Exhibit 10.12
DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING
(Loan B)
This document serves as a Fixture Filing under the District of Columbia Uniform
Commercial Code.
Grantor’s Organizational Identification Number is S037833.
     THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING is
made as of August 28, 2007, by SUNRISE CONNECTICUT AVENUE ASSISTED LIVING,
L.L.C., a limited liability company organized and existing under the laws of the
Commonwealth of Virginia (“Grantor”), to ALEXANDRA JOHNS and ELLEN-ELIZABETH
LEE, as Trustees either of whom may act (the “Individual Trustees”), and CHEVY
CHASE BANK, F.S.B., a federally chartered savings bank (“Beneficiary”).
RECITALS
     A. Grantor and Beneficiary are parties to a Loan and Security Agreement
(Loan B) dated of even date herewith (as amended, extended, restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”).
Pursuant to the Loan Agreement the Beneficiary has agreed to make a loan (herein
referred to as the “Loan”) to Grantor in the principal amount of $10,000,000.
The Loan will be evidenced by Grantor’s Deed of Trust Note (Loan B) of even date
herewith (as amended, extended, restated, supplemented or otherwise modified
from time to time, herein referred to as the “Note”).
     B. As a condition precedent to making the Loan to Grantor, Beneficiary
required that Grantor secure the payment and performance of all obligations of
Grantor arising out of, or in connection with, the Loan by the execution of this
Deed of Trust.
     NOW, THEREFORE, in order to induce Beneficiary to make the Loan to Grantor,
Grantor agrees as follows:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION
     Section 1.1 Definitions.
     As used in this Deed of Trust, Assignment, Security Agreement and Fixture
Filing, the terms defined in the Preamble and Recitals hereto shall have the
respective meanings specified therein, and the following terms shall have the
meanings indicated:
     “Accounts” means all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in or a lease of goods, all rights to receive the payment
of money or other consideration under present or future contracts (including,
without limitation, all rights to receive the payment of money or other
consideration

 

--------------------------------------------------------------------------------

 

from, or on behalf of, Medicare or Medicaid, except to the extent prohibited by
law, any private pay patient, and all rights to receive payments under presently
existing or hereafter acquired or created letters of credit), or by virtue of
services rendered, loans and advances made or other considerations given, by or
set forth in or arising out of any present or future chattel paper, note, draft,
lease, acceptance, writing, bond, insurance policy, instrument, document or
general intangible, and all extensions and renewals of any thereof, all rights
under or arising out of present or future contracts or agreements which gave
rise to any or all of the foregoing, including all claims or causes of action
now existing or hereafter arising in connection with or under any agreement or
document or by operation of law or otherwise, all collateral security of any
kind (including real property mortgages) given by any person with respect to any
of the foregoing, all rights to receive payment under all admission agreements
and all third-party payor contracts (including Medicare and Medicaid except to
the extent prohibited by law), and any and all depository accounts, except
resident trust accounts, into which the proceeds of all or any portion of such
accounts may be now or hereafter deposited, and all proceeds (cash and non-cash)
of the foregoing.
     “Additions” means any and all alterations, additions, accessions and
improvements to property, substitutions therefor, and renewals and replacements
thereof.
     “Casualty” means any act or occurrence of any kind or nature that results
in damage, loss or destruction to the Property.
     “Claim” means any liability, suit, action, claim, demand, loss, expense
(including, without limitation, attorney’s fees) or cost of any kind or nature
whatsoever.
     “Condemnation” means any taking of title, of use, or of any other property
interest under the exercise of the power of eminent domain, whether temporarily
or permanently, by any Governmental Authority or by any Person acting under
Governmental Authority.
     “Condemnation Awards” means any and all judgments, awards of damages
(including, but not limited to, severance and consequential damages), payments,
proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or
other compensation heretofore or hereafter made, including interest thereon, and
the right to receive the same, as a result of, or in connection with, any
Condemnation or threatened Condemnation.
     “Contracts of Sale” means any contracts for the sale of all or any part of
the Property or any interest therein, whether now or hereafter executed,
including, without limitation, all of the Proceeds thereof, any funds deposited
thereunder to secure performance by the purchasers of their obligations and the
right, after the occurrence of an Event of Default, to receive and collect all
payments due under any contracts of sale.
     “Deed of Trust” means this Deed of Trust, Assignment, Security Agreement
and Fixture Filing (Loan B) executed by Grantor for the benefit of Beneficiary,
as the same may from time to time be extended, amended, restated, supplemented
or otherwise modified.
     “Default” means an event which, with the giving of Notice or lapse of time,
or both, could or would constitute an Event of Default under the provisions of
this Deed of Trust.

2

--------------------------------------------------------------------------------

 

     “Encumbrance” means any Lien, easement, right of way, roadway (public or
private), common area, condominium regime, cooperative housing regime,
restrictive covenant, Lease or other matter of any nature that would affect
title to the Property.
     “Environmental Assessment” means a report of an environmental assessment of
the Property of such scope (including but not limited to the taking of soil
borings and air and groundwater samples and other above and below ground
testing) as Beneficiary may request, prepared by a recognized environmental
consulting firm acceptable to Beneficiary in all respects and sufficient in
detail to comply with Beneficiary’s established guidelines and the guidelines of
any appropriate Governmental Authority.
     “Environmental Requirement” means any Law or other agreement or
restriction, whether public or private (including but not limited to any
condition or requirement imposed by any insurer or surety company), now existing
or hereafter created, issued or enacted and all amendments thereto,
modifications thereof and substitutions therefor, which in any way pertains to
human health, safety or welfare, Hazardous Materials, Hazardous Materials
Contamination or the environment (including but not limited to ground, air,
water or noise pollution or contamination, and underground or above ground
tanks) and shall include without limitation, the Resource Conservation and
Recovery Act (the Solid Waste Disposal Act), 42 U.S.C. § 6901 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. § 9601 et seq. (“CERCLA”), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”); the Hazardous Materials Transportation
Act, 49 U.S.C. § 1801 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq.; and the Safe Drinking Water
Act, 42 U.S.C. § 300f et seq.
     “Equipment” means all building materials, fixtures, equipment and other
tangible personal property of every kind and nature whatsoever (other than
consumable goods, and trade fixtures or other personal property owned by tenants
occupying the Improvements), now or hereafter located or contained in or upon,
or attached to, the Real Property, whether now owned or hereafter acquired by
Grantor, together with all Additions to the Equipment and Proceeds thereof.
     “Event of Default” means the occurrence of any one or more of the events
specified in ARTICLE VI (Events of Default) and the continuance of such event
beyond the applicable cure periods, if any, set forth in ARTICLE VI.
     “Expenses” means all costs and expenses of any nature whatsoever incurred
at any time and from time to time (whether before or after an Event of Default)
by Beneficiary or the Trustees in exercising or enforcing any rights, powers and
remedies provided in this Deed of Trust or any of the other Financing Documents,
including, without limitation, reasonable attorney’s fees, court costs,
receiver’s fees, management fees and costs incurred in the repair, maintenance
and operation of, or taking possession of, or selling, the Property.
     “Facility” means an assisted living facility located on the Property and
known as “Sunrise of Connecticut Avenue”.

3

--------------------------------------------------------------------------------

 

     “Financing Documents” means this Deed of Trust, the Note, the Loan
Agreement, the Guaranty and any and all other documents which Grantor, Guarantor
or any other party or parties have executed and delivered, or may hereafter
execute and deliver, to evidence, secure or guarantee all or any portion of the
Obligations, as the same may from time to time be extended, amended, restated or
substituted from time to time.
     “Governmental Authority” means any governmental or quasi-governmental
entity, including, without limitation, any department, commission, board,
bureau, agency, administration, service or other instrumentality of any
governmental entity.
     “Guarantor” means Sunrise Senior Living, Inc. and its successors and
assigns.
     “Guaranty” means the Guaranty of Payment (Loan B) of even date hereof
executed by Guarantor for the benefit of the Beneficiary, as the same may from
time to time be extended, amended, restated, supplemented or otherwise modified.
     “Hazardous Materials” means any and all hazardous or toxic substances,
wastes or materials which, because of their quantity, concentration, or
physical, chemical or infectious characteristics, may cause or pose a present or
potential hazard or nuisance to human health, safety or welfare or to the
environment when used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled, including without limitation, any substance,
waste or material which is or contains asbestos, radon, polychlorinated
biphenyls, urea formaldehyde, explosives, radioactive materials or petroleum
products.
     “Hazardous Materials Contamination” means the contamination (whether
presently existing or occurring after the date of this Deed of Trust) of the
Improvements, facilities, soil, ground water, air or other elements on, in or
constituting a part of, the Property by Hazardous Materials, or the
contamination of the buildings, facilities, soil, ground water, air or other
elements on, in or constituting a part of, any other property as a result of
Hazardous Materials at any time (whether before or after the date of this Deed
of Trust) emanating from the Property.
     “Improvements” means the Facility and all other buildings, structures and
other improvements now or hereafter existing, erected or placed on the Land, or
in any way used in connection with the use, enjoyment, occupancy or operation of
the Land.
     “Land” means the land described in Exhibit A attached hereto, together with
(a) all estates, title interests, title reversion rights, increases, issues,
profits, rights of way or uses, additions, accretions, servitudes, gaps, gores,
liberties, privileges, water rights, water courses, alleys, streets, passages,
ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances,
easements and other rights, now or hereafter owned by Grantor, as lessee, and
belonging or appertaining to the Land, (b) all Claims whatsoever of Grantor with
respect to the Land, either in law or in equity, in possession or in expectancy,
and (c) all estate, right, title and interest of Grantor in and to all streets,
roads and public places, opened or proposed, now or hereafter adjoining or
appertaining to, the Land.

4

--------------------------------------------------------------------------------

 

     “Laws” means federal, state and local laws, statutes, rules, ordinances,
regulations, codes, licenses, authorizations, decisions, injunctions,
interpretations, orders or decrees of any court or other Governmental Authority
having jurisdiction as may be in effect from time to time.
     “Leases” means all leases, excluding Resident Agreements, license
agreements and other occupancy or use agreements (whether oral or written), now
or hereafter existing, which cover or relate to the Property, together with all
options therefor, amendments thereto and renewals, modifications and guarantees
thereof, including, without limitation, any cash or securities deposited under
the Leases to secure performance by the tenants of their obligations under the
Leases, whether such cash or securities are to be held until the expiration of
the terms of the Leases or applied to one or more of the installments of rent
coming due.
     “Licenses” means any and all licenses, certificates of need, operating
permits, franchises, and other licenses, authorizations, certifications,
permits, or approvals, other than construction permits, issued by, or on behalf
of, any Governmental Authority now existing or at any time hereafter issued,
with respect to the acquisition, construction, renovation, expansion, leasing,
ownership and/or operation of the Property, accreditation of the Property,
and/or the participation or eligibility for participation in any third party
payment or reimbursement programs (but specifically excluding any and all
third-party payor participation or reimbursement agreements now or at any time
hereafter existing for the benefit of the Borrower), any and all operating
licenses issued by any state Governmental Authority, any and all pharmaceutical
licenses and other licenses related to the purchase, dispensing, storage,
prescription or use of drugs, medications, and other “controlled substances,”
any and all licenses relating to the operation of food or beverage facilities or
amenities, if any, as the same may from time to time be amended, renewed,
restated, reissued, restricted, supplemented or otherwise modified.
     “Lien” means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code of any jurisdiction.
     “Loan Agreement” means the Loan and Security Agreement (Loan B) of even
date herewith between Grantor and Beneficiary which sets forth, among other
things, the terms and conditions upon which the Loan proceeds will be disbursed,
as the same may from time to time be extended, amended, restated, supplemented
or otherwise modified.
     “Manager” means Sunrise Senior Living Management, Inc., a Virginia
corporation, and its successors and assigns, in its capacity as Manager and
operator of the Facility.
     “Material Lease” means a Lease that generates $30,000 per year or more in
revenue.
     “Net Proceeds”, when used with respect to any Condemnation Awards or
insurance proceeds allocable to the Property, means the gross proceeds from any
Casualty or Condemnation remaining after payment of all expenses (including
attorneys’ fees) incurred in the collection of such gross proceeds.

5

--------------------------------------------------------------------------------

 

     “Note” has the meaning set forth in the Recitals hereto.
     “Notice” means a written communication delivered by hand, or sent by
overnight courier, or by certified or registered mail, postage prepaid, return
receipt requested, to the Person to whom such communication is to be given, at
the addresses as follows:

      Beneficiary:   Chevy Chase Bank, F.S.B.,     7926 Jones Branch Drive    
McLean, VA 22102     Attn: Richard L. Amador              Group Vice President  
    Grantor:   Sunrise Connecticut Avenue Assisted Living, L.L.C.     c/o
Sunrise Senior Living, Inc.     7902 Westpark Drive     McLean, Virginia 22102  
  Attn: James S. Pope       Guarantor:   Sunrise Senior Living, Inc.     7902
Westpark Drive     McLean, Virginia 22102     Attention: General Counsel      
With a Courtesy Copy to:   Wayne G. Tatusko, Esquire     Wayne G. Tatusko, PC  
  3016 Williams Drive     Suite 200     Fairfax, VA 22031       Trustees:   c/o
Chevy Chase Bank, F.S.B.,     7501 Wisconsin Avenue     Bethesda, MD 20814

or at such other address as any party shall have notified the others of in the
manner set forth in this definition.
     “Obligations” means all present and future debts, obligations and
liabilities of Grantor to Beneficiary and/or the Trustees arising pursuant to,
and/or on account of, the provisions of this Deed of Trust, the Note, the
Guaranty, any Swap Contract and any of the other Financing Documents, including,
without limitation, the obligations to (a) pay all principal (including, again
without limitation, any principal advanced after the date of this Deed of Trust
and any principal that is repaid and readvanced), interest, late charges and
prepayment premiums (if any) due at any time under the Note, and (b) pay all
Expenses, indemnification payments and other sums due at any time under this
Deed of Trust together with interest thereon as provided in Section 4.19
(Reimbursement; Interest), and (c) perform, observe and comply with all of the
terms, covenants and conditions, expressed or implied, with which Grantor and/or
Guarantor is required by this Deed of Trust and any of the other Financing
Documents, to perform, observe or comply.

6

--------------------------------------------------------------------------------

 

     “Operating Agreements and Management Contracts” means any and all contracts
and agreements previously, now or at any time hereafter entered into by Grantor
and/or Manager other than Resident Agreements with respect to the acquisition,
construction, renovation, expansion, ownership, operation, maintenance, use or
management of the Property or otherwise concerning the operations and business
of the Property, any and all service and maintenance contracts, any employment
contracts, any and all management agreements, any and all consulting agreements,
laboratory servicing agreements, pharmaceutical contracts, physician, other
clinician or other professional services provider contracts, patient admission
agreements, Resident Agreements, food and beverage service contracts, and other
contracts for the operation and maintenance of, or provision of services to, the
Property, as the same may from time to time be amended, restated or substituted
from time to time.
     “Permitted Encumbrances” means (a) the Encumbrances set forth in the
Commitment for Title Insurance No. NCS-311032-DC72 issued by First American
Title Insurance Company and furnished to Beneficiary in connection with this
Deed of Trust, as updated to the date of this Deed of Trust, (b) this Deed of
Trust, (c) any Leases so long as such Leases are subject and subordinate to this
Deed of Trust, (d) liens for Property Assessments which are either (i) not
delinquent, or (ii) being contested in accordance with the provisions of
Section 4.20 (Permitted Contests) and (e) a first lien Deed of Trust,
Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith
granted by Grantor to Trustees to secure Loan A (as defined in the Loan
Agreement).
     “Person” means an individual, a corporation, a partnership, a limited
liability company, a joint venture, a trust, an unincorporated association, any
Governmental Authority or any other entity.
     “Personalty” means all of Grantor’s interest in personal property of any
kind or nature whatsoever, whether tangible or intangible and whether now owned
or hereafter acquired, which is used in the construction of, or is placed upon,
or is derived from or used in connection with the maintenance, use, occupancy or
enjoyment of, the Property, including, without limitation, (a) the Equipment,
(b) the Accounts, (c) all Licenses and all Operating Agreements and Management
Contracts (provided all of such agreements with non-affiliated parties that are
for more than one (1) year in duration shall be subordinate to this Deed of
Trust, and Beneficiary shall have no responsibility for the performance of
Grantor’s obligations thereunder), and (d) all plans and specifications,
contracts and subcontracts for the construction or repair of the Improvements,
sewer and water taps, allocations and agreements for utilities, bonds, permits,
licenses, guarantees, warranties, causes of action, judgments, Claims, profits,
security deposits, utility deposits, refunds of fees or deposits paid to any
Governmental Authority, letters of credit and policies of insurance, together
with all Additions to the Personalty and Proceeds thereof.
     “Proceeds”, when used with respect to any of the collateral described in
this Deed of Trust, means all proceeds within the meaning of the Uniform
Commercial Code of the State and shall also include the proceeds of any and all
insurance policies.
     “Property” means the Land, the Improvements and the Personalty, and all
Additions to, and Proceeds of, all of the foregoing.

7

--------------------------------------------------------------------------------

 

     “Property Assessments” means all taxes, payments in lieu of taxes, water
rents, sewer rents, ground rents, assessments, condominium charges, maintenance
charges and other governmental or municipal or public or private dues, charges
and levies and any Liens (including federal tax liens) which are or may be
levied, imposed or assessed upon the Property or any part thereof, or upon any
Leases or any Rents, whether levied directly or indirectly or as excise taxes,
as income taxes, or otherwise.
     “Real Property” means the Land and the Improvements, and all Additions to,
and Proceeds of, each of the foregoing.
     “Reimbursement Rate” means the Post Default Rate as defined in the Loan
Agreement.
     “Rents” means Grantor’s right to any of the rents, royalties, issues,
profits, revenues, earnings, income and other benefits of the Property, or
arising from the use or enjoyment of the Property, or from any Lease or other
use, or occupancy pertaining to the Property.
     “Resident Agreements” means any and all contracts, authorizations,
agreements and/or consents executed by or on behalf of any resident or other
person seeking services from Grantor or Manager pursuant to which Grantor and/or
Manager provides or furnishes health or assisted living care and related
services at the Property, including the consent to treatment, assignment of
payment of benefits by third party, as amended, restated or substituted from
time to time.
     “State” means the District of Columbia.
     “Swap Contract” means any document, instrument or agreement between Grantor
and Beneficiary or any affiliate of Beneficiary, now existing or entered into in
the future, relating to an interest rate swap transaction, forward rate
transaction, interest rate cap, floor or collar transaction, any similar
transaction, any option to enter into any of the foregoing, and any combination
of the foregoing, which agreement may be oral or in writing, including, without
limitation, any master agreement relating to or governing any or all of the
foregoing and any related schedule or confirmation, each as amended from time to
time.
     “Taxes” means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, which at any time may be
assessed, levied, confirmed or imposed on Grantor or on any of its properties or
assets or any part thereof or in respect of any of its franchises, businesses,
income or profits.
     “Transfer” means any direct or indirect sale, assignment, conveyance or
transfer, including, without limitation, any contract or agreement to sell,
assign, convey or transfer, whether made with or without consideration.
     “Uniform Commercial Code” means the Uniform Commercial Code as adopted by
the State, as amended.
     “Trustees” means the Individual Trustees or their successors in trust who
may be acting under and pursuant to this Deed of Trust from time to time.

8

--------------------------------------------------------------------------------

 

     Section 1.2 Rules of Construction.
     The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of
similar import refer to this Deed of Trust in its entirety. The terms “agree”
and “agreements” mean and include “covenant” and “covenants”. The headings of
this Deed of Trust are for convenience only and shall not define or limit the
provisions hereof. All references (a) made in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders, (b) made in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well, (c) to the Land, Improvements,
Personalty, Real Property or Property shall mean all or any portion of each of
the foregoing, respectively, and (d) to Section numbers are to the respective
Sections contained in this Deed of Trust unless expressly indicated otherwise.
Any term used or defined in the Uniform Commercial Code of the State, as in
effect from time to time, which is not defined in this Deed of Trust has the
meaning given to that term in the Uniform Commercial Code of the State, as in
effect from time to time, when used in this Deed of Trust. However, if a term is
defined in Article 9 of the Uniform Commercial Code of the State differently
than in another Article of the Uniform Commercial Code of the State, the term
has the meaning specified in Article 9.
ARTICLE II
GRANTING CLAUSES; CONDITION OF GRANT
     In order to secure the prompt payment and performance of the Obligations,
Grantor (a) grants, bargains, sells and conveys the Real Property unto the
Trustees in trust for the benefit of Beneficiary, to have and to hold the Real
Property unto the Trustees in fee simple forever; provided that, Grantor may
retain possession of the Real Property until the occurrence of an Event of
Default; and (b) grants Beneficiary a lien on, and security interest in, the
Personalty; and (c) unconditionally and absolutely assigns the Leases and Rents
to Beneficiary (but subject to the license for collection of Rents described in
Section 4.14(b) (Leases)); and (d) assigns to, and grants Beneficiary a security
interest in, any Contracts of Sale; and (e) assigns to Beneficiary all
Condemnation Awards and any insurance proceeds payable with respect to any
Casualty. If and when Grantor has paid and performed all of the Obligations, the
Trustees, upon request by Beneficiary, will provide a release of this Deed of
Trust to Grantor. Grantor shall be responsible for the recordation of such
release and payment of any recording costs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     Grantor makes the following representations and warranties to Beneficiary:
     Section 3.1 Organization, Power and Authority of Grantor; Financing
Documents.
     Grantor (a) is a limited liability company duly organized, and existing and
in good standing under the laws of the jurisdiction in which it is organized,
and is duly qualified to do business and in good standing in the State and in
any other state in which Grantor conducts business, and (b) has the power,
authority and legal right to own its property and carry on the business now
being conducted by it and to engage in the transactions contemplated by the
Financing Documents. The execution and delivery of, and the carrying out of the
transactions contemplated by, the Financing

9

--------------------------------------------------------------------------------

 

Documents executed by Grantor, and the performance and observance of the terms
and conditions of such Financing Documents, have been duly authorized by all
necessary action of Grantor. The Financing Documents to which Grantor is a party
constitute the valid and legally binding obligations of Grantor and are fully
enforceable against Grantor in accordance with their respective terms.
     Section 3.2 Other Documents; Laws.
     The execution and performance of the Financing Documents executed by
Grantor and the consummation of the transactions contemplated thereby will not
conflict with, result in any breach of, or constitute a default under the
operating agreement of Grantor, or any contract, agreement, document or other
instrument to which Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene any Law to which Grantor
is subject.
     Section 3.3 Taxes.
     Grantor has filed all federal, state, county and municipal Tax returns
required to have been filed by Grantor and has paid all Taxes which have become
due pursuant to such returns or pursuant to any Tax assessments received by
Grantor.
     Section 3.4 Legal Actions.
     There are no (a) Claims pending or, to the best of Grantor’s knowledge and
belief, threatened, against or affecting Grantor, Grantor’s business or the
Property, or (b) investigations at law or in equity, before or by any court or
Governmental Authority, pending or, to the best of Grantor’s knowledge and
belief, threatened, against or affecting Grantor, Grantor’s business or the
Property. Grantor is not in default with respect to any order, writ, injunction,
decree or demand of any court or any Governmental Authority affecting Grantor or
the Property.
     Section 3.5 Nature of Loan; Usury; Disclosures.
     Grantor is a business or commercial organization, and the Loan is being
made solely for business or investment purposes. The rate of interest charged on
the Loan does not, and will not, violate any usury Law or interest rate
limitation. The Loan is not subject to the federal Consumer Credit Protection
Act (15 U.S.C. §1601 et. seq.) nor any other federal or state disclosure or
consumer protection laws.
     Section 3.6 Trade Names.
     Grantor conducts its business solely under the name set forth in the
Preamble to this Deed of Trust and makes use of no trade names in connection
therewith, unless such trade names have been previously disclosed to Beneficiary
in writing.
     Section 3.7 Warranty of Title.
     Grantor is (a) the owner of the fee simple legal title to the Real
Property, (b) except for the Permitted Encumbrances, the owner of all of the
beneficial and/or equitable interest in and to the Real Property and
(c) lawfully seized and possessed of the Real Property. Grantor has the right
and authority to convey the Real Property and does hereby warrant specially, and
agrees to

10

--------------------------------------------------------------------------------

 

defend, the Real Property and the title thereto, whether now owned or hereafter
acquired, against all Claims by any Person claiming by, through, or under
Grantor. The Real Property is subject to no Encumbrances other than the
Permitted Encumbrances.
     Section 3.8 Property Assessments.
     The Real Property is assessed for purposes of Property Assessments as a
separate and distinct parcel from any other property, such that the Real
Property shall never become subject to the Lien of any Property Assessments
levied or assessed against any property other than the Real Property.
     Section 3.9 Independence of the Real Property.
     No building or other improvements on property not covered by this Deed of
Trust rely on the Real Property or any interest therein to fulfill any
requirement of any Governmental Authority for the existence of such property,
building or improvements; and none of the Real Property relies, or will rely, on
any property not covered by this Deed of Trust or any interest therein to
fulfill any requirement of any Governmental Authority. The Real Property has
been properly subdivided from all other property in accordance with the
requirements of any applicable Governmental Authorities.
     Section 3.10 Existing Improvements.
     The existing Improvements, if any, were constructed, and are being
maintained, in accordance with all applicable Laws, including, without
limitation, zoning Laws.
     Section 3.11 Personalty.
     Grantor has good title to the Equipment, and the Personalty is not subject
to any Encumbrance other than the Permitted Encumbrances.
     Section 3.12 Leases, Rents, Contracts of Sale.
     The Leases, Rents and Contracts of Sale are not subject to any Encumbrance
other than the Permitted Encumbrances.
     Section 3.13 Presence of Hazardous Materials or Hazardous Materials
Contamination; Compliance with Environmental Requirements.
     To the best of Grantor’s knowledge and belief, (a) no Hazardous Materials
are currently located on the Property, nor is the Property affected by any
Hazardous Materials Contamination, (b) the Property has never been used as a
manufacturing, storage, treatment, processing, recycling or disposal site for
Hazardous Materials, and (c) no property in the vicinity of the Real Property
has ever been used as a manufacturing, storage, treatment, processing, recycling
or disposal site for Hazardous Materials, nor is any such property affected by
Hazardous Materials Contamination. The present condition and uses of, and
activities on, the Property do not violate any Environmental Requirement and the
uses of the Property which Grantor and each tenant and subtenant, if any, intend
in the future to make of the Property comply and will comply with all applicable
Environmental Requirements. Neither Grantor, nor to Grantor’s knowledge, any
tenant or subtenant, has obtained or is required to obtain any permit or other
authorization to

11

--------------------------------------------------------------------------------

 

construct, occupy, operate, use or conduct any activity on, the Property by
reason of any Environmental Requirement. Grantor has received no notice, and is
not aware, of any Claim involving a violation of any Environmental Requirement
with respect to the Property or any parcel in the vicinity of the Real Property
or any operation conducted on the Property or on any parcel in the vicinity of
the Real Property. There is no Environmental Requirement which requires any
work, repair, construction, capital expenditure, or other remedial work of any
nature whatsoever to be undertaken with respect to the Property.
     Section 3.14 Financial Statements.
     The financial statements heretofore delivered by Grantor and any other
party or parties to Beneficiary are true and correct in all respects, have been
prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the respective financial conditions of
the subjects thereof as of the respective dates thereof. No material adverse
change has occurred in the financial conditions reflected therein since the
respective dates thereof and no material additional liabilities have been
incurred by Grantor or any such other party or parties since the date thereof
other than the borrowings contemplated herein or as approved in writing by
Beneficiary.
ARTICLE IV
AFFIRMATIVE COVENANTS
     Section 4.1 Obligations.
     Grantor agrees to promptly pay and/or perform all of the Obligations, time
being of the essence in each case.
     Section 4.2 Insurance.
     Grantor shall maintain the following insurance at its sole cost and
expense:
               (a) Insurance against Casualty to the Property under a policy or
policies covering such risks as are ordinarily insured against by similar
businesses, but in any event including fire, lightning, windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, damage from aircraft,
smoke, vandalism, malicious mischief and acts of terrorism. Unless otherwise
agreed in writing by Beneficiary, such insurance shall be for the full
replacement cost of the Property. The deductible amount under such policy or
policies shall not exceed $25,000. No policy of insurance shall be written such
that the proceeds thereof will produce less than the minimum coverage required
by this Section by reason of co-insurance provisions or otherwise. The term
“full replacement cost” means the actual replacement cost of the Property
(excluding foundation and excavation costs and costs of underground flues,
pipes, drains and other uninsurable items). The “full replacement cost” shall be
determined from time to time at the request of Beneficiary (but not more
frequently than once every three (3) years) by a third party appraiser or
appraisal company or one of the insurers, who shall be selected and paid for by
Grantor but subject to Beneficiary’s approval. A combination of primary and
umbrella policies can be used to satisfy the limit requirements.

12

--------------------------------------------------------------------------------

 

               (b) Comprehensive general public liability insurance for bodily
injuries to Persons and damage to property, in limits of not less than
$2,000,000 for any one occurrence and $5,000,000 for the aggregate of all
occurrences during any given annual policy period. Such insurance shall name
Beneficiary as an additional insured.
               (c) Workers’ compensation insurance for all employees of Grantor
in such amount as is required by Law.
               (d) During any period of construction upon the Property, Grantor
shall maintain, or cause others to maintain, builder’s risk insurance
(non-reporting form) of the type customarily carried in the case of similar
construction for the full replacement cost of work in place and materials stored
at or upon the Property.
               (e) If at any time the Property is in an area that has been
identified as having special flood and mudslide hazards, and flood insurance is
available in such area, Grantor shall purchase and maintain a flood insurance
policy in form and amount acceptable to Beneficiary. In the event that the
Property is not in an area having special flood and mudslide hazards, Grantor
shall deliver to Beneficiary upon request evidence satisfactory to Beneficiary
stating that the Property is not in such a flood or mudslide hazard area.
               (f) Business interruption insurance in an amount acceptable to
Beneficiary.
               (g) Grantor will obtain and keep in force such other and further
insurance as may be required from time to time by Beneficiary in order to comply
with regular requirements and practices of Beneficiary in similar transactions.
               (h) To the extent that health care professionals are employed by
Manager, medical liability, malpractice and other health care professional
liability insurance protecting Manager, as the case may be, against claims
arising from the professional services performed by Manager, as the case may be,
with limits of (A) not less than One Million Dollars ($1,000,000) with respect
to bodily injury or death for each person or occurrence, and (B) not less than
Three Million Dollars ($3,000,000) in the aggregate for claims made for injury
or death in any one year, and an umbrella policy insuring against such liability
in an aggregate amount of Five Million Dollars ($5,000,000).
               (i) Each policy of insurance shall (i) be issued by one or more
recognized, financially sound and responsible insurance companies, (ii) with
respect to the insurance described under the preceding subsections (a), (d),
(e) and (f), have attached thereto standard non-contributing, non-reporting
mortgagee clauses in favor of and entitling Beneficiary without contribution to
collect any and all proceeds payable under such insurance, (iii) provide that
such policy shall not be canceled or modified without at least thirty (30) days
prior written notice to Beneficiary, and (iv) provide that any loss otherwise
payable thereunder shall be payable notwithstanding any act or negligence of
Grantor which might, absent such agreement, result in a forfeiture of all or a
part of such insurance payment. Unless an escrow account has been established
for insurance premiums pursuant to Section 4.5 (Property Assessments; Escrow),
Grantor shall promptly pay all premiums when due on such insurance and, not less
than thirty (30)

13

--------------------------------------------------------------------------------

 

days prior to the expiration dates of each such policy, Grantor will deliver to
Beneficiary evidence of payment satisfactory to Beneficiary. Grantor will within
five (5) days give Beneficiary Notice of any cancellation of, or change in, any
insurance policy. Beneficiary shall not, because of accepting, rejecting,
approving or obtaining insurance, incur any liability for (i) the existence,
nonexistence, form or legal sufficiency thereof, (ii) the solvency of any
insurer, or (iii) the payment of losses.
     Section 4.3 Adjustment of Condemnation and Insurance Claims.
     Grantor shall give prompt Notice to Beneficiary of any Casualty or any
Condemnation or threatened written Condemnation. Beneficiary is authorized, at
its sole option, to commence, appear in and prosecute, in its own or Grantor’s
name, any action or proceeding relating to any Condemnation or Casualty, and to
settle or compromise any Claim in connection therewith. In such case,
Beneficiary may also deduct from any payment all of its Expenses. Beneficiary
agrees, however, that, so long as no Event of Default has occurred and is
continuing, it will not settle or compromise any such Claim without the prior
written consent of Grantor, which consent shall not be unreasonably withheld or
delayed. If Beneficiary elects not to adjust a Claim, Grantor agrees to promptly
pursue the settlement and compromise of the Claim subject to Beneficiary’s
approval that will not be unreasonably withheld or delayed. If, prior to the
receipt by Beneficiary of any Condemnation Award or insurance proceeds, the
Property shall have been sold pursuant to the provisions of Section 7.2
(Foreclosure), Beneficiary shall have the right to receive such funds to the
extent of (a) any deficiency found to be due upon such sale with interest
thereon (whether or not a deficiency judgment on this Deed of Trust shall have
been sought or recovered or denied), and (b) necessary to reimburse Beneficiary
for its Expenses. Grantor agrees to execute and deliver from time to time, upon
the request of Beneficiary, such further instruments or documents as may be
requested by Beneficiary to confirm the grant and assignment to Beneficiary of
any Condemnation Awards or insurance proceeds.
     Section 4.4 Application of Net Proceeds.
     Net Proceeds must be applied to either (a) the payment of the Obligations,
or (b) the restoration of the Property. If either an Event of Default has
occurred or the cost to repair or restore the Property exceeds $3,000,000,
Beneficiary shall determine, in its sole discretion, the manner in which Net
Proceeds are to be applied. If no Event of Default has occurred and the cost to
repair or restore the Property is $3,000,000 or less, Grantor shall determine
the manner in which Net Proceeds are to be applied. In the event that, and to
the extent that, Net Proceeds are to be applied to the restoration of the
Property, each of the following conditions must also be met and complied with if
and to the extent required by Beneficiary:
               (a) An escrow account shall have been established with
Beneficiary composed of Net Proceeds, and, if necessary, additional deposits
made by Grantor, which, in the sole judgment of Beneficiary, is sufficient to
restore the Property to its use, value and condition immediately prior to the
Casualty or Condemnation. Beneficiary shall be entitled, at the expense of
Grantor, to consult such professionals as Beneficiary may deem necessary, in its
sole discretion, to determine the total costs of restoring the Property.
Interest will be paid on funds in the escrow account. Grantor hereby assigns to,
and grants Beneficiary a security interest in, such escrow account and the funds
therein to secure the payment and performance of the Obligations.

14

--------------------------------------------------------------------------------

 

               (b) Either:
               (i) All Material Leases must continue in full force and effect
(subject to rent abatement during restoration as may be provided in the Material
Leases) or, if terminated, the terminated Material Leases must have been
replaced with Material Leases of equal quality in the reasonable judgment of
Beneficiary. Any tenant having the right to terminate its Material Lease due to
the Casualty or Condemnation, and which has not exercised that right, shall have
confirmed in writing to Beneficiary its irrevocable waiver of such termination
right, or
               (ii) Proceeds from business interruption insurance must be
available to Grantor in such amounts as Beneficiary, in its reasonable judgment,
considers sufficient to pay the amortization under the Loan, and all Property
Assessments, insurance premiums and other sums becoming due from Grantor
pursuant to this Deed of Trust during the time required for restoration.
               (c) All restoration will be conducted under the supervision of an
architect or engineer, or both, selected and paid for by Grantor and approved in
advance by Beneficiary, and by a general contractor who shall be approved by
Beneficiary and shall have executed a fixed price contract.
               (d) The restoration will be performed pursuant to the original
plans and specifications approved by Beneficiary.
               (e) If required by Beneficiary at its sole option, the contractor
or contractors responsible for the restoration shall have obtained payment and
performance bonds from a corporate surety acceptable to Beneficiary and naming
Beneficiary as dual obligee.
               (f) Grantor shall have provided Beneficiary with reasonably
satisfactory evidence that there has been no adverse change in the economic
viability of the Property since the date of this Deed of Trust, such evidence to
include, among other things, an appraisal and market study prepared by a firm or
firms acceptable to Beneficiary, but at Grantor’s expense.
If any of the foregoing conditions are not satisfied, Beneficiary may, in its
sole discretion, apply Net Proceeds to the payment of the Obligations.
     If applied to restoration, Net Proceeds (and any other funds required to be
deposited with Beneficiary) shall be disbursed from time to time in accordance
with the terms and conditions of the construction loan agreement most commonly
used by Beneficiary or other regionally recognized construction lenders, at the
time of the Casualty or Condemnation for major commercial construction loans,
and subject also to the following conditions (which shall control in the event
of any conflict with the provisions of such construction loan agreement):
               (a) Restoration shall commence within sixty (60) days following
receipt of the Net Proceeds by Beneficiary or such additional time as may be
required by Grantor

15

--------------------------------------------------------------------------------

 

in obtaining the necessary licenses, permits or approvals from the applicable
Governmental Authorities provided Grantor has and continues to diligently pursue
obtaining the necessary licenses, permits and approvals, and shall be completed
within such time as may be determined by Beneficiary in view of the extent of
the Casualty or Condemnation but, in any event, shall be completed within a
reasonable period after the date the Net Proceeds are received.
               (b) At the time of each disbursement,
               (i) (1) no Leases (if any) shall have been terminated which
either singularly or in the aggregate affect more than ten percent (10%) of the
leasable area of the Property unless the same have been replaced with Leases of
equal quality, in the reasonable judgment of Beneficiary, and (2) no Default
shall have occurred, or
               (ii) Proceeds from business interruption insurance or other
moneys of Grantor must be available to Grantor in such amounts as Beneficiary,
in its reasonable judgment, considers sufficient to pay the amortization under
the Loan and all Property Assessments, insurance premiums and other sums
becoming due from Grantor pursuant to this Deed of Trust during the time
required for restoration.
               (c) Restoration shall be performed in accordance with the
requirements of Section 5.4 (Additional Improvements).
               (d) With respect to each disbursement and accompanying each
request therefor, there shall be delivered to Beneficiary (i) a certificate
addressed to Beneficiary from the architect or engineer supervising the
restoration stating that such disbursement is to pay the cost of restoration not
paid previously by any prior disbursement, that all restoration completed to the
date of such certificate has been completed in accordance with applicable Laws
and the approved plans and specifications, and that the amount of such
disbursement, together with all other disbursements, does not exceed ninety
percent (90%) of the requisition for direct construction costs until such time
as fifty percent (50%) of the restoration has been completed, then such
disbursements shall not exceed ninety-five percent (95%) of the requisition for
direct construction costs, and (ii) evidence satisfactory to Beneficiary that
all Claims then existing for labor, services and materials have been paid in
full or will be paid in full from the proceeds of the disbursement requested.
               (e) The final holdback shall be disbursed only upon delivery to
Beneficiary, in addition to the items required in paragraph (d) above, of the
following:
                    (i) Final waivers of Liens from all contractors and
subcontractors.
               (ii) A certificate of the architect or engineer stating that the
restoration has been completed in a good and workmanlike manner, in accordance
with the plans and specification approved by Beneficiary and in accordance with
all applicable Laws.

16

--------------------------------------------------------------------------------

 

               (iii) An estoppel affidavit from each tenant occupying or leasing
space under a Material Lease in the Property stating that its Lease is in full
force and effect.
               (f) Immediately upon the occurrence of any Event of Default,
Beneficiary may apply Net Proceeds and any other sums deposited with Beneficiary
to the repayment of the Obligations.
     Section 4.5 Property Assessments; Escrow.
               (a) Unless an escrow account for payment of Property Assessments
is created pursuant to subsection (c) below, Grantor will (i) promptly pay in
full and discharge all Property Assessments, and (ii) exhibit to Beneficiary,
upon demand, the receipted bills for such Property Assessments prior to the day
upon which the same shall become delinquent. Property Assessments shall be
considered delinquent as of the first day any interest or penalties commence to
accrue thereon.
               (b) In the event of the passage of any Law subsequent to the date
of this Deed of Trust in any manner changing or modifying the Laws now in force
governing the taxation of deeds of trust or debts secured by deeds of trust or
the manner of collecting any such taxes so as to adversely affect Beneficiary
(including, without limitation, a requirement that internal revenue stamps be
affixed to this Deed of Trust or any of the other Financing Documents), Grantor
will promptly pay any such tax. If Grantor fails to make such prompt payment, or
if any Law prohibits Grantor from making such payment or would penalize
Beneficiary if Grantor makes such payment, then the entire unpaid balance of the
Obligations shall, without Notice, immediately become due and payable at the
sole option of Beneficiary. In no event, however, shall any income taxes of
Beneficiary or franchise taxes of Beneficiary measured by income, or taxes in
lieu of such income taxes or franchise taxes, be required to be paid by Grantor.
               (c) At any time following the occurrence and during the
continuance of an Event of Default, Beneficiary reserves the right to require
Grantor to pay to Beneficiary monthly, on any date selected by Beneficiary, such
amount as Beneficiary from time to time estimates will generate sufficient funds
to pay all Property Assessments and premiums for the insurance required by
Section 4.2 (Insurance) prior to the date such Property Assessments or insurance
premiums next become due. Beneficiary’s estimates shall be based on the amounts
actually payable or, if unknown, on the amounts actually paid for the year
preceding that for which such payments are being made. Any deficiencies shall be
promptly paid by Grantor to Beneficiary on demand. Grantor shall transmit or
cause to be transmitted bills for the Property Assessments and insurance
premiums to Beneficiary as soon as received by Grantor. When Beneficiary has
received from Grantor, or on its account, funds sufficient to pay the same,
Beneficiary shall, except as provided below following an Event of Default, pay
such bills. Payments for such purposes may be made by Beneficiary at its
discretion even though subsequent owners of the Property may benefit thereby.
Upon foreclosure or release of this Deed of Trust or, to the extent permitted by
Law, upon the occurrence of an Event of Default, Beneficiary may apply any sums
so deposited to the payment of the Obligations. If from time to time funds are
accumulated under the terms of this Section in excess of the amount needed to
pay the Property

17

--------------------------------------------------------------------------------

 

Assessments and such insurance premiums, Grantor at least annually shall be
given the option of (i) receiving a refund of the excess funds, (ii) applying
the excess funds to the payment of the Obligations (provided prepayment is then
permitted without penalty pursuant to the Note), or (iii) permitting the excess
funds to remain in the escrow account established pursuant to this Section. If
Grantor fails to give Notice to Beneficiary of its intent with respect to the
application of the excess funds as provided in this Section within sixty
(60) days from the date Beneficiary mailed notice of the accumulation of the
excess funds, Beneficiary shall promptly return the excess funds to Grantor.
Within sixty (60) days after receipt from Grantor of a Notice requesting a
refund, Beneficiary shall also return excess funds to Grantor.
     Section 4.6 Compliance with Laws.
     Grantor will comply with and not violate, and cause to be complied with and
not violated, all present and future Laws applicable to the Property and its use
and operation.
     Section 4.7 Maintenance and Repair of the Property.
     Grantor, at Grantor’s sole expense, will (a) keep and maintain the
Improvements and the Equipment in good condition, working order and repair, and
(b) make all necessary or appropriate repairs and Additions to the Improvements
and Equipment, so that each part of the Improvements and all of the Equipment
shall at all times be in good condition and fit and proper for the respective
purposes for which they were originally intended, erected, or installed.
     Section 4.8 Additions to Security.
     All right, title and interest of Grantor in and to all Improvements and
Additions hereafter constructed or placed on the Property and in and to any
Equipment hereafter acquired shall, without any further deed of trust,
conveyance, assignment or other act by Grantor, become subject to the Lien of
this Deed of Trust as fully and completely, and with the same effect, as though
now owned by Grantor and specifically described in the granting clauses hereof.
Grantor agrees, however, to execute and deliver to the Trustees and/or
Beneficiary such further documents as may be required pursuant to Section 9.2
(Further Assurances).
     Section 4.9 Inspection.
     Upon reasonable advance notice thereof by Beneficiary, Grantor will permit
Beneficiary, or any Person authorized by Beneficiary, to enter and make
inspections of the Property at all reasonable times and as often as may be
requested by Beneficiary.
     Section 4.10 Management.
     Grantor shall at all times provide for the competent and responsible
management and operation of the Property. Each management contract affecting the
Property must be approved in writing by Beneficiary prior to the execution of
the same.
     Section 4.11 Books and Records.
     Grantor will keep and maintain full and accurate records and books
administered in accordance with generally accepted accounting principles,
consistently applied, showing in detail the earnings and expenses of the
Property and the operation thereof. Grantor shall permit

18

--------------------------------------------------------------------------------

 

Beneficiary, or any Person authorized by Beneficiary, to inspect and examine
such records and books (regardless of where maintained) and all supporting
vouchers and data and to make copies and extracts therefrom at all reasonable
times and as often as may be requested by Beneficiary. In addition, Grantor will
furnish or cause to be furnished to Beneficiary the financial information
required under the Loan Agreement:
     Section 4.12 Estoppel Certificates.
     Within ten (10) days after any request by Beneficiary or a proposed
assignee or purchaser of the Loan, Grantor shall certify in writing to
Beneficiary, or to such proposed assignee or purchaser, the then unpaid balance
of the Loan and whether Grantor has any right of defense or setoff to the
payment or performance of any of the Obligations.
     Section 4.13 Subrogation.
     To the extent permitted by Law, Beneficiary shall be subrogated,
notwithstanding its release of record, to any Lien now or hereafter existing on
the Property to the extent that such Lien is paid or discharged by Beneficiary
whether or not from the proceeds of the Loan. This Section shall not be deemed
or construed, however, to obligate Beneficiary to pay or discharge any Lien.
     Section 4.14 Leases.
               (a) Beneficiary shall approve any Material Lease executed after
the date of this Deed of Trust as to form, content and financial strength of the
tenant. At any time, within thirty (30) days after Notice from Beneficiary,
Grantor will deliver to Beneficiary a written description in such reasonable
detail as Beneficiary may request of all of the Leases, including, without
limitation, the names of all tenants, the terms of all Leases and the Rents
payable under all Leases. If any Material Lease provides for the giving by the
tenant of certificates with respect to the status of such Lease, Grantor shall
exercise its right to require such certificate within ten (10) days after any
request by Beneficiary. Following the occurrence of an Event of Default and
notice from Beneficiary, Grantor will notify all tenants under existing Leases,
and agrees to notify all tenants under future Leases, that (i) Grantor collects
and receives all Rents pursuant to the license granted to it hereunder, and
(ii) upon Notice from Beneficiary that such license has been revoked, the
tenants shall pay all unpaid Rent directly to Beneficiary.
               (b) So long as no Event of Default has occurred, Grantor shall
have a license (which license shall terminate automatically and without Notice
upon the occurrence of an Event of Default) to collect upon, but not prior to
accrual, the Rents under the Leases and, where applicable, subleases, such Rents
to be held in trust for Beneficiary. Each month, provided no Event of Default
has occurred, Grantor may retain such Rents and proceeds from Resident
Agreements as were collected that month and held in trust for Beneficiary. Upon
revocation of such license and following notification to the tenants under the
Leases by Beneficiary or the Trustees that Rents are to be paid to Beneficiary,
all Rents shall be paid directly to Beneficiary and not through Grantor. A
demand by Beneficiary on any tenant for the payment of Rent shall be sufficient
to warrant such tenant to make future payments of Rent to Beneficiary without
the necessity of further consent by Grantor.

19

--------------------------------------------------------------------------------

 

               (c) Grantor, at its sole cost and expense, will use its best
efforts to enforce or secure, or cause to be enforced or secured, the
performance of each and every obligation and undertaking of the respective
tenants under any Leases and will appear in and defend, at its sole cost and
expense, any action or proceeding arising under, or in any manner connected
with, such Leases.
               (d) Grantor will not assign the whole or any part of the Leases
or Rents without the prior written consent of Beneficiary, and any assignment
without such consent shall be null and void.
               (e) Grantor will promptly perform all of its obligations under
any Leases. Grantor will not, without the prior written consent of Beneficiary,
(i) cancel, terminate, accept a surrender of, reduce the payment of rent under
any Material Leases, or accept any prepayment of rent for more than one
(1) month in advance under, any Lease or Resident Agreements, (ii) modify, amend
or substitute any Material Leases, or (iii) permit a Lien on the Property
superior to any Lease, other than this Deed of Trust. Beneficiary acknowledges
that the community fee paid in connection with a Resident Agreement is not a
prepayment of rent.
               (f) If any Leases are subordinate (either by their date, their
express terms, or by subsequent agreement of the tenant) to this Deed of Trust,
such Leases shall be subject to the condition (and this Deed of Trust so
authorizes) that, in the event of any sale of the Property pursuant to the
provisions of Section 7.2 (Foreclosure), the Leases shall, at the sole option of
Beneficiary or any purchaser at such sale, either (i) continue in full force and
effect as set forth in the required advertisement of sale, and the tenant or
tenants thereunder will, upon request, attorn to and acknowledge in writing the
purchaser or purchasers at such sale or sales as landlord thereunder, or
(ii) upon notice to such effect from Beneficiary, the Trustees or any purchaser
or purchasers, terminate within ninety (90) days from the date of sale. As to
any Lease, neither Beneficiary nor any purchaser or purchasers at foreclosure
shall be bound by any payment of rent for more than one (1) month in advance or
by any amendment or modification of the Lease made without the prior written
consent of Beneficiary or, subsequent to a foreclosure sale, such purchaser or
purchasers.
               (g) Neither the Trustees nor Beneficiary shall be obligated to
perform or discharge any obligation of Grantor under any Lease. This assignment
of the Leases in no manner places on Beneficiary or the Trustees any
responsibility for (i) the control, care, management or repair of the Property,
(ii) the carrying out of any of the terms and conditions of the Leases,
(iii) any waste committed on the Property, or (iv) any dangerous or defective
condition on the Property (whether known or unknown). Grantor agrees to
indemnify the Trustees and Beneficiary for, and forever hold them harmless from,
any and all Claims arising out of, or in connection with, any Leases or any
assignment thereof.
               (h) Unless otherwise agreed to by Beneficiary, each Lease shall
(i) be at market rents, (ii) be subordinate to the lien of this Deed of Trust,
(iii) contain attornment language requiring each tenant to attorn to any
subsequent purchaser of the Property, (iv) not contain non-disturbance language
entitling such tenant to remain at the Property after any sale of the Property
except as specifically agreed to by Beneficiary in connection with specified
Leases,

20

--------------------------------------------------------------------------------

 

and shall be in all respects acceptable to Beneficiary and its counsel. Approved
Material Leases may not be amended, modified or terminated without the prior
written consent of Beneficiary.
     Section 4.15 Contracts of Sale.
     Following the occurrence and during the continuance of an Event of Default,
Grantor irrevocably authorizes Beneficiary, at its sole option, to collect, in
the name of Grantor or in its own name as assignee, all payments due or to
become due under any Contract of Sale. Grantor agrees that it will facilitate in
every reasonable way the collection by Beneficiary of such payments, and will,
upon written request by Beneficiary, execute a written notice and deliver the
same to each purchaser directing the purchaser to make such payments to
Beneficiary. In no event shall Beneficiary be accountable for more moneys than
it actually receives pursuant to a Contract of Sale, nor shall Beneficiary be
liable for any failure to collect payments under any Contract of Sale. The right
to determine the method of collection and the extent to which the enforcement of
collection shall be prosecuted is reserved to the sole discretion of
Beneficiary. Grantor, without the prior written consent of Beneficiary, will not
execute any assignment of any Contract of Sale or the payments due thereunder.
Grantor shall furnish to Beneficiary, within ten (10) days after a written
request from Beneficiary, a written certification containing the names of all
contract purchasers of the Property and shall attach to such certification a
copy of any Contract of Sale. Nothing contained in this Section shall (a) be
construed as a consent by Beneficiary to any Transfer of the Property, or
(b) constitute a delegation to Beneficiary of any of Grantor’s duties or
obligations under any Contract of Sale. Grantor agrees to indemnify Beneficiary
and the Trustees for, and forever hold them harmless from, any Claim arising out
of, or in connection with, any Contract of Sale.
     Section 4.16 Taxes.
     Grantor shall pay and discharge all Taxes prior to the date on which
penalties are attached thereto unless and to the extent only that such Taxes are
contested in accordance with Section 4.20 (Permitted Contests).
     Section 4.17 Hazardous Materials; Contamination.
          (a) The Grantor agrees to (i) give Notice to the Beneficiary
immediately upon the Grantor’s acquiring knowledge of the presence of any
Hazardous Materials on the Property or of any Hazardous Materials Contamination
or of any Claim made or threatened against the Grantor or the Property with
respect to any Environmental Requirement with a full description thereof;
(ii) at the Grantor’s sole cost and expense, promptly comply with any and all
Environmental Requirements relating to the Property or such Hazardous Materials
or Hazardous Materials Contamination and provide the Beneficiary with
satisfactory evidence of such compliance; (iii) provide the Beneficiary, within
thirty (30) days after a demand by the Beneficiary, with a bond, letter of
credit or similar financial assurance evidencing to the Beneficiary’s
satisfaction that the necessary funds are available to pay the cost of complying
with such Environmental Requirements and removing, treating and disposing of
such Hazardous Materials or Hazardous Materials Contamination and discharging
any Lien which may be established on the Property as a result thereof; and
(iv) take whatever other action as the Beneficiary may deem necessary or
appropriate to restore to the Grantor the full use and benefit of the Property
as contemplated by the Financing Documents.

21

--------------------------------------------------------------------------------

 

          (b) The Grantor shall immediately upon the receipt of Notice from the
Beneficiary, which may be given at any time and from time to time by the
Beneficiary in its sole discretion (but not more frequently than once during any
twelve (12) month period), cause an Environmental Assessment to be undertaken
with respect to the Property and furnish the same to the Beneficiary within
thirty (30) days after the date of the Beneficiary’s request. The cost of any
such Environmental Assessment shall be borne exclusively by the Grantor. The
Grantor shall cooperate with each environmental consulting firm engaged to make
any such Environmental Assessment and shall supply to each such environmental
consulting firm, from time to time and promptly on request, all information
available to the Grantor to facilitate the completion of the Environmental
Assessment. Notwithstanding the foregoing, the Beneficiary shall be under no
duty to require the preparation of any Environmental Assessment of the Property,
and in no event shall any such Environmental Assessment by the Beneficiary be or
give rise to any representation or warranty by the Beneficiary that Hazardous
Materials are or are not present on the Property, or that there has been
compliance by the Grantor or any other Person with any Environmental
Requirement.
          (c) The Grantor shall protect, indemnify, defend and hold the
Beneficiary, the Trustees, any Persons owned or controlled by, owning or
controlling, or under the common control of or affiliated with, the Beneficiary
and/or the Trustees, any participants in the Loan, the directors, officers,
employees and agents of the Beneficiary, and/or such other Persons, and the
heirs, personal representatives, successors and assigns of each of the
foregoing, harmless from and against any and all Claims of any kind or nature
whatsoever arising out of or in any way connected with any investigative,
enforcement, cleanup, removal, containment, remedial or other private,
governmental or regulatory action at any time threatened, instituted or
completed pursuant to any applicable Environmental Requirement against the
Grantor or the Beneficiary or against or with respect to the Property or any
condition, use or activity on the Property or at any time threatened or made by
any Person against the Grantor or the Beneficiary or against or with respect to
the Property or any condition, use or activity on the Property relating to any
damage, contribution, cost recovery, compensation, loss or injury resulting from
or in any way arising in connection with any Hazardous Materials or Hazardous
Materials Contamination. Upon demand by the Beneficiary, the Grantor shall
diligently defend any such Claim which affects the Property or is made or
commenced against the Beneficiary, whether alone or together with the Grantor or
any other Person, all at the Grantor’s sole cost and expense and by counsel to
be approved by the Beneficiary in the exercise of its reasonable judgment. In
the alternative, the Beneficiary may at any time elect to conduct its own
defense through counsel selected by the Beneficiary and at the cost and expense
of the Grantor.
     Section 4.18 Right to Perform.
     If the Grantor fails to promptly pay or perform any of the Obligations, the
Beneficiary, without Notice to or demand upon the Grantor, and without waiving
or releasing any Obligation or Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of the Grantor. The Beneficiary may enter upon the Property
for that purpose and take all action thereon as the Beneficiary considers
necessary or appropriate. All Expenses incurred by the Beneficiary pursuant to
this Section, together with interest thereon at the Reimbursement Rate, shall be
paid by the Grantor to the Beneficiary as provided in Section 4.19
(Reimbursement; Interest).

22

--------------------------------------------------------------------------------

 

     Section 4.19 Reimbursement; Interest.
     If Beneficiary or the Trustees shall incur any Expenses or pay any Claims
to which Beneficiary or the Trustees become a party by reason of this Deed of
Trust or the rights and remedies provided hereunder (regardless of whether this
Deed of Trust expressly provides for an indemnification against such Claims by
Grantor), such Expenses and Claims shall be (a) paid by Grantor to Beneficiary
on demand, together with interest thereon from the date incurred until paid in
full by Grantor at the Reimbursement Rate and (b) a part of the Obligations.
Notwithstanding the foregoing, however, in any action or proceeding to foreclose
this Deed of Trust or to recover or collect the Obligations, the provisions of
Law governing the recovery of costs, disbursements and allowances shall prevail
unaffected by this Section. Whenever this Deed of Trust provides for interest to
be paid by Grantor at the Reimbursement Rate, the Reimbursement Rate shall be
calculated on the basis of a 365-day year factor applied to actual days elapsed.
     Section 4.20 Permitted Contests.
     Grantor shall not be required to pay any of the Property Assessments, or to
comply with any Law, so long as Grantor shall in good faith, and at its cost and
expense, contest the amount or validity thereof, or take other appropriate
action with respect thereto, in good faith and in an appropriate manner or by
appropriate proceedings; provided that (a) such proceedings operate to prevent
the collection of, or other realization upon, such Property Assessments or
enforcement of the Law so contested, (b) there will be no sale, forfeiture or
loss of the Property during the contest, (c) neither Beneficiary nor the
Trustees are subjected to any Claim, and (d) Grantor provides assurances
satisfactory to Beneficiary (including, without limitation, the establishment of
an appropriate reserve account with Beneficiary) of its ability to pay such
Property Assessments or comply with such Law in the event Grantor is
unsuccessful in its contest. Each such contest shall be promptly prosecuted to
final conclusion or settlement, and Grantor shall indemnify and save Beneficiary
and Trustees harmless against all Claims in connection therewith. Promptly after
the settlement or conclusion of such contest or action, Grantor shall comply
with such Law and/or pay and discharge the amounts which shall be levied,
assessed or imposed or determined to be payable, together with all penalties,
fines, interests, costs and expenses in connection therewith.
     Section 4.21 Security Agreement.
     This Deed of Trust creates a security interest in the Personalty, and, to
the extent the Personalty is not real property, this Deed of Trust constitutes a
security agreement from the Grantor to the Beneficiary under the Uniform
Commercial Code of the State. This Deed of Trust constitutes a fixture filing
under the Uniform Commercial Code of the State, as amended or recodified from
time to time, and covers property which includes goods that are or are to become
fixtures on the Property. “Fixtures” shall include all articles of personal
property now or hereafter attached to, placed upon for an indefinite term or
used in connection with said real property, appurtenances and improvements,
together with all goods and other property which are or at any time become so
related to the Property that an interest in them arises under real estate law.
The respective mailing addresses of Grantor and Beneficiary are set forth in the
definition of “Notices” in Section 1.1 (Definitions).

23

--------------------------------------------------------------------------------

 

     The Grantor hereby authorizes Beneficiary at any time and from time to time
to file any initial financing statements, amendments thereto and continuation
statements as authorized by applicable law, required by Beneficiary to establish
or maintain the validity, perfection and priority of the security interest
granted in this Deed of Trust. For purposes of such filings, Grantor agrees to
furnish any information requested by Beneficiary promptly upon request by
Beneficiary. Grantor also ratifies its authorization for Beneficiary to have
filed any like initial financing statements, amendment thereto or continuation
statements if filed prior to the date of this Deed of Trust.
     Grantor shall pay all fees and costs that Beneficiary may incur in filing
this or any other documents in public offices and in obtaining such record
searches as Beneficiary may reasonably require. If any financing statement or
other document is filed in the records normally pertaining to personal property,
that filing shall never be construed as in any way derogating from or impairing
this Deed of Trust or the rights or obligations of the parties under it. The
Grantor hereby agrees to execute and deliver on demand, and hereby irrevocably
constitutes and appoints the Beneficiary the attorney-in-fact of the Grantor, to
execute, deliver and, if appropriate, to file with the appropriate filing office
or offices, such financing statements or other instruments as the Beneficiary
may request or require in order to perfect the security interest granted hereby
or to continue the effectiveness of the same.
     Section 4.22 Access Law.
               (a) Grantor agrees to use its best efforts to ensure that the
Property shall at all times comply with and remain in compliance with the
requirements of the Americans with Disabilities Act of 1990, all state and local
Laws and ordinances related to handicapped access and all rules, regulations,
and orders issued pursuant to any of the foregoing, including, without
limitation, the Americans with Disabilities Act Accessibility Guidelines for
Buildings and Facilities, all to the extent applicable to the Property
(collectively, “Access Laws”).
               (b) Notwithstanding any provisions set forth herein or in any
other document regarding Beneficiary’s approval of alterations of the Property,
Grantor shall not alter the Property in any manner which would increase
Grantor’s responsibilities for compliance with the applicable Access Laws
without the prior written approval of Beneficiary. The foregoing shall apply to
tenant improvements constructed by Grantor or by any of its tenants. Beneficiary
may condition any such approval upon receipt of a certificate of Access Law
compliance from an architect, engineer, or other person acceptable to
Beneficiary.
               (c) Grantor agrees to give prompt notice to Beneficiary of the
receipt by Grantor of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
     Section 4.23 Appraisals.
     Beneficiary shall have the right, upon an Event of Default, but not the
obligation to require annual updated appraisals of the Property, which
appraisals shall be prepared by an appraiser or appraisers designated by
Beneficiary and shall be in all respects acceptable to Beneficiary. The

24

--------------------------------------------------------------------------------

 

basis of the appraisal calculations shown on such appraisal reports and all
other aspects of the appraisal reports must be satisfactory to Beneficiary in
all respects. A copy of such appraisal reports shall be released to Grantor.
Grantor shall reimburse Beneficiary upon demand for all costs and expenses
incurred by Beneficiary with respect to the preparation and review of all future
appraisals required pursuant to the terms hereof; provided, however, Grantor
shall not be obligated to reimburse Beneficiary for more than one (1) appraisal
during the term of the Loan.
ARTICLE V
NEGATIVE COVENANTS
     Section 5.1 Encumbrances.
     Without the prior written consent of Beneficiary, Grantor will not permit
the Real Property or the Personalty, or the Leases, Rents and Contracts of Sale,
to become subject to any Encumbrances other than the Permitted Encumbrances.
Grantor shall give Beneficiary Notice of any default under any Lien and Notice
of any foreclosure or threat of foreclosure.
     Section 5.2 Transfer of the Property.
     Grantor will not Transfer, or contract to Transfer, all or any part of the
Property or any legal or beneficial interest therein (except for Transfers of
the Equipment permitted by Section 5.3 (Removal, etc. of Equipment).
     Section 5.3 Removal, etc. of Equipment.
     Except to the extent permitted by the following sentence, none of the
Improvements or Equipment shall be removed, demolished or materially altered,
without the prior written consent of the Beneficiary. Grantor may remove and
dispose of, free from the Lien of this Deed of Trust, such Equipment as from
time to time becomes worn out or obsolete, provided that, either (a) at the time
of, or prior to, such removal, any such Equipment is replaced with other
Equipment which is free from Liens other than Permitted Encumbrances and has a
value at least equal to that of the replaced Equipment (and by such removal and
replacement Grantor shall be deemed to have subjected such Equipment to the Lien
of this Deed of Trust), or (b) so long as a prepayment may be made without
penalty pursuant to the Note, such Equipment is sold at fair market value for
cash and the net cash proceeds received from such disposition are paid over
promptly to Beneficiary to be applied to the prepayment of the principal of the
Loan.
     Section 5.4 Additional Improvements.
     Grantor will not construct or permit to be constructed any Improvements for
which costs exceed $1,000,000 in the aggregate other than those presently on the
Land without the prior written consent of Beneficiary, which consent shall not
be unreasonably withheld. Grantor will complete and pay for, within a reasonable
time, any Improvements which Grantor is permitted to construct on the Land.
Grantor will construct and erect any permitted Improvements (a) strictly in
accordance with all applicable Laws and any private restrictive covenants,
(b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any
easement or right of way or upon the land of others, and (d) wholly within any
building restriction lines applicable to the Land.

25

--------------------------------------------------------------------------------

 

     Section 5.5 Restrictive Covenants, Zoning, etc.
     Without the prior written consent of Beneficiary, which consent shall not
be unreasonably withheld, Grantor will not initiate, join in, or consent to any
change in, any restrictive covenant, easement, zoning ordinance, or other public
or private restrictions, limiting or defining the uses which may be made of the
Property. Grantor will (a) promptly perform and observe, and cause to be
performed and observed, all of the terms and conditions of all material
agreements affecting the Property, and (b) do or cause to be done all things
necessary to preserve intact and unimpaired any and all easements, appurtenances
and other interests and rights in favor of, or constituting any portion of, the
Property.
     Section 5.6 Prohibition on Hazardous Materials.
     The Grantor will not cause, commit, permit or allow to continue any
violation of any Environmental Requirement by any Person on or with respect to
the Property. The Grantor will not place, install, store, spill, leak, dispose
of or release, or cause, commit, permit, or allow the placement, installation,
storage, spilling, leaking, disposal or release of, any Hazardous Materials on
the Property and will keep the Property free of all Hazardous Materials
Contamination.
ARTICLE VI
EVENTS OF DEFAULT
     The occurrence of any one or more of the following shall constitute an
“Event of Default” under this Deed of Trust:
     Section 6.1 Representations and Warranties.
     Any representation or warranty contained in this Deed of Trust, or in any
other document, certificate or opinion delivered to Beneficiary in connection
with the Loan, proves at any time to be incorrect or misleading in any material
respect.
     Section 6.2 Payment Obligations.
     Grantor fails to promptly pay any of the Obligations when and as provided
in the Financing Documents, subject to the notice and cure provisions contained
in the Financing Documents.
     Section 6.3 Transfer of the Property; Encumbrances.
     Grantor fails to comply with Section 5.1 (Encumbrances) or Section 5.2
(Transfer of the Property).
     Section 6.4 Insurance Obligations.
     Grantor fails to promptly perform or comply with any of Grantor’s
obligations in Section 4.2 (Insurance).

26

--------------------------------------------------------------------------------

 

     Section 6.5 Hazardous Materials.
     Grantor fails to promptly perform or comply with any of the terms and
conditions set forth in Section 4.17 (Hazardous Materials; Contamination) or
Section 5.6 (Prohibition on Hazardous Materials).
     Section 6.6 Other Obligations.
     Grantor fails to promptly perform or comply with any of the Obligations
(other than those expressly described in other Sections of this ARTICLE VI), and
such failure continues uncured for a period of thirty (30) days after Notice
from Beneficiary to Grantor, unless the nature of the failure is such that
(a) it cannot be cured within the thirty (30) day period, (b) Grantor institutes
corrective action within the thirty (30) day period and (c) Grantor diligently
pursues such action and completes the cure within ninety (90) days or as
promptly as reasonably possible under the circumstances.
     Section 6.7 Event of Default Under Other Financing Documents.
     An Event of Default (as defined therein) occurs under any of the Financing
Documents other than this Deed of Trust.
     Section 6.8 Change in Zoning or Public Restriction.
     Any change in any zoning ordinance or regulation or any other public
restriction is enacted, adopted or implemented, that limits or defines the uses
which may be made of the Property such that the present or intended use of the
Property as a Facility, would be in violation of such zoning ordinance or
regulation or public restriction, as changed, and not permitted as a
pre-existing, non-conforming use.
     Section 6.9 Default Under Other Lien Documents.
     A default occurs under any other mortgage, deed of trust or security
agreement covering all or any portion of the Property, including, without
limitation, any Permitted Encumbrances.
     Section 6.10 Voluntary Bankruptcy, etc.
     Grantor or Guarantor (a) applies for, or consents in writing to, the
appointment of a receiver, trustee or liquidator of Grantor or Guarantor or the
Property or of all or substantially all of Grantor’s or Guarantor’s other
assets, or (b) files a voluntary petition in bankruptcy or admits in writing its
inability to pay its debts as they become due, or (c) makes a general assignment
for the benefit of creditors, or (d) files a petition or an answer seeking a
reorganization (other than a reorganization not involving the liabilities of
Grantor or Guarantor) or an arrangement with creditors or takes advantage of any
bankruptcy or insolvency law, or (e) files an answer admitting the material
allegations of a petition filed against Grantor or Guarantor in any bankruptcy,
reorganization or insolvency proceeding.
     Section 6.11 Involuntary Bankruptcy, etc.
     An order, judgment or decree is entered by any court of competent
jurisdiction on the application of a creditor adjudicating Grantor or Guarantor
as bankrupt or insolvent, or appointing a receiver, trustee or liquidator of
Grantor, Guarantor or of the Property, or of all or

27

--------------------------------------------------------------------------------

 

substantially all of Grantor’s or Guarantor’s other assets, and such order,
judgment or decree continues unstayed and in effect for a period of ninety
(90) days from the date entered.
     Section 6.12 Execution; Attachment.
     Any execution or attachment is levied against the Property, and such
execution or attachment is not set aside, discharged or stayed within thirty
(30) days after the same is levied.
     Section 6.13 Judgment.
     Unless adequately covered by insurance in the opinion of Beneficiary, the
entry of a final, non-appealable judgment for the payment of money involving
more than $100,000 against Grantor or Guarantor and the failure by Grantor or
Guarantor, respectively, to discharge the same, or cause it to be discharged, or
bonded off to Beneficiary’s satisfaction, within thirty (30) days from the date
of the order, decree or process under which or pursuant to which such judgment
was entered.
     Section 6.14 Change in Business Status.
     Unless the written consent of Beneficiary is previously obtained, the sale
of all or substantially all of the business assets of Grantor, or the
commencement of any proceeding to dissolve or liquidate Grantor, or the
occurrence of any change in the form of business entity through which Grantor
presently conducts its business, or the occurrence of any merger or
consolidation involving Grantor.
     Section 6.15 Default Under Other Indebtedness.
     Grantor fails to pay any indebtedness of Grantor (other than the Loan) owed
to Beneficiary when and as due and payable (whether by acceleration or
otherwise).
     Section 6.16 Swap Default.
     An event occurs which gives the Beneficiary the right or option to
terminate any Swap Contract which is secured by this Deed of Trust.
     Section 6.17 Dissolution of Grantor, etc.
     Without Beneficiary’s prior express written consent thereto, (a) Grantor is
dissolved either pursuant to the provisions of its operating agreement, by
operation of law, or in any other manner, voluntarily or otherwise; (b) the
operating agreement of Grantor is terminated pursuant to any of its provisions
or by operation of law, or amended or modified in any material respect; (c) if
any member of Grantor either directly or indirectly sells, assigns, mortgages,
pledges, hypothecates, transfers or otherwise encumbers or permits to be
encumbered any or all of his, her or its interest in Grantor (other than for the
benefit of Beneficiary) or withdraws voluntarily or involuntarily (by operation
of law or otherwise) from Grantor; or (d) any new member is admitted to Grantor.
     Section 6.18 Management of the Facility.
     Sunrise Senior Living Management, Inc. or an entity controlled by Sunrise
Senior Living, Inc. ceases to operate and manage the Facility.

28

--------------------------------------------------------------------------------

 

     Section 6.19 Appraisals.
     Grantor fails to promptly perform or comply with any of the terms and
conditions set forth in Section 4.23 (Appraisals).
ARTICLE VII
RIGHTS AND REMEDIES
     Upon the occurrence of any Event of Default, Beneficiary, or the Trustees
at the direction of Beneficiary, may at any time thereafter exercise any of the
following rights, powers or remedies:
     Section 7.1 Acceleration.
     Beneficiary may declare (without Notice to Grantor and without presentment,
demand, protest or notice of protest or of dishonor, all of which Grantor hereby
waives) the Obligations to be immediately due and payable.
     Section 7.2 Foreclosure.
     The Trustees, personally or by their agent or attorneys, may sell the
Property, or any part or parts thereof, and all estate, right, title, interest,
claim and demand therein, at public auction at such time and place and upon such
terms and conditions as the Trustees may deem appropriate or as may be required
or permitted by applicable law, after having first advertised the time, place
and terms of sale in accordance with applicable law. In the event of any such
sale, the Beneficiary may bid for and purchase the Property (or such portion
thereof as may be offered for sale) and shall be entitled to apply all or any
part of the amount secured by this Deed of Trust as a credit to the purchase
price. At any foreclosure sale, such portion of the Property as is offered for
sale may, at the Beneficiary’s option, be offered for sale for one total price,
and the proceeds of such sale accounted for in one account without distinction
between the items of security or without assigning to them any proportion of
such proceeds, the Grantor hereby waiving the application of any doctrine of
marshalling. If less than all of the Property is sold at foreclosure and any of
the Obligations remain outstanding after the sale proceeds are applied thereto,
this Deed of Trust shall continue as a lien on the Property remaining unsold,
and the Beneficiary may at any time thereafter direct the Trustees to sell the
same as provided above.
     Section 7.3 Application of Proceeds.
     In the event of a foreclosure sale of the Property, either judicially or by
private power of sale, the proceeds of said sale shall be applied, unless
applicable statutes shall specify otherwise, first, to the expenses of such sale
and of all proceedings in connection therewith, including attorneys’; and
trustee’s fees, then to insurance premiums, liens, assessments, taxes and
charges including utility charges advanced by the Beneficiary together with
interest at the interest rate provide in the Note, this Deed of Trust or the
Financing Documents, and finally the remainder, if any, shall be paid to the
Grantor or as otherwise may be required by the provisions of applicable law.

29

--------------------------------------------------------------------------------

 

     Section 7.4 No Reinstatement.
     Except as otherwise provided by applicable law, if a Default shall have
occurred and the Beneficiary or the Trustees shall have commenced to exercise
any of the remedies permitted hereunder, then a tender of payment by the Grantor
or by anyone on behalf of the Grantor of the amount necessary to satisfy all
sums due hereunder, or the acceptance by the Beneficiary of any such payment so
tendered, shall not, without the prior consent of the Beneficiary, constitute a
reinstatement of the Note or this Deed of Trust.
     Section 7.5 Taking Possession or Control of the Property.
     As a matter of right without regard to the adequacy of the security, and to
the extent permitted by law without Notice to Grantor, Beneficiary shall be
entitled, upon application to a court of competent jurisdiction, to the
immediate appointment of a receiver for all or any part of the Property and the
Rents, whether such receivership be incidental to a proposed sale of the
Property or otherwise, and Grantor hereby consents to the appointment of such a
receiver. In addition, to the extent permitted by Law, and with or without the
appointment of a receiver, or an application therefor, Beneficiary may (a) enter
upon, and take possession of (and Grantor shall surrender actual possession of),
the Property or any part thereof, without Notice to Grantor and without bringing
any legal action or proceeding, or, if necessary by force, legal proceedings,
ejectment or otherwise, and (b) remove and exclude Grantor and its agents and
employees therefrom.
     Section 7.6 Management of the Property.
     Upon obtaining possession of the Property or upon the appointment of a
receiver as described in Section 7.5 (Taking Possession or Control),
Beneficiary, the Trustees or the receiver, as the case may be, may, at their
sole option, (a) make all necessary or proper repairs and Additions to or upon
the Property, (b) operate, maintain, control, make secure and preserve the
Property, (c) receive all Rents, and (d) complete the construction of any
unfinished Improvements on the Property and, in connection therewith, continue
any and all outstanding contracts for the erection and completion of such
Improvements and make and enter into any further contracts which may be
necessary, either in their or its own name (the cost of completing the
Improvements shall be Expenses secured by this Deed of Trust and accrue interest
as set forth in Section 4.19 (Reimbursement; Interest)). In so doing,
Beneficiary, the Trustees or such receiver shall have the right to manage the
Property and to carry on the business of Grantor and may exercise all of the
rights and powers of Grantor, including, but without limiting the generality of
the foregoing, the right to lease the Property, to cancel, modify, renew or
extend any Lease or sub-lease of the Property and to carry on any contracts
entered into by Grantor with respect to the Property. Beneficiary, the Trustees
or such receiver shall be under no liability for, or by reason of, any such
taking of possession, entry, holding, removal, maintaining, operation or
management, except for willful misconduct. Any Rents received shall be applied
(a) first, to pay all Expenses, and (b) the balance, if any, to payment of the
other Obligations. Grantor shall pay on demand to Beneficiary, the receiver or
the Trustees (as the case may be) the amount of any deficiency between (a) the
Rents received by Beneficiary, the receiver or the Trustees, and (b) all
Expenses incurred together with interest thereon at the Reimbursement Rate as
provided in Section 4.19 (Reimbursement; Interest). The exercise of the remedies
provided in this Section shall not cure or waive any Event of Default, and the
enforcement of such remedies, once commenced, shall continue for so long as

30

--------------------------------------------------------------------------------

 

Beneficiary shall elect, notwithstanding the fact that the exercise of such
remedies may have, for a time, cured the original Event of Default.
     Section 7.7 Uniform Commercial Code.
     Beneficiary may proceed under the Uniform Commercial Code as to all or any
part of the Personalty, and in conjunction therewith may exercise all of the
rights, remedies and powers of a secured creditor under the Uniform Commercial
Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of
the Equipment and make the same available within the Improvements. Any
notification required by the Uniform Commercial Code with respect to a sale or
other disposition of Personalty shall be deemed reasonably and properly given if
sent in accordance with the Notice provision of this Deed of Trust at least ten
(10) days before any such sale or disposition. Disposition of the Personalty
shall be deemed commercially reasonable if made pursuant to a public sale
advertised at least twice in a newspaper of general circulation in the community
where the Property is located. Proceeds from any such sale shall be applied as
follows: (a) first, to pay all Expenses incurred in connection with the sale,
and (b) the balance, if any, to payment of the other Obligations.
     Section 7.8 Other Remedies.
     Beneficiary shall have the right from time to time to enforce any legal or
equitable remedy against Grantor and to sue Grantor for any sums (whether
interest, damages for failure to pay principal or any installments thereof,
taxes, or any other sums required to be paid under the terms of this Deed of
Trust, as the same become due), without regard to whether or not any other of
the Obligations shall be due, and without prejudice to the right of Beneficiary
thereafter to enforce any appropriate remedy against Grantor, including, without
limitation, an action of foreclosure or an action for specific performance for a
Default by Grantor existing at the time such earlier action was commenced.
     Section 7.9 Remedies, etc. Cumulative.
     Each right, power and remedy of Beneficiary or the Trustees as provided for
in this Deed of Trust, or in any of the other Financing Documents or now or
hereafter existing by Law, shall be cumulative and concurrent and shall be in
addition to every other right, power or remedy provided for in this Deed of
Trust, or in any of the other Financing Documents or now or hereafter existing
by Law, and the exercise or beginning of the exercise by Beneficiary or the
Trustees of any one or more of such rights, powers or remedies shall not
preclude the simultaneous or later exercise by Beneficiary or the Trustees of
any or all such other rights, powers or remedies.
     Section 7.10 No Waiver by Beneficiary etc.
     No course of dealing or conduct between Beneficiary, the Trustees and
Grantor shall be effective to amend, modify or change any provisions of this
Deed of Trust or the other Financing Documents. No failure or delay by
Beneficiary or the Trustees to insist upon the strict performance of any term,
covenant or agreement of this Deed of Trust or of any of the other Financing
Documents, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of any such term, covenant or agreement or of
any such breach, or preclude Beneficiary or the Trustees from exercising any
such right, power or remedy at any

31

--------------------------------------------------------------------------------

 

later time or times. By accepting payment after the due date of any of the
Obligations, Beneficiary or the Trustees shall not be deemed to waive the right
either to require prompt payment when due of all other Obligations, or to
declare an Event of Default for failure to make prompt payment of any such other
Obligations. Neither Grantor nor any other Person now or hereafter obligated for
the payment of the whole or any part of the Obligations shall be relieved of
such liability by reason of (a) the failure of Beneficiary to comply with any
request of Grantor or of any other Person to take action to foreclose this Deed
of Trust or otherwise enforce any of the provisions of this Deed of Trust, or
(b) any agreement or stipulation between any subsequent owner or owners of the
Property and Beneficiary, or (c) Beneficiary extending the time of payment or
modifying the terms of this Deed of Trust or any of the other Financing
Documents without first having obtained the consent of Grantor or such other
Person. Regardless of consideration, and without the necessity for any notice to
or consent by the holder of any subordinate Lien on the Property, Beneficiary
may release any Person at any time liable for any of the Obligations or any part
of the security for the Obligations, and may extend the time of payment or
otherwise modify the terms of this Deed of Trust or any of the other Financing
Documents without in any way impairing or affecting the Lien of this Deed of
Trust or the priority of this Deed of Trust over any subordinate Lien. The
holder of any subordinate Lien shall have no right to terminate any Lease
regardless of whether or not such Lease is subordinate to this Deed of Trust.
Beneficiary may resort to the security or collateral described in this Deed of
Trust or any of the other Financing Documents in such order and manner as
Beneficiary may elect in its sole discretion.
     Section 7.11 Waivers and Agreements Regarding Remedies.
     To the full extent Grantor may do so, Grantor hereby:
               (a) agrees that it will not at any time plead, claim or take
advantage of any Laws now or hereafter in force providing for any appraisement,
valuation, stay, extension or redemption, and waives and releases all rights of
redemption, valuation, appraisement, stay of execution, extension and notice of
election to accelerate the Obligations;
               (b) waives all rights to a marshalling of the assets of Grantor,
including without limitation, the Property, or to a sale in the inverse order of
alienation in the event of a foreclosure of the Property, and agrees not to
assert any right under any Law pertaining to the marshalling of assets, the sale
in inverse order of alienation, the exemption of homestead, the administration
of estates of decedents, or other matters whatsoever to defeat, reduce or affect
the right of Beneficiary under the terms of this Deed of Trust to a sale of the
Property without any prior or different resort for collection, or the right of
Beneficiary to the payment of the Obligations out of the proceeds of sale of the
Property in preference to every other claimant whatsoever;
               (c) waives any right to bring or utilize any defense,
counterclaim or setoff, other than one which denies the existence or sufficiency
of the facts upon which any foreclosure action is grounded. If any defense,
counterclaim or setoff, other than one permitted by the preceding clause, is
timely raised in a foreclosure action, such defense, counterclaim or setoff
shall be dismissed. If such defense, counterclaim or setoff is based on a Claim
which could be tried in an action for money damages, such Claim may be brought
in a

32

--------------------------------------------------------------------------------

 

separate action which shall not thereafter be consolidated with the foreclosure
action. The bringing of such separate action for money damages shall not be
deemed to afford any grounds for staying the foreclosure action;
               (d) waives and relinquishes any and all rights and remedies which
Grantor may have or be able to assert by reason of the provisions of any Laws
pertaining to the rights and remedies of sureties; and
               (e) any requirement that the Beneficiary or the Trustees present
evidence or otherwise proceed before any court, clerk or other judicial or
quasi-judicial body before exercising the power of sale contained in this Deed
of Trust.
     Section 7.12 Setoff.
     Beneficiary may set off against and apply any funds of Grantor on deposit
with, or under the control of, Beneficiary to the payment of the Obligations,
without Notice and without resort to any judicial proceeding.
ARTICLE VIII
THE TRUSTEES
     Section 8.1 Liability of the Trustees.
     The Trustees shall have no liability or responsibility for, and make no
warranties in connection with, the validity or enforceability of any of the
Financing Documents or the description, value or status of title to the
Property. The Trustees shall be protected in acting upon any notice, request,
consent, demand, statement, note or other paper or document believed by them to
be genuine and to have been signed by the party or parties purporting to sign
the same. The Trustees shall not be liable for any error of judgment, nor for
any act done or step taken or omitted, nor for any mistakes of law or fact, nor
for anything which the Trustees may do or refrain from doing in good faith, nor
generally shall either of the Trustees have any accountability hereunder except
for willful misconduct and/or gross negligence. The powers and duties of the
Trustees hereunder may be exercised through such attorneys, agents or servants
as they may appoint, and the Trustees shall have no liability or responsibility
for any act, failure to act, negligence or willful conduct of such attorney,
agent or servant, so long as they were selected with reasonable care. In
addition, the Trustees may consult with legal counsel selected by them and the
Trustees shall have no liability or responsibility by reason of any act or
failure to act in accordance with the opinions of such counsel. The Trustees may
act hereunder and may sell or otherwise dispose of the Property or any part
thereof as herein provided, although the Trustees have been, may now be or may
hereafter be, attorneys, officers, agents or employees of Beneficiary, in
respect of any matter of business whatsoever. The Trustees, however, shall have
no obligation to sell all or any part of the Property following an Event of
Default or to take any other action authorized to be taken by them hereunder
except upon the demand of Beneficiary.
     Section 8.2 Substitution of Trustees, etc.
     Beneficiary shall have, and is hereby granted with warranty of further
assurances, the irrevocable power to appoint a new or replacement or substitute
Trustee or Trustees. Such

33

--------------------------------------------------------------------------------

 

power may be exercised at any time without notice, without cause and without
specifying any reason therefor, by filing for record in the office where this
Deed of Trust is recorded a Deed of Appointment. The power of appointment of a
successor Trustee or Trustees may be exercised as often as and whenever
Beneficiary may choose, and the exercise of the power of appointment, no matter
how often, shall not be an exhaustion thereof. Upon the recordation of such Deed
or Deeds of Appointment, the Trustee or Trustees so appointed shall thereupon,
without any further act or deed of conveyance, become fully vested with
identically the same title and estate in and to the Property and with all the
rights, powers, trusts and duties of their, his or its predecessor in the trust
hereunder with like effect as if originally named as Trustees or as one of the
Trustees hereunder. Whenever in this Deed of Trust reference is made to the
Trustees, it shall be construed to mean the Trustee or Trustees for the time
being, whether original or successors or successor in trust. All title, estate,
rights, powers, trusts and duties hereunder given or appertaining to or
devolving upon the Trustees shall be in each of the Trustees so that any action
hereunder or purporting to be hereunder of any one of the original or any
successor Trustees shall for all purposes be considered to be, and as effective
as, the action of all the Trustees.
ARTICLE IX
MISCELLANEOUS
     Section 9.1 Application of Moneys.
     Whenever it is provided in this Deed of Trust for any moneys to be applied
to payment of the Obligations, and no express order of payment is set forth,
such moneys shall be applied to the Obligations in such order and manner as
Beneficiary may determine in its sole discretion.
     Section 9.2 Further Assurances.
     At any time, and from time to time, upon request by Beneficiary, Grantor
will, at Grantor’s expense, (a) correct any defect, error or omission which may
be discovered in the form or content of any of the Financing Documents, and
(b) make, execute, deliver and record, or cause to be made, executed, delivered
and recorded, any and all further instruments, certificates, and other documents
as may, in the opinion of Beneficiary, be necessary or desirable in order to
complete, perfect or continue and preserve the Lien of this Deed of Trust. Upon
any failure by Grantor to do so, Beneficiary may make, execute and record any
and all such instruments, certificates and documents for and in the name of
Grantor, all at the sole expense of Grantor, and Grantor hereby irrevocably
appoints Beneficiary the agent and attorney-in-fact of Grantor to do so, this
appointment being coupled with an interest. With respect to any financing
statement, Grantor agrees that a carbon, photographic or other reproduction of a
security agreement or a financing statement is sufficient as a financing
statement for purposes of Section 28.9-402 of the Uniform Commercial Code of the
State.
     Section 9.3 Notices.
     All Notices shall be deemed to have been received when delivered by hand,
when delivered to an overnight courier, or three (3) days following deposit of
such Notice in the mail in the manner provided for in the definition of Notices
in ARTICLE I (Definitions; Rules of Construction).

34

--------------------------------------------------------------------------------

 

     Section 9.4 Successors and Assigns.
     All of the grants, covenants, terms, provisions and conditions of this Deed
of Trust shall run with the Land and shall apply to and bind the successors and
assigns of Grantor (including any permitted subsequent owner of the Property),
and inure to the benefit of Beneficiary, its successors and assigns and to the
successors in trust of the Trustees.
     Section 9.5 No Warranty by Beneficiary or Trustees.
     By inspecting the Property or by accepting or approving anything required
to be observed, performed or fulfilled by Grantor or to be given to Beneficiary
or the Trustees pursuant to this Deed of Trust or any of the other Financing
Documents, Beneficiary and the Trustees shall not be deemed to have warranted or
represented the condition, sufficiency, legality, effectiveness or legal effect
of the same, and such acceptance or approval shall not constitute any warranty
or representation with respect thereto by Beneficiary or the Trustees.
     Section 9.6 Amendments.
     This Deed of Trust may not be modified or amended except by an agreement in
writing, signed by the party against whom enforcement of the change is sought.
     Section 9.7 Illegality.
     If fulfillment of any provision of this Deed of Trust or any transaction
related hereto shall at any time involve transcending the limit of validity
prescribed by Law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision herein
contained, other than the provisions requiring Grantor to pay the Obligations,
operates or would prospectively operate to invalidate this Deed of Trust in
whole or in part, then such clause or provision only shall be void, as though
not herein contained, and the remainder of this Deed of Trust shall remain
operative and in full force and effect; and if such clause or provision requires
Grantor to pay any of the Obligations, then at the sole option of Beneficiary,
all of the Obligations shall become due and payable.
     Section 9.8 Assignments by Beneficiary.
     Beneficiary may, without notice to, or consent of, Grantor, sell, assign or
transfer to or participate with any Person or Persons all or any part of the
Obligations, and each such Person or Persons shall have the right to enforce the
provisions of this Deed of Trust and any of the other Financing Documents as
fully as Beneficiary, provided that Beneficiary shall continue to have the
unimpaired right to enforce the provisions of this Deed of Trust and any of the
other Financing Documents as to so much of the Obligations that Beneficiary has
not sold, assigned or transferred. In connection with the foregoing, Beneficiary
shall have the right to disclose to any such actual or potential purchaser,
assignee, transferee or participant all financial records, information, reports,
financial statements and documents obtained in connection with this Agreement
and any of the other Financing Documents or otherwise. Notwithstanding the
foregoing provisions of this Section 9.8, Beneficiary shall give notice to
Grantor of any sale, assignment, transfer or participation to a Person who is an
affiliate or successor of Beneficiary either before or after the transaction has
occurred as Beneficiary shall determine; however, Beneficiary shall give notice
to Grantor in advance of any such transaction with a non-affiliate.

35

--------------------------------------------------------------------------------

 

     Section 9.9 Governing Law.
     This Deed of Trust shall be construed, governed and enforced in accordance
with the Laws in effect from time to time in the State.
     Section 9.10 Counterparts.
     This Deed of Trust may be executed in any number of duplicate originals,
each of which shall be an original but all of which together shall constitute
one and the same instrument.

36

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed
under seal as of the day and year first written above.

              WITNESS OR ATTEST:       GRANTOR:           SUNRISE CONNECTICUT
AVENUE ASSISTED LIVING L.L.C.  
 
      By:   Sunrise Senior Living Investments, Inc., its sole Member

                 
/s/
       By:   /s/   (SEAL)
 
         
 
Name:    
 
          Title:    

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:
     On August ___, 2007, before me,
                                                             , a Notary Public
in and for the Commonwealth shown above, appeared
                                        , personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose signature is
subscribed to the within instrument, and acknowledged to me that he executed the
same in his authorized capacity as                     of Sunrise Senior Living
Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living,
L.L.C., and that by his signature on the instrument the entity upon behalf of
which he acted, executed the instrument.
     WITNESS my hand and official seal.

                 
 
          /s/    
 
          Notary Public    

My Commission Expires:                                         

37

--------------------------------------------------------------------------------

 

EXHIBIT A
PROPERTY DESCRIPTION
Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue
Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio
37 among the Records of the Office of the Surveyor of the District of Columbia.

 

--------------------------------------------------------------------------------

 

Names and Addresses of All Parties
to Deed of Trust:

     
Grantor:
  Sunrise Connecticut Avenue Assisted Living L.L.C.
 
  c/o Sunrise Senior Living, Inc.
 
  7902 Westpark Drive
 
  McLean, Virginia 22102
 
   
Trustee(s):
  Alexandra Johns and Ellen-Elizabeth Lee
 
  7926 Jones Branch Drive
 
  McLean, VA 22102
 
   
Grantee:
  Chevy Chase Bank, F.S.B.
 
  7926 Jones Branch Drive
 
  McLean, VA 22102