nature of this Lease and all of the foregoing provisions shall continue to apply in full force.

     1.3 Term . The initial term (“Initial Term”) of this Lease commences on the Effective Date and expires at 12:00 Midnight Eastern Time on April 1, 2011 (the “Expiration Date”); provided, however, that [i] Tenant has one or more options to renew the Lease pursuant to Article 12, and [ii] that any addition to the Leased Property pursuant to amendment of this Lease shall extend the Initial Term so that the Initial Term shall expire on the 13 ^th anniversary of the Amended Commencement Date as set forth in such amendment.

     1.4 Definitions . Except as otherwise expressly provided, [i] the terms defined in this Section have the meanings assigned to them in this Section 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 generally accepted accounting principles as of the time applicable; and [iii] the words “herein”, “hereof”, and “hereunder” and similar words refer to this Lease as a whole and not to any particular section.

     “ADA” means the federal statute entitled Americans with Disabilities Act, 42 U.S.C. §12101, et seq .

     “Affiliate” means any person, corporation, partnership, limited liability company, trust, or other legal entity that, directly or indirectly, controls, or is controlled by, or is under common control with Tenant or Guarantor. “Control” (and the correlative meanings of the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity. “Affiliate” includes, without limitation, each Guarantor.

     “Affiliate Facility” means each facility leased by Landlord or any Landlord Affiliate to any Affiliate, whether now or hereafter existing.

     “Affiliate Lease” means each lease now or hereafter made between Landlord or any Landlord Affiliate and any Affiliate, as amended, modified, extended or renewed from time to time.

     “Affiliate Tenant” means each Affiliate that is a tenant under an Affiliate Lease.

     “Allocated Lease Amount” means the portion of the Lease Amount allocated to a specific Facility as set forth on the attached Exhibit C, including any Lease Advance Amount designated by Landlord as allocated to such specific Facility.

     “Amended Commencement Date” means the Commencement Date as amended pursuant to the most recent amendment of this Lease in effect at such time.

     “Annual Company Budget” means Company’s projection of its financial statement for the next fiscal year (or the 12-month rolling forward period, if applicable), which shall include the balance sheet, statement of income, statement of cash flows, statement of shareholders’ equity and statement of capital expenditures for the applicable period.

     “Annual Facility Budget” means Tenant’s projection of the Facility Financial Statement for the next fiscal year (or the 12-month rolling forward period, if applicable).

     “Annual Financial Statements” means [i] for Tenant and Subtenant, an audited balance sheet, statement of income, and statement of cash flows for the most recent fiscal year on an individual facility and consolidated basis; [ii] for each Facility, an audited Facility Financial Statement for the most recent fiscal year; [iii] for Guarantor, if Guarantor is or includes a corporation, partnership or limited liability company, an audited balance sheet and statement of income for the most recent fiscal year; and [iv] for Guarantor, if Guarantor is or includes an individual, a current unaudited personal financial statement.

     “Bankruptcy Code” means the United States Bankruptcy Code set forth in 11 U.S.C. §101 et. seq., as amended from time to time.

     “Base Rent” has the meaning set forth in §2.1, as increased from time to time pursuant to §2.2.

     “Business Day” means any day other than a Saturday, Sunday, or national holiday.

     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

     “Closing” means the closing of the lease of the Leased Property to Tenant.

     “Collateral” has the meaning set forth in §24.1.

     “Commencement Date” means the Effective Date if such date is the first day of a month, and if it is not, the first day of the first month following the Effective Date.

     “Commitment” means the Commitment Letter for the Lease dated August 25, 1997.

     “Company” means Tandem Health Care, Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania.

     “CPI” means the United States Department of Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban Consumers (1998-2000=100), U.S. City Average, All Items, or, if that index is not available at the time in question, the index designated by such Department as the successor to such index, and if there is no index so designated, an index for an area in the United States that most closely corresponds to the entire United States, published by such Department, or if none, by any other instrumentality of the United States.

     “Effective Date” means the date of this Lease.

     “Environmental Laws” means all federal, state, and local laws, ordinances and policies the purpose of which is to protect human health and the environment, as amended from time to time, including, but not limited to, [i] CERCLA; [ii] the Resource Conservation and

Recovery Act; [iii] the Hazardous Materials Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control Act; [vii] the Occupational Safety and Health Act; [viii] the Safe Drinking Water Act; and [ix] analogous state laws and regulations.

     “Event of Default” has the meaning set forth in §8.1.

     “Expiration Date” has the meaning set forth in §1.3.

     “Extended Term” has the meaning set forth in §12.3(a).

     “Facility” means each facility located on a portion of the Land, including the Facility Property associated with such Facility. References in this Lease to “the Facility” shall mean each Facility individually unless expressly stated otherwise.

     “Facility Cash Flow” has the meaning set forth in §15.7.1.

     “Facility Coverage Ratio” has the meaning set forth in §15.7.1.

     “Facility Financial Statement” means a financial statement for each Facility which shall include the balance sheet, statement of income, statement of cash flows, statement of shareholders’ equity, occupancy census data (including payor mix), statement of capital expenditures and a comparison of the actual financial data versus the Annual Facility Budget for the applicable period.

     “Facility Name” means the name under which a Facility has done business during the Term. The Facility Name in use by each Facility on the Effective Date is set forth on the attached Exhibit C.

     “Facility Property” means the portion of the Land on which a Facility is located, the legal description of which is set forth beneath the applicable Facility Name on Exhibit A, the Improvements on such portion of the Land, the Related Rights with respect to such portion of the Land, and Landlord’s Personal Property with respect to such Facility.

     “Facility Uses” means the uses relating to the operation of a Facility as a facility of the type and operating the number of beds and units set forth on Exhibit C with respect to such Facility.

     “Fair Market Value” has the meaning set forth in §13.3.

     “Financial Statements” means [i] the annual, quarterly and year to date financial statements of Tenant and Guarantor; and [ii] all operating statements for each Facility, that were submitted to Landlord prior to the Effective Date.

     “Fixtures” means all permanently affixed equipment, machinery, fixtures and other items of real and/or personal property (excluding Landlord’s Personal Property), including all components thereof, now and hereafter located in, on or used in connection with, and permanently affixed to or incorporated into the Improvements, including, without limitation, all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating,

refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning systems and apparatus, sprinkler systems and fire and theft protection equipment, built-in oxygen and vacuum systems, towers and other devices for the transmission of radio, television and other signals, all of which, to the greatest extent permitted by law, are hereby deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto.

     “Government Authorizations” means all permits, licenses, approvals, consents, and authorizations required to comply with all Legal Requirements, including, but not limited to, [i] zoning permits, variances, exceptions, special use permits, conditional use permits, and consents; [ii] the permits, licenses, provider agreements and approvals required for licensure and operation of each Facility in accordance with its respective Facility Uses and certified as a provider under the federal Medicare and state Medicaid programs; [iii] environmental, ecological, coastal, wetlands, air, and water permits, licenses, and consents; [iv] curb cut, subdivision, land use, and planning permits, licenses, approvals and consents; [v] building, sign, fire, health, and safety permits, licenses, approvals, and consents; and [vi] architectural reviews, approvals, and consents required under restrictive covenants.

     “Guarantor” means each Subtenant, individually and collectively.

     “Guaranty” means the Unconditional and Continuing Lease Guaranty entered into by Guarantor to guarantee payment and performance of the Secured Obligations and any amendments thereto or substitutions or replacements therefor.

     “Hazardous Materials” means any substance [i] the presence of which poses a hazard to the health or safety of persons on or about the Land, including, but not limited to, asbestos containing materials; [ii] which requires removal or remediation under any Environmental Law, including, without limitation, any substance which is toxic, explosive, flammable, radioactive, or otherwise hazardous; or [iii] which is regulated under or classified under any Environmental Law as hazardous or toxic, including, but not limited to, any substance within the meaning of “hazardous substance”, “hazardous material”, “hazardous waste”, “toxic substance”, “regulated substance”, “solid waste”, or “pollutant” as defined in any Environmental Law.

     “HCRI” means Health Care REIT, Inc., a corporation organized under the laws of the State of Delaware.

     “HCRI-PA” means HCRI Pennsylvania Properties, Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania.

     “HIPDB” means the Healthcare Integrity and Protection Data Bank maintained by the Department of Health and Human Services.

     “Impositions” has the meaning set forth in §3.2.

     “Improvements” means all buildings, structures, Fixtures and other improvements of every kind on the Land, including, but not limited to, alleys, sidewalks, utility pipes, conduits

and lines (on-site and off-site), parking areas and roadways appurtenant to such buildings and structures, now or hereafter situated upon the Land.

     “Increaser Rate” means 20.25 basis points per year for the Initial Term and 20.25 basis points per year for each Renewal Term.

     “Initial Lease Advance” means $47,831,425.00.

     “Initial Term” has the meaning set forth in §1.3.

     “Issuer” means a financial institution satisfactory to Landlord issuing the Letter of Credit and such Issuer’s successors and assigns. Any “Issuer” shall have a Lace Financial Service Rating of “C+” or higher at all times throughout the Term.

     “Land” means the real property described in Exhibit A attached hereto.

     “Landlord” means HCRI and HCRI-PA, individually and collectively.

     “Landlord Affiliate” means any person, corporation, partnership, limited liability company, trust, or other legal entity that, directly or indirectly, controls, or is controlled by, or is under common control with Landlord. “Control” (and the correlative meanings of the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity. “Landlord Affiliate” includes, without limitation, HCRI Indiana Properties, LLC, HCRI Texas Properties, Ltd., HCRI Nevada Properties, Inc., HCRI Properties, Inc., HCRI North Carolina Properties, LLC and HCRI Louisiana Properties, L.P.

     “Landlord’s Personal Property” means all Personal Property owned by Landlord on the Effective Date, including, without limitation, all personal property listed on the attached Exhibit D, together with any and all replacements thereof, and all Personal Property that pursuant to the terms of this Lease becomes the property of Landlord during the Term.

     “LC Proceeds” has the meaning set forth in §20.3.

     “Lease” means this Master Lease Agreement, as amended from time to time.

     “Lease Advance” means any advance of funds by Landlord to Tenant pursuant to the terms of this Lease.

     “Lease Advance Amount” means the amount of any Lease Advance. The first Lease Advance Amount is the Lease Amount on the Effective Date.

     “Lease Advance Date” means the date on which Landlord makes a Lease Advance.

     “Lease Amount” is an aggregate concept and means the sum of the Lease Advance Amounts outstanding at the applicable time. As of the Effective Date, the Lease Amount is $47,831,425.00.

     “Lease Documents” means this Lease and all documents executed by Landlord and Tenant relating to this Lease or the Facility.

     “Lease Payments” means the sum of the Base Rent payments (as increased from time to time) for the applicable period.

     “Lease Rate” means the annual rate used to determine Base Rent for each Lease Advance. The Lease Rate is 10.45% using the 365/360 method. The Lease Rate includes any accrued Increaser Rate. On the Renewal Date, the Lease Rate will be the Renewal Rate.

     “Lease Year” means each consecutive period of 365 or 366 days throughout the Term. The first Lease Year commences on the Commencement Date and expires on the day before the first anniversary of the Commencement Date.

     “Leased Property” means all of the Land, Improvements, Related Rights and Landlord’s Personal Property.

     “Legal Requirements” means all laws, regulations, rules, orders, writs, injunctions, decrees, certificates, requirements, agreements, conditions of participation and standards of any federal, state, county, municipal or other governmental entity, administrative agency, insurance underwriting board, architectural control board, private third-party payor, accreditation organization, or any restrictive covenants applicable to the development, construction, condition and operation of the Facility by Tenant, including, but not limited to, [i] zoning, building, fire, health, safety, sign, and subdivision regulations and codes; [ii] certificate of need laws (if applicable); [iii] licensure to operate as each Facility in accordance with its respective Facility Uses; [iv] Medicare and Medicaid certification requirements (if applicable); [v] the ADA; [vi] any Environmental Laws; and [vii] requirements, conditions and standards for participation in third-party payor insurance programs.

     “Letter of Credit” means an irrevocable and transferable Letter of Credit in an amount equal to 2.5% of the Lease Amount, issued by Issuer in favor of Landlord as security for the Lease and in form acceptable to Landlord, and any amendments thereto or replacements or substitutions therefor.

     “Material Obligation” means [i] any indebtedness secured by a security interest in or a lien, deed of trust or mortgage on any of the Leased Property (or any part thereof, including any Personal Property) and any agreement relating thereto; [ii] any obligation or agreement that is material to the construction or operation of the Facility or that is material to Tenant’s business or financial condition; [iii] any indebtedness or lease of Tenant or Subtenant that has an outstanding principal balance or obligation of at least $50,000.00 and any agreement relating thereto; [iv] any indebtedness or lease of Guarantor or of any other party that has been guaranteed by Guarantor that has an outstanding principal balance or obligation of at least $250,000.00; [v] any obligation to or agreement with the Issuer relating to the Letter of Credit; and [vi] any sublease of the Leased Property.

     “Net Worth” has the meaning set forth in §15.7.1.

     “Option Price” has the meaning set forth in §13.2.

     “Option to Purchase” has the meaning set forth in §13.1.

     “Organizational Documents” means [i] for a corporation, its Articles of Incorporation certified by the Secretary of State of the state of organization, as amended to date, and its Bylaws certified by such entity, as amended to date; [ii] for a partnership, its Partnership Agreement certified by such entity, as amended to date, and the Partnership Certificate, certified by the appropriate authority, as amended to date; and [iii] for a limited liability company, its Articles of Organization certified by the Secretary of State of the state of organization, as amended to date, and its Operating Agreement certified by such entity, as amended to date.

     “Overdue Rate” has the meaning set forth in §8.6.

     “PA-Facility” means each Facility located in the Commonwealth of Pennsylvania.

     “Periodic Financial Statements” means [i] for Tenant and Subtenant, an unaudited balance sheet and statement of income for the most recent quarter; [ii] for the Facility, an unaudited Facility Financial Statement for the most recent month; [iii] for Guarantor, if Guarantor is or includes a corporation, partnership, or limited liability company, an unaudited balance sheet and statement of income of Guarantor for the most recent quarter; and [iv] for Guarantor, if Guarantor is or includes an individual, a current unaudited personal financial statement.

     “Permitted Exceptions” means all easements, liens, encumbrances, restrictions, agreements and other title matters existing as of the Effective Date, including, without limitation, the exceptions to title set forth on Exhibit B attached hereto, and any sublease of any portion of the Leased Property made in complete accordance with Article 18.

     “Permitted Liens” means [i] liens granted to Landlord; [ii] liens customarily incurred by Tenant or Subtenant in the ordinary course of business for items not delinquent, including mechanic’s liens and deposits and charges under worker’s compensation laws; [iii] liens for taxes and assessments not yet due and payable; [iv] any lien, charge, or encumbrance which is being contested in good faith pursuant to this Lease; [v] the Permitted Exceptions; and [vi] purchase money financing and capitalized equipment leases for the acquisition of personal property provided, however, that Landlord obtains a nondisturbance agreement from the purchase money lender or equipment lessor in form and substance as may be satisfactory to Landlord if the original cost of the equipment exceeds $50,000.00.

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

     “Portfolio Cash Flow” has the meaning set forth in §15.7.1.

     “Portfolio Coverage Ratio” has the meaning set forth in §15.7.1.

     “Pro Forma Statement” means a financial forecast for the Facility for the next five-year period prepared in accordance with the standards for forecasts established by the American Institute of Certified Public Accountants.

     “Purchase Notice” has the meaning set forth in §13.1.

     “Qualified Capital Expenditures” means the expenditures capitalized on the books of Tenant or Subtenant for any of the following: replacement of furniture, fixtures and equipment, including refrigerators, ranges, major appliances, bathroom fixtures, doors (exterior and interior), central air conditioning and heating systems (including cooling towers, water chilling units, furnaces, boilers and fuel storage tanks) and major replacement of siding; major roof replacements, including major replacements of gutters, downspouts, eaves and soffits; major repairs and replacements of plumbing and sanitary systems; overhaul of elevator systems; major repaving, resurfacing and sealcoating of sidewalks, parking lots and driveways; repainting of entire building exterior; but excluding major alterations, renovations, additions and normal maintenance and repairs.

     “Rate Determination Date” means the date on which the value for the Rate Index is established for computing any Lease Rate. For any Lease Advances made during the Initial Term, the Rate Determination Date is the Lease Advance Date. For any Renewal Date, the Rate Determination Date is the last Business Day of the current Term.

     “Rate Index” means the yield quoted in the Wall Street Journal on the applicable Rate Determination Date for the most actively traded United States Treasury Notes having the nearest equivalent maturity date to the Expiration Date or the expiration date for the current Renewal Term, as applicable. For any Lease Advance other than the first Lease Advance, the yield shall be computed based upon the remainder of the Initial Term or Renewal Term, as applicable.

     “Rate Spread” means the rate spread from time to time used to calculate the Lease Rate applicable to any Lease Advance. The Rate Spread is 390 basis points for the Initial Term.

     “Receivables” means [i] all of Tenant’s or Subtenant’s rights to receive payment for providing resident care and services as set forth in any accounts, contract rights, and instruments, and [ii] those documents, chattel paper, inventory proceeds, provider agreements, participation agreements, ledger sheets, files, records, computer programs, tapes, and agreements relating to Tenant’s or Subtenant’s rights to receive payment for providing resident care services.

     “Related Rights” means all easements, rights (including bed operating rights) and appurtenances relating to the Land and the Improvements.

     “Renewal Date” means the first day of each Renewal Term.

     “Renewal Option” has the meaning set forth in §12.1.

     “Renewal Rate” means the Lease Rate established for the Lease Year ending on the date immediately prior to the Renewal Date plus the Increaser Rate.

     “Renewal Term” has the meaning set forth in §12.1.

     “Rent” has the meaning set forth in §2.3.

     “Replacement Operator” has the meaning set forth in §15.9.1.

     “Secured Obligations” means all payment and performance obligations of Tenant, Subtenant and Guarantor to Landlord or any Landlord Affiliate, including, but not limited to, all obligations under this Lease, any loans extended to Tenant, Subtenant or Guarantor by Landlord or any Landlord Affiliate and all documents executed by Tenant, Subtenant or Guarantor in connection with this Lease, any loan or any other obligation.

     “State” means the State in which a respective Facility is located.

     “States” means, collectively, the States in which the Leased Property is located.

     “Subtenant” means Tandem Health Care of Cheswick, Inc.; Tandem Health Care of Fort Myers, Inc.; Tandem Health Care of Lakeland, Inc.; Tandem Health Care of New Port Richey, Inc.; Tandem Health Care of Vero Beach, Inc.; and Tandem Health Care of West Palm Beach, Inc., individually and collectively. Each Subtenant will be the licensed operator of its respective Facility as shown on Exhibit C. References in this Lease to “Subtenant” shall mean each Subtenant individually and shall relate to such Subtenant’s respective Facility unless expressly stated otherwise.

     “Tenant” has the meaning set forth in the introductory paragraph of this Lease.

     “Term” means the Initial Term and each Renewal Term.

     1.5 Landlord As Agent . With respect to each PA-Facility, HCRI-PA appoints HCRI as the agent and lawful attorney-in-fact of HCRI-PA to act for HCRI-PA for all purposes and actions of Landlord under this Lease. All notices, consents, waivers and all other documents and instruments executed by HCRI pursuant to this Lease from time to time and all other actions of HCRI as Landlord under this Lease shall be binding upon HCRI-PA. All Rent payable under this Lease shall be paid to HCRI.

ARTICLE 2: RENT

     2.1 Base Rent . Tenant shall pay Landlord base rent (“Base Rent”) in advance in consecutive monthly installments payable on the first day of each month during the Term commencing on the Commencement Date. If the Effective Date is not the first day of a month, Tenant shall pay Landlord Base Rent on the Effective Date for the partial month, i.e., for the period commencing on the Effective Date and ending on the day before the Commencement Date. The Base Rent for the Initial Term will be computed monthly and will be equal to 1/12th of the sum of the products of each Lease Advance times the Lease Rate for each Lease Advance. The Base Rent for each Renewal Term will be computed in accordance with §12.2.

     2.2 Increase of Lease Rate and Base Rent . Commencing on the first day of April, 2002 and on each April 1 ^st thereafter throughout the Term (including any Renewal Term

and Extended Term), the Lease Rate will increase by the applicable Increaser Rate. On each date that the Lease Rate is increased, the Base Rent will be increased accordingly and will be equal to 1/12th of the sum of the products of each Lease Advance times the Lease Rate (including the applicable Increaser Rate) for each Lease Advance.

     2.3 Additional Rent . In addition to Base Rent, Tenant shall pay all other amounts, liabilities, obligations and Impositions which Tenant assumes or agrees to pay under this Lease and any fine, penalty, interest, charge and cost which may be added for nonpayment or late payment of such items (collectively the “Additional Rent”). The Base Rent and Additional Rent are hereinafter referred to as “Rent”. Landlord shall have all legal, equitable and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of nonpayment of the Rent.

     2.4 Place of Payment of Rent . Tenant shall make all payments of Rent at Landlord’s address set forth in the first paragraph of this Lease or at such other place as Landlord may designate from time to time.

     2.5 Net Lease . This Lease shall be deemed and construed to be an “absolute net lease”, and Tenant shall pay all Rent and other charges and expenses in connection with the Leased Property throughout the Term, without abatement, deduction, recoupment or set-off.

     2.6 No Termination, Abatement, Etc. Except as otherwise specifically provided in this Lease, Tenant shall remain bound by this Lease in accordance with its terms. Tenant shall not, without the consent of Landlord, modify, surrender or terminate the Lease, nor seek nor be entitled to any abatement, deduction, deferment or reduction of Rent, or set-off or recoupment against the Rent. Except as expressly provided in this Lease, the obligations of Landlord and Tenant shall not be affected by reason of [i] any damage to, or destruction of, the Leased Property or any part thereof from whatever cause (other than Landlord’s negligence or willful misconduct) or any Taking (as hereinafter defined) of the Leased Property or any part thereof; [ii] the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, or any part thereof, the interference with such use by any person, corporation, partnership or other entity (other than Landlord or Landlord Affiliate), or by reason of eviction by paramount title; [iii] any claim which Tenant has or might have against Landlord or by reason of any default or breach of any warranty by Landlord under this Lease or any other agreement between Landlord and Tenant, or to which Landlord and Tenant are parties; [iv] any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceeding affecting Landlord or any assignee or transferee of Landlord; or [v] any other cause, whether similar or dissimilar to any of the foregoing, other than a discharge of Tenant from any such obligations as a matter of law. Except as otherwise specifically provided in this Lease, Tenant 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 or any portion thereof; or [b] entitling Tenant to any abatement, reduction, suspension or deferment of the Rent or other sums payable by Tenant hereunder. The obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements and the Rent and all other sums payable by Tenant 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.

     2.7 Computational Method . Landlord and Tenant acknowledge that all rates under this Lease will be computed based on the actual number of days elapsed over a 360-day year (365/360 method).

ARTICLE 3: IMPOSITIONS AND UTILITIES

     3.1 Payment of Impositions . Tenant shall pay, as Additional Rent, all Impositions that may be levied or become a lien on the Leased Property or any part thereof at any time (whether prior to or during the Term), without regard to prior ownership of said Leased Property, before any fine, penalty, interest, or cost is incurred; provided, however, Tenant may contest any Imposition in accordance with §3.7. Tenant shall deliver to Landlord [i] not more than 10 days after the due date of each Imposition, copies of the invoice for such Imposition and the check delivered for payment thereof; and [ii] not more than 30 days after the due date of each Imposition, a copy of the official receipt evidencing such payment or other proof of payment satisfactory to Landlord. Tenant’s obligation to pay such Impositions shall be deemed absolutely fixed upon the date such Impositions become a lien upon the Leased Property or any part thereof. Tenant, at its expense, shall prepare and file all tax returns and reports in respect of any Imposition as may be required by governmental authorities. Tenant shall be entitled to any refund due from any taxing authority if no Event of Default shall have occurred hereunder and be continuing and if Tenant shall have paid all Impositions due and payable as of the date of the refund. Landlord shall be entitled to any refund from any taxing authority if an Event of Default has occurred and is continuing. Any refunds retained by Landlord due to an Event of Default shall be applied as provided in §8.8. Landlord and Tenant 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 as may be necessary to prepare any required returns and reports. In the event governmental authorities classify any property covered by this Lease as personal property, Tenant shall file all personal property tax returns in such jurisdictions where it may legally so file. Landlord, to the extent it possesses the same, and Tenant, to the extent it possesses the same, will provide the other party, upon request, with cost and depreciation records necessary for filing returns for any property so classified as personal property. Where Landlord is legally required to file personal property tax returns, Tenant will be provided with copies of assessment notices indicating a value in excess of the reported value in sufficient time for Tenant to file a protest. Tenant may, upon notice to Landlord, at Tenant’s option and at Tenant’s sole cost and expense, protest, appeal, or institute such other proceedings as Tenant may deem appropriate to effect a reduction of real estate or personal property assessments and Landlord, at Tenant’s expense as aforesaid, shall fully cooperate with Tenant in such protest, appeal, or other action. Tenant shall reimburse Landlord for all personal property taxes paid by Landlord within 30 days after receipt of billings accompanied by copies of a bill therefor and payments thereof which identify the personal property with respect to which such payments are made. Impositions imposed in respect to the tax-fiscal period during which the Term terminates shall be adjusted and prorated between Landlord and Tenant, whether or not such Imposition is imposed before or after such termination, and Tenant’s obligation to pay its prorated share thereof shall survive such termination.

     3.2 Definition of Impositions . “Impositions” means, collectively, [i] taxes (including, without limitation, all capital stock and franchise taxes of Landlord imposed by the State or any governmental entity in the State due to this lease transaction or Landlord’s ownership of the Leased Property and the income arising therefrom, or due to Landlord being considered as doing business in the State because of Landlord’s ownership of the Leased Property or lease thereof to Tenant), all real estate and personal property ad valorem, sales and use, business or occupation, single business, gross receipts, transaction privilege, rent or similar taxes; [ii] assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not to be completed with the Term); [iii] ground rents, water, sewer or other rents and charges, excises, tax levies, and fees (including, without limitation, license, permit, inspection, authorization and similar fees); [iv] all taxes imposed on Tenant’s operations of the Leased Property, including, without limitation, employee withholding taxes, income taxes and intangible taxes; [v] all taxes imposed by the State or any governmental entity in the State with respect to the conveyance of the Leased Property by Landlord to Tenant or Tenant’s designee, including, without limitation, conveyance taxes and capital gains taxes; and [vi] 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 or any part thereof and/or the Rent (including all interest and penalties thereon due to any failure in payment by Tenant), 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 [a] Landlord or Landlord’s interest in the Leased Property or any part thereof; [b] the Leased Property or any part thereof or any rent therefrom or any estate, right, title or interest therein; or [c] any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof. Tenant shall not, however, be required to pay any tax based on net income imposed on Landlord by any governmental entity other than the capital stock and franchise taxes described in clause [i] above.

     3.3 Escrow of Impositions . If an Event of Default occurs and while it remains uncured, Tenant shall, at Landlord’s election, deposit with Landlord on the first day of each month a sum equal to 1/12th of the Impositions assessed against the Leased Property for the preceding tax year, which sums shall be used by Landlord toward payment of such Impositions. Tenant, on demand, shall pay to Landlord any additional funds necessary to pay and discharge the obligations of Tenant pursuant to the provisions of this Section. The receipt by Landlord of the payment of such Impositions by and from Tenant shall only be as an accommodation to Tenant, the mortgagees, and the taxing authorities, and shall not be construed as rent or income to Landlord, Landlord serving, if at all, only as a conduit for delivery purposes.

     3.4 Utilities . Tenant shall pay, as Additional Rent, all taxes, assessments, charges, deposits, and bills for utilities, including, without limitation, charges for water, gas, oil, sanitary and storm sewer, electricity, telephone service, and trash collection, which may be charged against the occupant of the Improvements during the Term. If an Event of Default occurs and while it remains uncured, Tenant shall, upon written notice and at Landlord’s election, deposit with Landlord on the first day of each month a sum equal to 1/12th of the amount of the annual utility expenses for the preceding Lease Year, which sums shall be used by Landlord to pay such utilities. Tenant shall, on demand, pay to Landlord any additional amount needed to pay such utilities. Landlord’s receipt of such payments shall only be an

accommodation to Tenant and the utility companies and shall not constitute rent or income to Landlord. Tenant shall at all times maintain that amount of heat necessary to ensure against the freezing of water lines. Tenant hereby agrees to indemnify and hold Landlord harmless from and against any liability or damages to the utility systems and the Leased Property that may result from Tenant’s failure to maintain sufficient heat in the Improvements.

     3.5 Discontinuance of Utilities . Landlord will not be liable for damages to person or property or for injury to, or interruption of, business for any discontinuance of utilities nor will such discontinuance in any way be construed as an eviction of Tenant or cause an abatement of rent or operate to release Tenant from any of Tenant’s obligations under this Lease.

     3.6 Business Expenses . Tenant shall promptly pay all expenses and costs incurred in connection with the operation of the Facility on the Leased Property, including, without limitation, employee benefits, employee vacation and sick pay, consulting fees, and expenses for inventory and supplies.

     3.7 Permitted Contests . Tenant, on its own or on Landlord’s behalf (or in Landlord’s name), but at Tenant’s expense, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount or validity or application, in whole or in part, of any Imposition or any Legal Requirement or insurance requirement or any lien, attachment, levy, encumbrance, charge or claim provided that [i] in the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the commencement and continuation of such proceedings shall suspend the collection thereof from Landlord and from the Leased Property; [ii] neither the Leased Property nor any Rent therefrom nor any part thereof or interest therein would be in any immediate danger of being sold, forfeited, attached or lost; [iii] in the case of a Legal Requirement, Landlord would not be in any immediate danger of civil or criminal liability for failure to comply therewith pending the outcome of such proceedings; [iv] in the event that any such contest shall involve a sum of money or potential loss in excess of $50,000.00, Tenant shall deliver to Landlord and its counsel an opinion of Tenant’s counsel to the effect set forth in clauses [i], [ii] and [iii], to the extent applicable; [v] in the case of a Legal Requirement and/or an Imposition, lien, encumbrance or charge, Tenant shall give such reasonable security as may be demanded by Landlord to insure ultimate payment of the same and to prevent any sale or forfeiture of the affected Leased Property or the Rent by reason of such nonpayment or noncompliance; provided, however, the provisions of this Section shall not be construed to permit Tenant to contest the payment of Rent (except as to contests concerning the method of computation or the basis of levy of any Imposition or the basis for the assertion of any other claim) or any other sums payable by Tenant to Landlord hereunder; [vi] in the case of an insurance requirement, the coverage required by Article 4 shall be maintained; and [vii] if such contest be finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent due hereunder, 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. Landlord, at Tenant’s expense, shall execute and deliver to Tenant such authorizations and other documents as may be reasonably required in any such contest, and, if reasonably requested by Tenant or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby agrees to indemnify and save Landlord harmless from and against any liability, cost or expense of any kind that may be imposed upon Landlord in connection with any such contest and any loss resulting therefrom.

ARTICLE 4: INSURANCE

     4.1 Property Insurance . At Tenant’s expense, Tenant shall maintain in full force and effect a property insurance policy or policies insuring the Leased Property against the following:

          (a) Loss or damage commonly covered by a “Special Form” policy insuring against physical loss or damage to the Improvements and Personal Property, including, but not limited to, risk of loss from fire and other hazards, collapse, transit coverage, vandalism, malicious mischief, theft, earthquake (if the Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually recommended in the area of the Leased Property). The policy shall be in the amount of the full replacement value (as defined in §4.5) of the Improvements and Personal Property and shall contain a deductible amount acceptable to Landlord. Landlord shall be named as an additional insured. The policy shall include a stipulated value endorsement or agreed amount endorsement and endorsements for contingent liability for operations of building laws, demolition costs, and increased cost of construction.

          (b) If applicable, loss or damage by explosion of steam boilers, pressure vessels, or similar apparatus, now or hereafter installed on the Leased Property, in commercially reasonable amounts acceptable to Landlord.

          (c) Consequential loss of rents and income coverage insuring against all “Special Form” risk of physical loss or damage with limits and deductible amounts acceptable to Landlord covering risk of loss during the first nine months of reconstruction, and containing an endorsement for extended period of indemnity of at least six months, and shall be written with a stipulated amount of coverage if available at a reasonable premium.

          (d) If the Leased Property is located, in whole or in part, in a federally designated 100-year flood plain area, flood insurance for the Improvements in an amount equal to the lesser of [i] the full replacement value of the Improvements; or [ii] the maximum amount of insurance available for the Improvements under all federal and private flood insurance programs.

          (e) Loss or damage caused by the breakage of plate glass in commercially reasonable amounts acceptable to Landlord.

          (f) Loss or damage commonly covered by blanket crime insurance, including employee dishonesty, loss of money orders or paper currency, depositor’s forgery, and loss of property of patients accepted by Tenant for safekeeping, in commercially reasonable amounts acceptable to Landlord.

     4.2 Liability Insurance . At Tenant’s expense, Tenant shall maintain liability insurance against the following:

          (a) Claims for personal injury or property damage commonly covered by comprehensive general liability insurance with endorsements for incidental malpractice, contractual, personal injury, owner’s protective liability, voluntary medical payments, products and completed operations, broad form property damage, and extended bodily injury, with

commercially reasonable amounts for bodily injury, property damage, and voluntary medical payments acceptable to Landlord, but with a combined single limit of not less than $5,000,000.00 per occurrence.

          (b) Claims for personal injury and property damage commonly covered by comprehensive automobile liability insurance, covering all owned and non-owned automobiles, with commercially reasonable amounts for bodily injury, property damage, and for automobile medical payments acceptable to Landlord, but with a combined single limit of not less than $5,000,000.00 per occurrence.

          (c) Claims for personal injury commonly covered by medical malpractice insurance in commercially reasonable amounts acceptable to Landlord.

          (d) Claims commonly covered by worker’s compensation insurance for all persons employed by Tenant on the Leased Property. Such worker’s compensation insurance shall be in accordance with the requirements of all applicable local, state, and federal law.

     4.3 Builder’s Risk Insurance. In connection with any construction, Tenant shall maintain in full force and effect a builder’s completed value risk policy (“Builder’s Risk Policy”) of insurance in a nonreporting form insuring against all “Special Form” risk of physical loss or damage to the Improvements, including, but not limited to, risk of loss from fire and other hazards, collapse, transit coverage, vandalism, malicious mischief, theft, earthquake (if Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually recommended in the area of the Leased Property). The Builder’s Risk Policy shall include endorsements providing coverage for building materials and supplies and temporary premises. The Builder’s Risk Policy shall be in the amount of the full replacement value of the Improvements and shall contain a deductible amount acceptable to Landlord. Landlord shall be named as an additional insured. The Builder’s Risk Policy shall include an endorsement permitting initial occupancy.

     4.4 Insurance Requirements . The following provisions shall apply to all insurance coverages required hereunder:

          (a) The form and substance of all policies shall be subject to the approval of Landlord, which approval will not be unreasonably withheld.

          (b) The carriers of all policies shall have a Best’s Rating of “A” or better and a Best’s Financial Category of X or higher and shall be authorized to do insurance business in the State.

          (c) Tenant shall be the “named insured” and Landlord shall be an “additional insured” on each liability policy. On all property and casualty policies, Landlord and Tenant shall be joint payees.

          (d) Tenant shall deliver to Landlord certificates or policies showing the required coverages and endorsements. The policies of insurance shall provide that the policy may not be canceled or not renewed, and no material change or reduction in coverage may be made, without at least 30 days’ prior written notice to Landlord.

          (e) The policies shall contain a severability of interest and/or cross-liability endorsement, provide that the acts or omissions of Tenant or Landlord will not invalidate the coverage of the other party, and provide that Landlord shall not be responsible for payment of premiums.

          (f) All loss adjustment shall require the written consent of Landlord and Tenant, as their interests may appear.

          (g) At least 30 days prior to the expiration of each insurance policy, Tenant shall deliver to Landlord a certificate showing renewal of such policy and payment of the annual premium therefor and a current Certificate of Compliance (in the form delivered at the time of Closing) completed and signed by Tenant’s insurance agent.

     4.5 Replacement Value . The term “full replacement value” means the actual replacement cost thereof from time to time, including increased cost of construction endorsement, with no reductions or deductions. Tenant shall, in connection with each annual policy renewal, deliver to Landlord a redetermination of the full replacement value by the insurer or an endorsement indicating that the Leased Property is insured for its full replacement value. If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased Property, Landlord may have such full replacement value redetermined at any time after such Permitted Alterations are made, regardless of when the full replacement value was last determined.

     4.6 Blanket Policy . Notwithstanding anything to the contrary contained in this Section, Tenant may carry the insurance required by this Article under a blanket policy of insurance, provided that the coverage afforded Tenant will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all of the requirements of this Lease.

     4.7 No Separate Insurance . Tenant shall not take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article, or increase the amounts of any then existing insurance, by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including Landlord and any mortgagees, are included therein as additional insureds or loss payees, the loss is payable under said insurance in the same manner as losses are payable under this Lease, and such additional insurance is not prohibited by the existing policies of insurance. Tenant shall immediately notify Landlord of the taking out of such separate insurance or the increasing of any of the amounts of the existing insurance by securing an additional policy or additional policies.

     4.8 Waiver of Subrogation . Each party hereto hereby waives any and every claim which arises or may arise in its favor and against the other party hereto during the Term for any and all loss of, or damage to, any of its property located within or upon, or constituting a part of, the Leased Property, which loss or damage is covered by valid and collectible insurance policies, to the extent that such loss or damage is recoverable under such policies. Said mutual waiver shall be in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss or damage to property of the parties hereto. Inasmuch as the said waivers will preclude the assignment of any aforesaid claim by way of

subrogation (or otherwise) to an insurance company (or any other person), each party hereto agrees immediately to give each insurance company which has issued to it policies of insurance, written notice of the terms of said mutual waivers, and to have such insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverage by reason of said waivers, so long as such endorsement is available at a reasonable cost.

     4.9 Mortgages . The following provisions shall apply if Landlord now or hereafter places a mortgage on the Leased Property or any part thereof: [i] Tenant shall obtain a standard form of lender’s loss payable clause insuring the interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance to such mortgagee; [iii] loss adjustment shall require the consent of the mortgagee, such consent not to be unreasonably withheld or delayed; and [iv] Tenant shall provide such other information and documents as may reasonably be required by the mortgagee.

     4.10 Escrows . After an Event of Default occurs hereunder, Tenant shall make such periodic payments of insurance premiums in accordance with Landlord’s requirements after receipt of notice thereof from Landlord.

ARTICLE 5: INDEMNITY

     5.1 Tenant’s Indemnification . Except for claims arising out of the willful misconduct or gross negligence of Landlord or its authorized representatives, Tenant hereby indemnifies and agrees to hold harmless Landlord, any successors or assigns of Landlord, and Landlord’s and such successor’s and assign’s directors, officers, employees and agents from and against any and all demands, claims, causes of action, fines, penalties, damages (including consequential damages), losses, liabilities (including strict liability), judgments, and expenses (including, without limitation, reasonable attorneys’ fees, court costs, and the costs set forth in §8.7) incurred in connection with or arising from: [i] the use or occupancy of the Leased Property by Tenant or any persons claiming under Tenant; [ii] any activity, work, or thing done, or permitted or suffered by Tenant in or about the Leased Property; [iii] any acts, omissions, or negligence of Tenant or any person claiming under Tenant, or the contractors, agents, employees, invitees, or visitors of Tenant or any such person; [iv] any breach, violation, or nonperformance by Tenant or any person claiming under Tenant or the employees, agents, contractors, invitees, or visitors of Tenant or of any such person, of any term, covenant, or provision of this Lease or any law, ordinance, or governmental requirement of any kind, including, without limitation, any failure to comply with any applicable requirements under the ADA; [v] any injury or damage to the person, property or business of Tenant, its employees, agents, contractors, invitees, visitors, or any other person entering upon the Leased Property; [vi] any construction, alterations, changes or demolition of the Facility performed by or contracted for by Tenant or its employees, agents or contractors; and [vii] any obligations, costs or expenses arising under any Permitted Exceptions. If any action or proceeding is brought against Landlord, its employees, or agents by reason of any such claim, Tenant, upon notice from Landlord, will defend the claim at Tenant’s expense with counsel reasonably satisfactory to Landlord. All amounts payable to Landlord under this Section shall be payable on written demand and any such amounts which are not paid within 10 days after demand therefor by Landlord shall bear interest at the Overdue Rate. In case any action, suit or proceeding is

brought against Tenant by reason of any such occurrence, Tenant shall use its best efforts to defend such action, suit or proceeding.

     5.1.1 Notice of Claim . Landlord shall notify Tenant in writing of any claim or action brought against Landlord in which indemnity may be sought against Tenant pursuant to this Section. Such notice shall be given in sufficient time to allow Tenant to defend or participate in such claim or action, but the failure to give such notice in sufficient time shall not constitute a defense hereunder nor in any way impair the obligations of Tenant under this Section unless the failure to give such notice precludes Tenant’s defense of any such action.

     5.1.2 Survival of Covenants . The covenants of Tenant contained in this Section shall remain in full force and effect after the termination of this Lease until the expiration of the period stated in the applicable statute of limitations during which a claim or cause of action may be brought and payment in full or the satisfaction of such claim or cause of action and of all expenses and charges incurred by Landlord relating to the enforcement of the provisions herein specified.

     5.1.3 Reimbursement of Expenses . Unless prohibited by law, Tenant hereby agrees to pay to Landlord all of the reasonable fees, charges and reasonable out-of-pocket expenses related to the Facility and required hereby, or incurred by Landlord in enforcing the provisions of this Lease.

     5.2 Environmental Indemnity; Audits . Tenant hereby indemnifies and agrees to hold harmless Landlord, any successors to Landlord’s interest in this Lease, and Landlord’s and such successors’ directors, officers, employees and agents from and against any losses, claims, damages (including consequential damages), penalties, fines, liabilities (including strict liability), costs (including cleanup and recovery costs), and expenses (including expenses of litigation and reasonable consultants’ and attorneys’ fees) incurred by Landlord or any other indemnitee or assessed against any portion of the Leased Property by virtue of any claim or lien by any governmental or quasi-governmental unit, body, or agency, or any third party, for cleanup costs or other costs pursuant to any Environmental Law. Tenant’s indemnity shall survive the termination of this Lease. Provided, however, Tenant shall have no indemnity obligation with respect to [i] Hazardous Materials first introduced to the Leased Property subsequent to the date that Tenant’s occupancy of the Leased Property shall have fully terminated; or [ii] Hazardous Materials introduced to the Leased Property by Landlord, its agent, employees, successors or assigns. If at any time during the Term of this Lease any governmental authority notifies Landlord or Tenant of a violation of any Environmental Law or Landlord reasonably believes that a Facility may violate any Environmental Law, Landlord may require one or more environmental audits of such portion of the Leased Property, in such form, scope and substance as specified by Landlord, at Tenant’s expense. Tenant shall, within 30 days after receipt of an invoice from Landlord, reimburse Landlord for all costs and expenses incurred in reviewing any environmental audit, including, without limitation, reasonable attorneys’ fees and costs.

     5.3 Limitation of Landlord’s Liability . Except for its own gross negligence and willful misconduct, Landlord, its agents, and employees, will not be liable for any loss, injury, death, or damage (including consequential damages) to persons, property, or Tenant’s business occasioned by theft, act of God, public enemy, injunction, riot, strike, insurrection, war,

court order, requisition, order of governmental body or authority, fire, explosion, falling objects, steam, water, rain or snow, leak or flow of water (including water from the elevator system), rain or snow from the Leased Property or into the Leased Property or from the roof, street, subsurface or from any other place, or by dampness or from the breakage, leakage, obstruction, or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures of the Leased Property, or from construction, repair, or alteration of the Leased Property or from any acts or omissions of any other occupant or visitor of the Leased Property, or from any other cause beyond Landlord’s control.

ARTICLE 6: USE AND ACCEPTANCE OF PREMISES

     6.1 Use of Leased Property . Tenant shall use and occupy the Leased Property exclusively for the Facility Uses specified for each Facility and for all lawful and licensed ancillary uses, and for no other purpose without the prior written consent of Landlord. Tenant shall obtain and maintain all approvals, licenses, and consents needed to use and operate the Leased Property as herein permitted. Tenant shall deliver to Landlord complete copies of surveys, examinations, certification and licensure inspections, compliance certificates, and other similar reports issued to Tenant by any governmental agency within 10 days after Tenant’s receipt of each item.

     6.2 Acceptance of Leased Property . Tenant acknowledges that [i] Tenant and its agents have had an opportunity to inspect the Leased Property; [ii] Tenant has found the Leased Property fit for Tenant’s use; [iii] Landlord will deliver the Leased Property to Tenant in “as-is” condition; [iv] Landlord is not obligated to make any improvements or repairs to the Leased Property; and [v] the roof, walls, foundation, heating, ventilating, air conditioning, telephone, sewer, electrical, mechanical, elevator, utility, plumbing, and other portions of the Leased Property are in good working order. Tenant waives any claim or action against Landlord with respect to the condition of the Leased Property. LANDLORD 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 QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.

     6.3 Conditions of Use and Occupancy . Tenant agrees that during the Term it shall use and keep the Leased Property in a careful, safe and proper manner; not commit or suffer waste thereon; not use or occupy the Leased Property for any unlawful purposes; not use or occupy the Leased Property or permit the same to be used or occupied, for any purpose or business deemed extrahazardous on account of fire or otherwise; keep the Leased Property in such repair and condition as may be required by the Board of Health, or other city, state or federal authorities, free of all cost to Landlord; not permit any acts to be done which will cause the cancellation, invalidation, or suspension of any insurance policy; and permit Landlord and its agents to enter upon the Leased Property at all reasonable times to examine the condition thereof. Landlord shall have the right to have an annual inspection of the Leased Property performed and, with respect to any such inspection next following a renovation or repair to a particular Facility,

Tenant shall pay an inspection fee of $1,500.00 per such renovated Facility plus Landlord’s reasonable out-of-pocket expenses within 30 days after receipt of Landlord’s invoice.

ARTICLE 7: MAINTENANCE AND MECHANICS’ LIENS

     7.1 Maintenance . Tenant shall maintain, repair, and replace the Leased Property, including, without limitation, all structural and nonstructural repairs and replacements to the roof, foundations, exterior walls, HVAC systems, equipment, parking areas, sidewalks, water, sewer and gas connections, pipes and mains. Tenant shall pay, as Additional Rent, the full cost of maintenance, repairs, and replacements. Tenant shall maintain all drives, sidewalks, parking areas, and lawns on or about the Leased Property in a clean and orderly condition, free of accumulations of dirt, rubbish, snow and ice. Tenant shall at all times maintain, operate and otherwise manage the Leased Property on a basis and in a manner consistent with the standards of the highest quality competing facilities in the market areas served by the Leased Property. All repairs shall, to the extent reasonably achievable, be at least equivalent in quality to the original work or the property to be repaired shall be replaced. Tenant 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 or any parts thereof for the Facility Uses. Tenant shall permit Landlord to inspect the Leased Property at all reasonable times, and if Landlord gives Tenant notice of maintenance problem areas, Tenant shall deliver to Landlord a plan of correction within 10 Business Days after receipt of the notice. Tenant shall diligently pursue correction of all problem areas within 60 days after receipt of the notice and, upon expiration of the 60-day period, shall deliver evidence of completion to Landlord or an interim report evidencing Tenant’s diligent progress towards completion and, at the end of the next 60-day period, evidence of satisfactory completion. Upon completion, Landlord shall have the right to re-inspect the Facility and, if applicable, Tenant shall pay Landlord’s inspection fee and reasonable out-of-pocket expenses as set forth in §6.3 within 30 days after receipt of Landlord’s invoice. At each inspection of the Leased Property by Landlord, the Facility employee in charge of maintenance shall be available to tour the Facility with Landlord and answer questions.

     7.2 Required Alterations . Tenant shall, at Tenant’s sole cost and expense, make any additions, changes, improvements or alterations to the Leased Property, including structural alterations, which may be required by any governmental authorities, including those required to maintain licensure or certification under the Medicare and Medicaid programs (if so certified), whether such changes are required by Tenant’s use, changes in the law, ordinances, or governmental regulations, defects existing as of the date of this Lease, or any other cause whatever. All such additions, changes, improvements or alterations shall be deemed to be Permitted Alterations and shall comply with all laws requiring such alterations and with the provisions of §16.4.

     7.3 Mechanic’s Liens . Tenant shall have no authority to permit or create a lien against Landlord’s interest in the Leased Property, and Tenant shall post notices or file such documents as may be required to protect Landlord’s interest in the Leased Property against liens. Tenant hereby agrees to defend, indemnify, and hold Landlord harmless from and against any mechanic’s liens against the Leased Property by reason of work, labor, services or materials supplied or claimed to have been supplied on or to the Leased Property by or on behalf of Tenant. Tenant shall remove, cause the title company to insure over, bond-off, or otherwise

obtain the release of any mechanic’s lien filed against the Leased Property within 20 days after notice of the filing thereof. Tenant shall pay all expenses in connection therewith, including, without limitation, damages, interest, court costs and reasonable attorneys’ fees.

     7.4 Replacements of Fixtures and Landlord’s Personal Property . Tenant shall not remove Fixtures and Landlord’s Personal Property from the Leased Property except to replace the Fixtures and Landlord’s Personal Property by other similar items of equal or higher quality and value. Items being replaced by Tenant may be removed and shall become the property of Tenant and items replacing the same shall be and remain the property of Landlord. Tenant shall execute, upon written request from Landlord, any and all documents necessary to evidence Landlord’s ownership of Landlord’s Personal Property and replacements therefor. Tenant may finance replacements for the Fixtures and Landlord’s Personal Property by equipment lease or by a security agreement and financing statement if [i] Landlord has consented to the terms and conditions of the equipment lease or security agreement; and [ii] the equipment lessor or lender has entered into a nondisturbance agreement with Landlord upon terms and conditions reasonably acceptable to Landlord, including, without limitation, the following: [a] Landlord shall have the right (but not the obligation) to assume such security agreement or equipment lease upon the occurrence of an Event of Default under this Lease; [b] the equipment lessor or lender shall notify Landlord of any default by Tenant under the equipment lease or security agreement and give Landlord a reasonable opportunity to cure such default; and [c] Landlord shall have the right to assign its rights under the equipment lease, security agreement, or nondisturbance agreement. Tenant shall, within 30 days after receipt of an invoice from Landlord, reimburse Landlord for all costs and expenses incurred in reviewing and approving the equipment lease, security agreement, and nondisturbance agreement, including, without limitation, reasonable attorneys’ fees and costs.

ARTICLE 8: DEFAULTS AND REMEDIES

     8.1 Events of Default . The occurrence of any one or more of the following shall be an event of default (“Event of Default”) hereunder:

          (a) Tenant fails to pay in full any installment of Base Rent, any Additional Rent or any other monetary obligation payable by Tenant under this Lease (including the Option Price), within 10 days after written notice thereof is given to Tenant by Landlord that such payment is due.

          (b) Landlord gives Tenant three or more notices of nonpayment of Rent (after expiration of the 10 day grace period) in any Lease Year.

          (c) Tenant, Subtenant or Guarantor (where applicable) fails to comply with any covenant set forth in Article 14, §15.6, §15.7, §15.8 or Article 20 of this Lease.

          (d) Tenant fails to observe and perform any other covenant, condition or agreement under this Lease to be performed by Tenant and [i] such failure continues for a period of 30 days after written notice thereof is given to Tenant by Landlord; or [ii] if, by reason of the nature of such default the same reasonably cannot be remedied within said 30 days, Tenant fails to proceed with diligence reasonably satisfactory to Landlord after receipt of the notice to

cure the default or, in any event, fails to cure such default within 75 days after receipt of the notice. The foregoing notice and cure provisions do not apply to any Event of Default otherwise specifically described in any other subsection of §8.1.

          (e) Tenant or Subtenant abandons or vacates any Facility Property or any material part thereof, ceases to operate any Facility, ceases to do business for any one or more days without Landlord’s prior written consent, not to be unreasonably withheld, or ceases to exist for any reason for any one or more days.

          (f) [i] The filing by Tenant, Subtenant or Guarantor of a petition under the Bankruptcy Code or the commencement of a bankruptcy or similar proceeding by Tenant, Subtenant or Guarantor; [ii] the failure by Tenant, Subtenant or Guarantor within 60 days to dismiss an involuntary bankruptcy petition or other commencement of a bankruptcy, reorganization or similar proceeding against such party, or to lift or stay any execution, garnishment or attachment of such consequence as will impair its ability to carry on its operation at the Leased Property; [iii] the entry of an order for relief under the Bankruptcy Code in respect of Tenant, Subtenant or Guarantor; [iv] any assignment by Tenant, Subtenant or Guarantor for the benefit of its creditors; [v] the entry by Tenant, Subtenant or Guarantor into an agreement of composition with its creditors; [vi] the approval by a court of competent jurisdiction of a petition applicable to Tenant, Subtenant or Guarantor in any proceeding for its reorganization instituted under the provisions of any state or federal bankruptcy, insolvency, or similar laws; [vii] appointment by final order, judgment, or decree of a court of competent jurisdiction of a receiver of a whole or any substantial part of the properties of Tenant, Subtenant or Guarantor (provided such receiver shall not have been removed or discharged within 60 days of the date of his qualification).

          (g) [i] Any receiver, administrator, custodian or other person, in each case acting in respect to Tenant or Subtenant, takes possession or control of any of the Leased Property and continues in possession for 60 days; [ii] any writ against any of the Leased Property is not released within 60 days; [iii] any judgment is rendered or proceedings are instituted against the Leased Property, Tenant or Subtenant which affect the Leased Property or any part thereof, which is not dismissed for 60 days (except as otherwise provided in this Section); [iv] all or a substantial part of the assets of Tenant, Subtenant or Guarantor are attached, seized, subjected to a writ or distress warrant, or are levied upon, or come into the possession of any receiver, trustee, custodian, or assignee for the benefit of creditors; [v] Tenant, Subtenant or Guarantor is enjoined, restrained, or in any way prevented by court order, or any proceeding is filed or commenced seeking to enjoin, restrain or in any way prevent Tenant, Subtenant or Guarantor from conducting all or a substantial part of its business or affairs; or [vi] except as otherwise permitted hereunder, a final notice of lien, levy or assessment is filed of record with respect to all or any part of the Leased Property or any property of Tenant or Subtenant located at the Leased Property and is not dismissed, discharged, or bonded-off within 30 days.

          (h) Any representation or warranty made by Tenant, Subtenant or Guarantor in this Lease or any other document executed in connection with this Lease, any guaranty of or other security for this Lease, or any report, certificate, application, financial statement or other instrument furnished by Tenant, Subtenant or Guarantor pursuant hereto or

thereto shall prove to be false, misleading or incorrect in any material respect as of the date made.

          (i) Tenant, any Subtenant, any Guarantor, or any Affiliate defaults on any indebtedness or obligation to Landlord or any Landlord Affiliate, any Secured Obligation or any agreement with Landlord or any Landlord Affiliate, including, without limitation, any lease with Landlord or any Landlord Affiliate, or Tenant, any Subtenant or any Guarantor defaults on any Material Obligation, and any applicable grace or cure period with respect to default under such indebtedness or obligation expires without such default having been cured. This provision applies to all such indebtedness, obligations and agreements as they may be amended, modified, extended, or renewed from time to time.

          (j) The occurrence of any change in Tenant’s or Subtenant’s leasehold interest in the Leased Property, without the prior written consent of Landlord.

          (k) Any guarantor of this Lease dies, dissolves, terminates, is adjudicated incompetent, files a petition in bankruptcy, or is adjudicated insolvent under the Bankruptcy Code or any other insolvency law, or fails to comply with any covenant or requirement of such guarantor set forth in this Lease or in the guaranty of such guarantor, and in the case of the death or incompetency of an individual guarantor only, Tenant fails within 30 days to deliver to Landlord a substitute guaranty or other collateral reasonably satisfactory to Landlord.

          (l) The license for the Facility or any other Government Authorization is canceled, suspended, reduced to provisional or temporary, or otherwise invalidated, or notice of impending license revocation or decertification proceedings is received and Tenant or Subtenant fails to diligently contest such proceeding, or any reduction occurs in the number of licensed beds or units at the Facility, or an admissions ban is issued for the Facility.

     8.2 Remedies . Upon the occurrence of an Event of Default under this Lease or any Lease Document and during the continuation of an Event of Default, and at any time thereafter until Landlord waives the default in writing or acknowledges cure of the default in writing, at Landlord’s option, without declaration, notice of nonperformance, protest, notice of protest, notice of default, notice to quit or any other notice or demand of any kind, Landlord may exercise any and all rights and remedies provided in this Lease or any Lease Document or otherwise provided under law or in equity, including, without limitation, any one or more of the following remedies:

          (a) Landlord may re-enter and take possession of the Leased Property or any portion thereof without terminating this Lease, and lease such Leased Property for the account of Tenant, holding Tenant liable for all costs of Landlord in reletting such Leased Property and for the difference in the amount received by such reletting and the amounts payable by Tenant under the Lease.

          (b) Landlord may terminate this Lease with respect to all or any portion of the Leased Property by written notice to Tenant, exclude Tenant from possession of such Leased Property and use efforts to lease such Leased Property to others, holding Tenant

liable for the difference in the amounts received from such reletting and the amounts payable by Tenant under this Lease.

          (c) Landlord may re-enter the Leased Property or any portion thereof and have, repossess and enjoy such Leased Property as if this Lease had not been made, and in such event, Tenant and its successors and assigns shall remain liable for any contingent or unliquidated obligations or sums owing at the time of such repossession.

          (d) Landlord may have access to and inspect, examine and make copies of the books and records and any and all accounts, data and income tax and other returns of Tenant insofar as they pertain to the Leased Property.

          (e) Landlord may accelerate all of the unpaid Rent hereunder so that the aggregate Rent for the unexpired term of this Lease becomes immediately due and payable.

          (f) Landlord may take whatever action at law or in equity as may appear necessary or desirable to collect the Rent and other amounts payable under this Lease then due and thereafter to become due, or to enforce performance and observance of any obligations, agreements or covenants of Tenant under this Lease.

          (g) With respect to the Collateral or any portion thereof and Landlord’s security interest therein, Landlord may exercise all of its rights as secured party under Article 9 of the Uniform Commercial Code as adopted in the State. Landlord may sell the Collateral by public or private sale upon five days notice to Tenant or Subtenant. Tenant and Subtenant agree that a commercially reasonable manner of disposition of the Collateral shall include, without limitation and at the option of Landlord, a sale of the Collateral, in whole or in part, concurrently with the sale of the Leased Property.

          (h) Landlord may obtain control over and collect the Receivables and apply the proceeds of the collections to satisfaction of the Secured Obligations unless prohibited by law. Tenant and Subtenant appoint Landlord or its designee as attorney for Tenant and Subtenant, respectively, with powers [i] to receive, to endorse, to sign and/or to deliver, in Tenant’s or Subtenant’s name or Landlord’s name, any and all checks, drafts, and other instruments for the payment of money relating to the Receivables, and to waive demand, presentment, notice of dishonor, protest, and any other notice with respect to any such instrument; [ii] to sign Tenant’s or Subtenant’s name on any invoice or bill of lading relating to any Receivable, drafts against account debtors, assignments and verifications of Receivables, and notices to account debtors; [iii] to send verifications of Receivables to any account debtor; and [iv] to do all other acts and things necessary to carry out this Lease. Landlord shall not be liable for any omissions, commissions, errors of judgment, or mistakes in fact or law made in the exercise of any such powers, except for Landlord’s gross negligence and willful misconduct. At Landlord’s option, Tenant and Subtenant shall [i] provide Landlord a full accounting of all amounts received on account of Receivables with such frequency and in such form as Landlord may require, either with or without applying all collections on Receivables in payment of the Secured Obligations or [ii] deliver to Landlord on the day of receipt all such collections in the form received and duly endorsed by Tenant or Subtenant, as applicable. At Landlord’s request, Tenant and Subtenant shall institute any action or enter into any settlement determined by

Landlord to be necessary to obtain recovery or redress from any account debtor in default of Receivables. Landlord may give notice of its security interest in the Receivables to any or all account debtors with instructions to make all payments on Receivables directly to Landlord, thereby terminating Tenant’s and Subtenant’s authority to collect Receivables. After terminating Tenant’s and Subtenant’s authority to enforce or collect Receivables, Landlord shall have the right to take possession of any or all Receivables and records thereof and is hereby authorized to do so, and only Landlord shall have the right to collect and enforce the Receivables. Prior to the occurrence of an Event of Default, at Tenant’s and Subtenant’s cost and expense, but on behalf of Landlord and for Landlord’s account, Tenant and Subtenant shall collect or otherwise enforce all amounts unpaid on Receivables and hold all such collections in trust for Landlord, but Tenant and Subtenant may commingle such collections with Tenant’s and Subtenant’s own funds, until Tenant&r