Exhibit 10.20
 
MEZZANINE LOAN AGREEMENT
Dated as of July 31, 2007
Between
CSE CASABLANCA HOLDINGS II LLC,
as Borrower
and
COLUMN FINANCIAL, INC.,
as Lender
 

 

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TABLE OF CONTENTS

              Page  
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
    1  
Section 1.1. Definitions
    1  
Section 1.2. Principles of Construction
    25  
 
       
II. GENERAL TERMS
    25  
Section 2.1. Loan Commitment; Disbursement to Borrower
    25  
Section 2.2. Interest Rate
    25  
Section 2.3. Loan Payment
    31  
Section 2.4. Prepayments
    32  
Section 2.5. Release of Collateral
    33  
Section 2.6. Cash Management
    35  
Section 2.7. Expiring Or Terminating Operating Leases
    37  
Section 2.8. Substitution of Individual Properties
    38  
Section 2.9. Intentionally Omitted
    44  
Section 2.10 Extension of the Initial Maturity Date
    44  
 
       
III. SENIOR LOAN
    45  
Section 3.1. Notices Under Senior Loan Documents
    45  
Section 3.2. Senior Loan Defaults
    45  
Section 3.3. Senior Loan Estoppels
    46  
Section 3.4. No Amendments to Senior Loan Documents
    47  
Section 3.5. Acquisition of the Senior Loan
    47  
Section 3.6. Deed in Lieu of Foreclosure
    47  
Section 3.7. Refinancing or Prepayment of the Senior Loan
    47  
Section 3.8. Intercreditor Agreement
    48  
 
       
IV. REPRESENTATIONS AND WARRANTIES
    48  
Section 4.1. Borrower Representations
    48  
Section 4.2. Health Care Representations
    56  
Section 4.3. Survival of Representations
    60  
 
       
V. BORROWER COVENANTS
    61  
Section 5.1. Affirmative Covenants
    61  
Section 5.2. Negative Covenants
    74  
 
       
VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
    78  
Section 6.1. Insurance
    78  
Section 6.2. Casualty
    83  
Section 6.3. Condemnation
    83  
Section 6.4. Restoration
    84  

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              Page  
VII. RESERVE FUNDS
    84  
Section 7.1. Reserves
    84  
Section 7.2. Intentionally Omitted
    84  
Section 7.3. Intentionally Omitted
    84  
Section 7.4. Intentionally Omitted
    84  
Section 7.5. Intentionally Omitted
    84  
Section 7.6. Intentionally Omitted
    85  
Section 7.7. Reserve Funds, Generally
    85  
 
       
VIII. DEFAULTS
    86  
Section 8.1. Event of Default
    86  
Section 8.2. Remedies
    91  
 
       
IX. SPECIAL PROVISIONS
    92  
Section 9.1. Sale of Notes and Securitization
    92  
Section 9.2. Securitization Indemnification
    93  
Section 9.3. Achievements
    94  
Section 9.4. Exculpation
    94  
Section 9.5. Servicer
    97  
Section 9.6. Guarantor Net Worth Threshold
    97  
Section 9.7. Severance of Loan
    97  
 
       
X. MISCELLANEOUS
    97  
Section 10.1. Survival
    97  
Section 10.2. Lender’s Discretion
    97  
Section 10.3. Governing Law
    98  
Section 10.4. Modification, Waiver in Writing
    99  
Section 10.5. Delay Not a Waiver
    99  
Section 10.6. Notices
    100  
Section 10.7. Trial by Jury
    101  
Section 10.8. Headings
    101  
Section 10.9. Severability
    101  
Section 10.10. Preferences
    101  
Section 10.11. Waiver of Notice
    101  
Section 10.12. Remedies of Borrower
    102  
Section 10.13. Expenses; Indemnity
    102  
Section 10.14. Schedules Incorporated
    103  
Section 10.15. Offsets, Counterclaims and Defenses
    103  
Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries
    103  
Section 10.17. Publicity
    104  
Section 10.18. Waiver of Marshalling of Assets
    104  
Section 10.19. Waiver of Counterclaim
    104  
Section 10.20. Conflict; Construction of Documents; Reliance
    105  
Section 10.21. Brokers and Financial Advisors
    105  
Section 10.22. Prior Agreements
    105  

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MEZZANINE LOAN AGREEMENT
          THIS MEZZANINE LOAN AGREEMENT, dated as of July 31, 2007 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between COLUMN FINANCIAL, INC., having an address at 11 Madison
Avenue, New York, New York 10010 (“Lender”) and CSE CASABLANCA HOLDINGS II LLC
having its principal place of business at 4445 Willard Avenue, 12th Floor, Chevy
Chase, MD 20815 (“Borrower”).
WITNESSETH:
          WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined)
from Lender; and
          WHEREAS, Lender is willing to make the Loan to Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan Documents
(as hereinafter defined).
          NOW THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
          I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
          Section 1.1. Definitions. For all purposes of this Agreement, except
as otherwise expressly required or unless the context clearly indicates a
contrary intent:
          “Acceptable Counterparty” shall mean any counterparty to the Interest
Rate Cap Agreement (or any guarantor thereof) that has and shall maintain, until
the expiration of the applicable Interest Rate Cap Agreement, the Minimum
Counterparty Rating.
          “Additional Insolvency Opinion” shall have the meaning set forth in
Section 4.1.30(c) hereof.
          “Adjusted Release Amount” shall mean for each Individual Collateral,
one hundred twenty-five (125%) of the Release Amount for such Individual
Collateral.
          “Affiliate” shall mean, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such first Person or is a director or officer of such first Person
or of an Affiliate of such first Person. Affiliate shall not include (i) any
Operating Tenant solely because it is a tenant under an Operating Lease,
(ii) any director or shareholder of CapitalSource Inc. (iii) any Person that is
under the control of any director of CapitalSource Inc. or (iv) any Person that
is under the control of or controls any shareholder of CapitalSource Inc.

 

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          “ALTA” shall mean American Land Title Association, or any successor
thereto.
          “Applicable Interest Rate” shall mean the rate or rates at which the
outstanding principal amount of the Loan bears interest from time to time in
accordance with the provisions of Section 2.2.3 hereof.
          “Appraisal” shall mean, with respect to each Individual Property, an
appraisal of such Individual Property prepared by a qualified MAI appraiser with
no interest (direct or indirect) in the Senior Loan or in the Properties and
which is in compliance with the requirements of FIRREA and is otherwise in form
and substance satisfactory to Lender in its sole discretion.
          “Award” shall mean any compensation paid by any Governmental Authority
in connection with a Condemnation with respect to all or any part of any
Individual Property.
          “Bankruptcy Action” shall mean with respect to any Person (a) such
Person filing a voluntary petition under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary
petition against such Person under the Bankruptcy Code or any other Federal or
state bankruptcy or insolvency law, or soliciting or causing to be solicited
petitioning creditors for any involuntary petition against such Person; (c) such
Person filing an answer consenting to or otherwise acquiescing in or joining in
any involuntary petition filed against it, by any other Person under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or
soliciting or causing to be solicited petitioning creditors for any involuntary
petition from any Person; (d) such Person consenting to or acquiescing in or
joining in an application for the appointment of a custodian, receiver, trustee,
or examiner for such Person or any portion of the Collateral; or (e) such Person
making an assignment for the benefit of creditors, or admitting, in writing or
in any legal proceeding, its insolvency or inability to pay its debts as they
become due.
          “Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as
amended, 11 U.S.C., Section 101, et seq., and the regulations adopted and
promulgated pursuant thereto.
          “Borrower” shall have the meaning set forth in the introductory
paragraph hereto together with its successors and assigns.
          “Breakage Costs” shall have the meaning set forth in Section 2.2.3(h)
hereof.
          “Business Day” shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
          “Calculation Date” shall mean the last day of each calendar month
during the term of the Loan.
          “Capital Expenditures” shall mean, for any period, the amount expended
for items capitalized under GAAP (including expenditures for building
improvements or major repairs, leasing commissions and tenant improvements).

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          “Cash Management Account” shall have the meaning set forth in
Section 2.6.2 hereof.
          “Cash Management Agreement” shall mean that certain Cash Management
Agreement, dated as of the date hereof, by and between Borrower and Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
          “Cash Trap Period” shall have the meaning set forth in Section 9.3
hereof.
          “Casualty” shall have the meaning set forth in Section 6.2 hereof.
          “Closing Date” shall mean the date of this Agreement.
          “Code” shall mean the Internal Revenue Code of 1986, as amended, as it
may be further amended from time to time, and any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
          “Collateral” shall mean all collateral securing or intended to secure
the Debt, including the Pledged Collateral.
          “Collateral Assignment of Interest Rate Cap Agreement” shall mean that
certain Collateral Assignment of Interest Rate Cap Agreement, dated as of the
date hereof, executed by Borrower in connection with the Loan for the benefit of
the Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
          “Condemnation” shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
any Individual Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting such
Individual Property or any part thereof.
          “Condemnation Proceeds” shall have the meaning set forth in the Senior
Loan Agreement.
          “Counterparty” shall mean, with respect to the Interest Rate Cap
Agreement, Deutsche Bank and with respect to any Replacement Interest Rate Cap
Agreement, any substitute Acceptable Counterparty.
          “Covered Disclosure Information” shall have the meaning set forth in
Section 9.2 (b) hereof.
          “CS” shall mean Credit Suisse Securities (USA) LLC and its successors
in interest.
          “Debt” shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon (including any interest that would accrue on the outstanding
principal amount of the Loan through and including the end of any applicable
Interest Period, even if such Interest Period extends beyond

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any applicable Payment Date, prepayment date or the Maturity Date) and all other
sums due and payable to Lender in respect of the Loan under the Note, this
Agreement, the Pledge and the other Loan Documents.
          “Debt Service” shall mean, with respect to any particular period of
time, scheduled principal and/or interest payments due and payable under this
Agreement and the Note.
          “Debt Service Coverage Ratio” shall mean a ratio for the applicable
period in which:
          (a) the numerator is the Net Cash Flow (excluding interest on credit
accounts) for such period as set forth in the financial statements required
hereunder; and
          (b) the denominator is the sum of (i) the Debt Service due and payable
under the Note for such period and (ii) the debt service due and payable with
respect to the Senior Loan for such period.
          “Default” shall mean the occurrence of any event hereunder or under
any other Loan Document which, but for the giving of notice or passage of time,
or both, would be an Event of Default.
          “Default Rate” shall mean a rate per annum equal to the lesser of
(a) the Maximum Legal Rate and (b) three percent (3%) above the Applicable
Interest Rate.
          “Determination Date” shall mean, with respect to any Interest Period,
the date that is two (2) London Business Days prior to the fifteenth (15th) day
of the calendar month in which such Interest Period commences.
          “Disclosure Document” shall mean a prospectus, private placement
memorandum or offering memorandum in each case in preliminary or final form,
used to offer Securities in connection with a Securitization which Borrower has
been given a reasonable opportunity to review by Lender.
          “Effective Operating Lease” shall mean an Operating Lease approved by
Lender which is in force and effect and which has not been cancelled or
terminated.
          “Eligible Account” shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or
(b) a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.

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          “Eligible Institution” shall mean a depository institution or trust
company, the short term unsecured debt obligations or commercial paper of which
are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the
case of accounts in which funds are held for thirty (30) days or less (or, in
the case of accounts in which funds are held for more than thirty (30) days, the
long term unsecured debt obligations of which are rated at least “AA” by Fitch
and S&P and “Aa2” by Moody’s).
          “Embargoed Person” shall have the meaning set forth in Section 4.1.35
hereof.
          “Environmental Indemnity” shall mean that certain Environmental
Indemnity Agreement dated as of the date hereof, executed by Borrower in
connection with the Loan for the benefit of Lender as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
          “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended.
          “Event of Default” shall have the meaning set forth in Section 8.1(a)
hereof.
          “Excess Cash Flow” shall have the meaning set forth in Section 2.6.2
hereof.
          “Exchange Act” shall have the meaning set forth in Section 9.2(a)
hereof.
          “Extended Maturity Date” shall have the meaning set forth in
Section 2.10 hereof.
          “Extension Option” shall have the meaning set forth in Section 2.10
hereof.
          “Facility”, with respect to each Individual Property, shall have the
meaning set forth in the granting clause of the Mortgage for such Individual
Property.
          “Fiscal Year” shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the term of the Loan.
          “Fitch” shall mean Fitch, Inc.
          “GAAP” shall mean generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
          “Government Account” shall mean any account payable by any Government
Payor under the Medicare or Medicaid programs, any similar or implementing state
statutes and the rules and regulations promulgated pursuant to any thereof.
          “Government Payor” shall mean the Centers for Medicare and Medicaid
Services and any other federal or state governmental authority or any other
governmental Person responsible for making payment of any Government Account.

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          “Governmental Authority” shall mean any court, board, agency,
commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
          “Gross Income from Operations” shall mean, for any period, all income,
computed in accordance with GAAP, derived from the operation of the Properties
from whatever source during such period, including, but not limited to, all
patient or resident room revenues, revenues for services provided to patients or
residents, revenues from charges imposed on patients or persons acting by or on
behalf of patients or residents, or revenues received for care or services to
patients or residents, all food, beverage, and merchandise sales receipts,
Rents, utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent
concessions or credits, and other pass-through or reimbursements paid by tenants
under the Leases of any nature, but excluding (a) Rents from month-to-month
tenants or tenants that are included in any Bankruptcy Action, (b) sales, use
and occupancy or other taxes on receipts required to be accounted for by Owner
to any Governmental Authority or Healthcare Authority, (c) refunds and
uncollectible accounts, (d) sales of furniture, fixtures and equipment,
Insurance Proceeds and Condemnation Proceeds (other than business interruption
or other loss of income insurance), (e) and any disbursements to the Owner from
the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Debt
Service Reserve Fund, or any other escrow fund established by the Senior Loan
Documents (it being the intent that with respect to each Individual Property
subject to an Operating Lease, Gross Income from Operations includes all revenue
received by the applicable operator tenant but excludes any rent received by
Owner under the applicable Operating Lease).
          “Guarantor” shall mean CapitalSource Inc., a Delaware corporation.
          “Guaranty” shall mean that certain Guaranty Agreement, dated of even
date herewith, from Guarantor to Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
          “Health Care Authorities” shall mean any Governmental Authority or
quasi-Governmental Authority or any agency, intermediary, board, authority or
entity having jurisdiction over the ownership, operation, use or occupancy of
any Individual Property as a skilled nursing facility, long-term acute care
facility or assisted living facility.
          “Health Care Licenses” shall have the meaning set forth in
Section 4.2(a) hereof.
          “Health Care Requirements” shall mean, with respect to each Individual
Property, all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions
or agreements, in each case, pertaining to or concerned with the establishment,
construction, ownership, operation, use or occupancy of such Individual Property
or any part thereof as a skilled nursing facility, long-term acute care
facility, assisted living facility or other health care facility and all
material permits, licenses and authorizations and regulations relating thereto,
including all material rules, orders, regulations and decrees of and agreements
with Health Care Authorities as pertaining to such Individual Property.

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          “Improvements” shall have the meaning set forth in the granting clause
of the related Mortgage with respect to each Individual Property.
          “Indebtedness” of a Person, at a particular date, means the sum
(without duplication) at such date of (a) all indebtedness or liability of such
Person (including, without limitation, amounts for borrowed money and
indebtedness in the form of mezzanine debt and preferred equity); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance facilities; (f) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds, to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (g) obligations secured by any Liens, whether or not
the obligations have been assumed. For the purposes hereof, with respect to
Owner, the term “Indebtedness” does not include any obligations of Borrower
under the Operating Leases.
          “Indemnifying Person” shall mean each of Borrower, and Principal.
          “Independent Director” or “Independent Manager” shall mean a Person
who, except in connection with his or her service as an Independent Director or
Independent Manager of any Principal, the Borrower, Guarantor or any Affiliate
of any of them or any borrower of any of them or any of the affiliates of such
borrower under the applicable organizational documents of such entity, is not at
the time of initial appointment, or at any time while serving as a director or
manager, as applicable, and has not been at any time during the preceding five
(5) years: (a) a stockholder, director, officer, employee, partner, member,
attorney or counsel of the Principal, the Borrower or any Affiliate of any of
them; (b) a creditor, customer, supplier or other Person who derives any of its
purchases or revenues from its activities with the Principal, the Borrower or
any Affiliate of any of them, but shall exclude Persons who are creditors,
customers, suppliers or other Persons who derives any of their purchases or
revenues from their activities with the Guarantor; (c) a Person controlling or
under common control with any such stockholder, director, officer, partner,
member, customer, supplier or other Person; or (d) a member of the immediate
family of any such stockholder, director, officer, employee, partner, member,
creditor, customer, supplier or other Person. As used in this definition, the
term “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or activities of a Person,
whether through ownership of voting securities, by contract or otherwise.
          “Individual Collateral” shall mean, with respect to each Individual
Property, the Pledged Collateral with respect to the Pledged Company that
directly or indirectly owns such Individual Property.
          “Individual Property” shall mean each parcel of real property, the
Improvements thereon and all personal property owned by an Owner Entity and
encumbered by a Mortgage, together with all rights pertaining to such property
and Improvements, as more particularly described in the Granting Clauses of each
Mortgage and referred to therein as the “Property”.
          “Initial Maturity Date” shall mean April 9, 2009.

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          “Initial Term” shall mean the period from and after the Closing Date
through and including the Initial Maturity Date.
          “Insolvency Opinion” shall mean that certain non-consolidation opinion
letter dated as of the Closing Date delivered by Hogan & Hartson LLP in
connection with the Loan.
          “Insurance Account” shall mean any account payable by any Insurance
Payor in respect of any private program of health insurance.
          “Insurance Payor” shall mean any private insurance carrier or other
Person responsible for making payment of any Insurance Account.
          “Insurance Premiums” shall mean the premiums due for the insurance
required under Section 6.1 hereof.
          “Insurance Proceeds” shall have the meaning set forth in
Section 6.4(b) hereof.
          “Interest Period” shall mean, with respect to any Payment Date, the
period commencing on the fifteenth (15th) day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs and terminating
on (and including) the fourteenth (14th) day of the calendar month in which such
Payment Date occurs; provided; however, each Interest Period shall be a full
month and shall not be shortened by reason of any payment of the Loan prior to
the expiration of such Interest Period.
          “Knowledge” or “knowledge” whenever in any Loan Document, or in any
document or certificate executed on behalf of Borrower, Principal or Guarantor
pursuant to any Loan Document, reference is made to the knowledge of any of
Borrower, Principal or Guarantor (whether by use of the words “knowledge” or
“known”, or other words of similar meaning, and whether or not the same are
capitalized), such shall be deemed to refer solely to the knowledge, without
duty of independent inquiry or investigation (except that the persons described
in clause (i) shall make reasonable inquiry of one or more of the persons
described in clause (ii) below), of one or more of the following persons:
(i) Jim Pieczynski (for so long as such individual is employed in his current
position), or such individual who succeeds him as the senior officer in charge
of the Properties; Imram Javaid (for so long as such individual is employed in
his current position), or such individual who succeeds him as the officer in
charge of the day to day running of the Properties; the individuals who report
directly to Mr. Javaid or his successor; and Giles Coates (for so long as such
individual is employed in his current position), or such individual who succeeds
him as Assistant Treasurer in charge of the Properties; and (ii) the individuals
employed by CapitalSource Inc. with whom the persons mentioned in clause
(i) above would reasonably be expected to consult for information on the subject
matter (other than those acting in their capacity as attorneys), including
without limitation the individuals with responsibility for management, oversight
or supervision of one or more of the Properties and/or one or more of the
applicable Owner Entities.
          “LC Covered Property” shall mean an Individual Property with respect
to which Borrower has delivered a Letter of Credit pursuant to Section 2.7 or
Section 8.1(e) for as long as Lender is holding such Letter of Credit as
additional security for repayment of the Debt.

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          “Lease” shall mean any lease (including each Operating Lease and any
master lease, sub-master lease or operating lease), rental agreement, residency
agreement, occupancy agreement, residency agreement, sublease or subsublease,
letting, license, concession or other agreement of whatever form, including,
without limitation, service, consulting and administrative agreement (whether
written or oral and whether now or hereafter in effect) pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any
portion of any space in any Individual Property, and (a) every modification,
amendment, extension, renewal, replacement or other agreement relating to such
lease, sublease, subsublease, or other agreement entered into in connection with
such lease, sublease, subsublease, or other agreement and (b) every guarantee of
the performance and observance of the covenants, conditions and agreements in
such lease, sublease, subsublease or other agreement. For the avoidance of
doubt, the term “Lease” does not include any Loan Document or any Senior Loan
Document.
          “Lease Debt Service Coverage Ratio” shall mean a ratio for the
applicable period in which:
     (i) the numerator is the Rents (without duplication) payable to Owner under
the Operating Leases for such period; and
     (ii) the denominator is the sum of (i) Debt Service due and payable under
the Note for such period and (ii) the debt service due and payable with respect
to the Senior Loan for such period.
          “Legal Requirements” shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions of Governmental Authorities or Health Care
Authorities affecting all or part of the Collateral, any Individual Property or
any part thereof, or the construction, use, alteration or operation thereof, or
any part thereof, whether now or hereafter enacted and in force, and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting all or part of the Collateral, any Individual Property or any part
thereof, including, without limitation, any which could reasonably be expected
to (a) require repairs, modifications or alterations in or to any Individual
Property or any part thereof, or (b) in any way limit the use and enjoyment
thereof.
          “Lender” shall have the meaning set forth in the introductory
paragraph hereto, in its capacity as holder of the Note and the other Loan
Documents, together with its successors and assigns in such capacity.
          “Letter of Credit” shall mean an irrevocable, transferable, clean
sight draft letter of credit acceptable to Lender and the Rating Agencies
(having a term of not less than one year) in favor of Lender and entitling
Lender to draw thereon in New York, New York, issued by a domestic Eligible
Institution or the U.S. agency or branch of a foreign Eligible Institution. If
at any time the bank issuing any such Letter of Credit shall cease to be an
Eligible Institution, Lender shall have the right after ten (10) Business Days’
notice to Borrower, provided that Borrower has not delivered to Lender a
replacement Letter of Credit within said ten (10)

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Business Day period, to draw down the same in full and hold the proceeds of such
draw as Reserve Funds in accordance with the provisions hereof, provided that
Borrower shall be permitted to obtain and deliver to Lender a replacement Letter
of Credit, in which event Lender will return to Borrower the original letter of
Credit or the proceeds thereof, as applicable.
          “Liabilities” shall have the meaning set forth in Section 9.2(b)
hereof.
          “LIBOR” shall mean, with respect to each Interest Period, the rate
(expressed as a percentage per annum and rounded upward, if necessary, to the
next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a one-month period,
that appears on Telerate Page 3750 (or the successor thereto) as of 11:00 a.m.,
London time, on the related Determination Date. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London time, on such Determination Date,
LIBOR shall be the arithmetic mean of the offered rates (expressed as a
percentage per annum) for deposits in U.S. dollars for a one-month period that
appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such
Determination Date, if at least two such offered rates so appear. If fewer than
two such offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m.,
London time, on such Determination Date, Lender shall request the principal
London office of any four major reference banks in the London interbank market
selected by Lender to provide such bank’s offered quotation (expressed as a
percentage per annum) to prime banks in the London interbank market for deposits
in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such
Determination Date for the amounts of not less than the outstanding amount of
the Loan. If at least two such offered quotations are so provided, LIBOR shall
be the arithmetic mean of such quotations. If fewer than two such quotations are
so provided, Lender shall request any three major banks in New York City
selected by Lender to provide such bank’s rate (expressed as a percentage per
annum) for loans in U.S. dollars to leading European banks for a one-month
period as of approximately 11:00 a.m., New York City time on the applicable
Determination Date for amounts of not less than the outstanding amount of the
Loan. If at least two such rates are so provided, LIBOR shall be the arithmetic
mean of such rates. LIBOR shall be determined conclusively by Lender or its
agent, absent manifest error.
          “LIBOR Loan” shall mean the Loan at such time as interest thereon
accrues at a rate of interest based upon LIBOR.
          “Licenses” shall have the meaning set forth in Section 4.1.22 hereof.
          “Lien” shall mean, with respect to each Individual Property, any
mortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of,
on or affecting Borrower, the related Individual Property, any portion thereof
or any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic’s, materialmen’s and other similar liens and
encumbrances.
          “Liquidation Event” (i) any Condemnation of an Individual Property or
any material portion thereof, (ii) a Transfer of an Individual Property in
connection with realization thereon following an Event of Default under the
Senior Loan, including without limitation a

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foreclosure sale, or (iii) any refinancing or payoff of an Individual Property
or the Senior Loan permitted hereunder (including any refund of reserves on
deposit with Senior Lender (but not disbursements therefrom but excluding any
Transfer of an Individual Property in connection with a release of collateral
pursuant to Section 2.5, Section 2.7, Section 2.8 or Section 8.1(c) (in
connection with which Lender shall receive the amounts provided in such
Sections).
          “Loan” shall mean the loan made by Lender to Borrower pursuant to this
Agreement.
          “Loan Documents” shall mean, collectively, this Agreement, the Note,
the Pledge, the other Security Documents, the Environmental Indemnity, the
Guaranty, the Cash Management Agreement, the Collateral Assignment of Interest
Rate Cap Agreement and all other documents executed and/or delivered by
Borrower, Owner or their Affiliates to Lender in connection with the Loan.
Notwithstanding anything to the contrary herein or in any other Loan Documents,
the term “Loan Documents” does not include (A) any of the Senior Loan Documents
or (B) any intercreditor agreement, or any similar agreement, to which Borrower
is not a signatory, it being the intention of the parties that the rights and
obligations of Lender, on one hand, Borrower and each Affiliate of Borrower
which has any obligations under the Loan Documents, on the other hand, solely to
each other under each and every one of the Loan Documents shall be unaffected by
the existence or contents of any such agreement, as if such agreement did not
exist.
          “Lockbox Bank” shall mean Bank of America, N.A. or any successor or
permitted assigns thereof.
          “Lockout Release Date” shall mean May 9, 2008.
          “London Business Day” shall mean any day other than a Saturday, Sunday
or any other day on which commercial banks in London, England are not open for
business.
          “Major Lease” shall mean all Leases which individually or in the
aggregate with respect to the same Tenant and its Affiliates constitute more
than five percent (5%) of the total annual Rents for the Properties or more than
five percent (5%) of the square footage of the Improvements.
          “Maryland Guarantors” shall mean CSE Cambridge Realty LLC, CSE Elkton
Realty LLC and CSE Lexington Park Realty LLC, each a Delaware limited liability
company.
          “Material Adverse Effect” (whether capitalized or not) shall mean any
material adverse effect upon (a) the business, operations, economic performance,
prospects, assets or condition (financial or otherwise) of (i) Owner (taken as a
whole) or (ii) the Properties (taken as a whole); (b) the ability of Owner
(taken as a whole) to perform, in all material respects, its obligations under
the Senior Loan Documents; (c) the ability of Borrower to perform, in all
material respects, its obligations under the Loan Documents; (d) the
enforceability or validity of any Loan Document or the performance or priority
of any Lien created under any Loan Document; (e) the value of, or cash flow
from, the Properties or the operations thereof (taken as a whole or the value of
Collateral (taken as a whole)); or (f) the material rights, interest and
remedies of Lender under the Loan Documents. To the extent that any one act or
event when

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taken by itself does not have a Material Adverse Effect but such act or event
together with one or more other acts or events then in existence would
collectively have a Material Adverse Effect, then such acts or events shall be
deemed to have a Material Adverse Effect
          “Maturity Date” shall mean the Initial Maturity Date or, if Borrower
has timely and properly extended the Initial Maturity Date pursuant to
Section 2.10 hereunder, the applicable Extended Maturity Date, or such other
date on which the final payment of principal of the Note becomes due and payable
as therein or herein provided, whether at such stated maturity date, by
declaration of acceleration, or otherwise.
          “Maximum Legal Rate” shall mean the maximum nonusurious interest rate,
if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or the other Loan Documents, under the laws of such state or
states whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.
          “Medical Payors” shall mean the Center for Medicare and Medicaid
Services and any other federal or state governmental authority or any other
governmental Person responsible for making payment of any Medicaid Account.
          “Medicaid” shall mean Title XIX of the Social Security Act, which was
enacted in 1965 to provide a cooperative federal-state program for low income
and medically indigent persons, which is partially funded by the federal
government and administered by the states.
          “Medicaid Account” shall mean any account payable by any Medical Payor
under the Medicare or Medicaid programs, any similar or implementing state
statutes and the rules and regulations promulgated pursuant to any thereof.
          “Medicare” shall mean Title XVIII of the Social Security Act, which
was enacted in 1965 to provide a federally funded and administered health
program for the aged and certain disabled persons.
          “Minimum Counterparty Rating” shall mean, with respect to a
Counterparty, that (x) short-term unsecured debt obligations or commercial paper
or counterparty rating of such Counterparty are rated at least “A-1” by S&P and,
if rated by Fitch, at least “F-1” by Fitch or, in the event that the short-term
unsecured debt obligations or commercial paper of such Counterparty are not
rated, the long-term unsecured debt obligations or counterparty rating of such
Counterparty are rated at least “A+” by S&P and, if rated by Fitch, Fitch, and
(y) the short-term unsecured debt obligations or commercial paper or
counterparty rating of such Counterparty are rated at least “P-1” by Moody’s and
the long-term unsecured debt obligations or counterparty rating of such
Counterparty are rated at least “A1” by Moody’s or, in the event that the
short-term unsecured debt obligations or commercial paper of such Counterparty
are not rated, the long-term unsecured debt obligations of such Counterparty are
rated at least “Aa3” by Moody’s, which rating shall not include a “t” or
otherwise reflect a termination risk.
          “Monthly Principal Payment Amount” shall mean, on each Payment Date,
an amount of principal of the Loan set forth opposite such Payment Date on
Schedule IX attached hereto.

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          “Moody’s” shall mean Moody’s Investor Service, Inc.
          “Mortgage” shall have the meaning set forth in the Senior Loan
Agreement.
          “Net Cash Flow” shall mean, for any period, the amount obtained by
subtracting Operating Expenses and Capital Expenditures for such period from
Gross Income from Operations for such period.
          “Net Cash Flow Schedule” shall have the meaning set forth in
Section 5.1.11(b) hereof.
          “Net Liquidation Proceeds after Debt Service” shall mean with respect
to any Liquidation Event, all amounts paid to or received by or on behalf of
Owner in connection with such Liquidation Event, less (i) Lender’s reasonable
costs incurred in connection with the recovery thereof, (ii) the costs incurred
by Owner in connection with a restoration of the applicable Properties made in
accordance with the Senior Loan Documents or Operating Leases, (iii) amounts
required or permitted to be deducted therefrom and amounts paid pursuant to the
Senior Loan Documents to Senior Lender, (iv) in the case of a foreclosure sale,
disposition or Transfer of the applicable Property or Properties in connection
with realization thereon following an Event of Default under the Senior Loan,
such reasonable and customary costs and expenses of sale or other disposition
(including attorneys’ fees and brokerage commissions), (v) in the case of a
foreclosure sale, such costs and expenses incurred by Senior Lender under the
Senior Loan Documents as Senior Lender shall be entitled to receive
reimbursement for under the terms of the Senior Loan Documents and (vi) in the
case of a refinancing of the Senior Loan, the amount refinanced and reasonable
and customary costs and expenses (including reasonable attorneys’ fees) of such
refinancing.
          “Net Operating Income” shall mean, for any period, the amount obtained
by subtracting Operating Expenses for such period from Gross Income from
Operations for such period.
          “Net Proceeds” shall have the meaning set forth in Section 6.4(b)
hereof.
          “Net Proceeds Deficiency” shall have the meaning set forth in
Section 6.4(b)(vi) hereof.
          “New Lease” shall have the meaning set forth in Section 5.1.20 hereof.
          “Non-Material Lease” shall mean any Lease to a third-party tenant with
respect to an Individual Property, which Lease (i) is entered into in the
ordinary course of business, (ii) has a term not to exceed one (1) year,
(iii) is for a non-material portion of the Facility located on such Individual
Property (in any event not to exceed 500 square feet of such Facility) and (iv)
facilitates the provision of services by such third party at such Facility,
which services are related or reasonably incident to the primary business
conducted at such Facility. In addition, any Lease relating to billboard space,
telephone use, vending machines, cellular antenna or other telecommunications
equipment which (i) is entered into in the ordinary course of business (ii)
relates to only one Individual Property, (iii) has a term of not more than five
(5) years and (iv)

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provides for rents or fees that do not exceed three (3%) percent of the Rents
for such Individual Property shall also be a Non-Material Lease.
          “Note” shall mean that certain Promissory Note of even date herewith
in the principal amount of Thirty-Six Million One Hundred Forty Thousand Nine
Hundred Eighty-One and No/100 Dollars ($36,140,981.00), made by Borrower in
favor of Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
          “O&M Programs” shall mean collectively, with respect to the
Properties, those certain Operations and Maintenance Programs to be delivered as
provided in Section 5.1.25 hereof.
          “Occupancy Report” shall mean a schedule which sets forth the
occupancy status of each Individual Property, the average daily rate and other
charges payable with respect thereto, the class of payment or reimbursement
(i.e., private, third-party payor, Medicaid, and Veterans Administration), the
average monthly census of the applicable Facility, occupancy rates and any
arrearages in payments, in each case, in such form and to such extent as is
required to be provided, from time to time by the Operator Tenant of such
Individual Property under its Operating Lease.
          “Officer’s Certificate” shall mean a certificate of Borrower delivered
to Lender by Borrower which is signed by an authorized senior officer of the
general partner or managing member of Borrower, as applicable.
          “Operating Expenses” shall mean, for any period, the total of all
expenditures, computed in accordance with GAAP, of whatever kind during such
period relating to the operation, maintenance and management of the Properties
that are incurred with respect to the Properties on a regular monthly or other
periodic basis to the extent actually incurred with respect to the Properties,
including without limitation, utilities, ordinary repairs and maintenance,
license fees, property taxes and assessments, advertising expenses, legal fees,
consulting fees, management fees, payroll and related taxes, computer processing
charges, tenant improvements and leasing commissions, operational equipment or
other lease payments as approved by Lender, and other similar costs, but
excluding depreciation, Debt Service, and debt service on the Senior Loan,
Capital Expenditures, and contributions to the Replacement Reserve Fund, the Tax
and Insurance Escrow Fund, the Debt Service Reserve Fund and any other reserves
required under the Senior Loan Documents, it being understood that with respect
to any Individual Property subject to an Effective Operating Lease, Operating
Expense shall not include rent payable by the Operator Tenant to Owner under
such Operating Lease.
          “Operating Leases” shall mean the operating leases affecting one of
the Individual Properties and which are described on Schedule II annexed hereto,
and all Replacement Operating Leases. Unless otherwise consented to by Lender,
each Replacement Operating Lease shall provide that the Operator Tenant shall be
solely responsible for obtaining and maintaining all Health Care Licenses and
for complying with all Health Care Requirements.

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          “Operator Tenant” shall mean, with respect to each Individual
Property, the operator tenant of such Individual Property pursuant to the
Operating Lease relating to such Individual Property.
          “Other Charges” shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining any Individual Property, now or hereafter levied or
assessed or imposed against such Individual Property or any part thereof but
only if non-payment thereof will result in a lien against a Property.
          “Owner” shall mean, individually and collectively, each of the
entities which comprises the borrowers under the Senior Loan (including all
owners of the Properties), together with their successors and assigns. Each
reference to Owner shall refer to such entities collectively and individually to
each entity constituting Owner.
          “Owner Entity” shall mean each entity which comprises Owner.
          “Payor” shall mean, individually and collectively as the context
requires, (a) Government Payor and (b) Private Payor.
          “Payment Date” shall mean the ninth (9th) day of each calendar month
during the term of the Loan or, if such day is not a Business Day, the
immediately preceding Business Day.
          “Permitted Encumbrances” shall mean, with respect to an Individual
Property, collectively (a) the Liens and security interests created by or
expressly permitted under the Loan Documents, (b) all Liens, encumbrances and
other matters disclosed in the Title Insurance Policies relating to such
Individual Property or any part thereof, (c) Liens, if any, for Taxes or Other
Charges not yet due or delinquent, (d) involuntary liens or encumbrances which
are subordinate to the Lien of the applicable Mortgage and related Loan
Documents and do not materially and adversely affect the value or operation of
the Property in question (e) liens and encumbrances of Persons claiming under or
through an Operator Tenant provided (i) such liens or encumbrances (A) are not
prohibited under an Operating Lease, (B) are subordinate to the Lien of the
applicable Mortgage and related Loan Documents and (C) do not materially or
adversely affect the value or operation of the Individual Property in question
and (ii) the holder of such lien or encumbrance has not commenced an action or
proceeding against or relating to the Individual Property in question, (f) such
other title and survey exceptions as Lender has approved or may approve in
writing in Lender’s sole discretion, and (g) the Liens created by the Senior
Loan Documents.
          “Permitted Investments” shall have the meaning set forth in the Cash
Management Agreement.
          “Person” shall mean any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association or
Governmental Authority and any fiduciary acting in such capacity on behalf of
any of the foregoing.
          “Personal Property” shall have the meaning set forth in the granting
clauses of the Mortgage with respect to each Individual Property.

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          “Physical Condition Report” shall mean, with respect to each
Individual Property, a report prepared by a company reasonably satisfactory to
Lender regarding the physical conditions of such Individual Property, in form
and substance reasonably satisfactory to Lender and consistent with Lender’s
then underwriting criteria.
          “Pledge” shall mean that certain pledge and security agreement dated
as of the date hereof made by Borrower in favor of Lender which creates a
security interest in 100% of the ownership interests in the Pledged Companies
(the “Pledged Collateral”).
          “Pledged Collateral” shall have meaning set forth in the definition of
“Pledge”.
          “Pledged Companies” shall have the meaning set forth in the Pledge.
          “Policies” shall have the meaning specified in Section 6.1(b) hereof.
          “Prescribed Laws” shall mean, collectively, (a) the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act),
(b) Executive Order No. 13224 on Terrorist Financing, effective September 24,
2001, and relating to Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the
International Emergency Economic Power Act, 50 U.S.C. §1701 et. seq. and (d) any
other applicable Legal Requirements relating to money laundering or terrorism.
          “Prepayment Premium” shall mean, if the prepayment occurs on or after
the Lockout Release Date and on or before the date that is six (6) months prior
to the Initial Maturity Date, an amount equal to one percent (1%) of the
principal amount of the Loan being prepaid.
          “Prime Rate” shall mean the annual rate of interest publicly announced
by Citibank, N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a base rate,
Prime Rate shall mean the rate of interest published in The Wall Street Journal
from time to time as the “Prime Rate.” If more than one “Prime Rate” is
published in The Wall Street Journal for a day, the average of such “Prime
Rates” shall be used, and such average shall be rounded up to the nearest
one-eighth of one percent (0.125%). If The Wall Street Journal ceases to publish
the “Prime Rate,” the Lender shall select an equivalent publication that
publishes such “Prime Rate,” and if such “Prime Rates” are no longer generally
published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall select a comparable interest rate
index.
          “Prime Rate Loan” shall mean the Loan at such time as interest thereon
accrues at a rate of interest based upon the Prime Rate.
          “Prime Rate Spread” shall mean the difference (expressed as the number
of basis points) between (a) LIBOR plus the Spread on the date LIBOR was last
applicable to the Loan and (b) the Prime Rate on the date that LIBOR was last
applicable to the Loan; provided, however, in no event shall such difference be
a negative number.

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          “Principal” shall mean the Special Purpose Entity which is the
(a) managing member of the Borrower in the event that such Borrower is a limited
liability company with more than one member, or (b) general partner of such
Borrower in the event that the Borrower is a limited partnership.
          “Private Payor” shall mean, individually and collectively as the
context requires, (a) Insurance Payor and (b) Resident Payor.
          “Properties” shall mean, collectively, each and every Individual
Property which is subject to the terms of the Senior Loan Agreement.
          “Provided Information” shall mean any and all written financial and
other written information prepared at any time by any Indemnifying Person or its
agents and provided to Lender with respect to the Properties, Owner, Borrower,
Principal or Guarantor.
          “Qualified Operator” shall mean with respect to each Individual
Property, a reputable and experienced operator possessing experience in
operating and managing health care properties similar in size, scope, use and
value as such Individual Property, which operator, in all cases, is licensed to
operate such Individual Property and shall otherwise be reasonably approved by
Lender, provided that, if a Securitization shall have occurred, in addition to
obtaining Lender’s approval, Borrower shall have obtained and delivered to
Lender prior written confirmation from the applicable Rating Agencies that
operation of such Individual Property by such Person will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Securities or any
class thereof.
          “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any
other nationally recognized statistical rating agency which has been approved by
Lender; provided that at any time after a Securitization, Rating Agencies shall
mean those of the foregoing rating agencies that from time to time rate the
Securities.
          “Release Amount” shall mean for an Individual Collateral the amount
set forth on Schedule I hereto.
          “REIT” shall mean a real estate investment trust within the meaning of
Section 856 through 859 of the Code.
          “REMIC Trust” shall mean a “real estate mortgage investment conduit”
within the meaning of Section 860D of the Code that holds the Note.
          “Rents” shall mean, with respect to each Individual Property, all
amounts payable to Owner on account of or by virtue of any Operating Lease of
any other Lease, accounts (including any rights of Owner in accounts arising
from the operations conducted at or by the Facility), deposits (whether for
security or otherwise but excluding any resident trust accounts), rents, issues,
profits, revenues, royalties, rights, benefits, and income of every nature of
and from the Individual Property and the operations conducted or to be conducted
thereon, including, without limitation, minimum rents, additional rents,
termination payments, forfeited security deposits, any rights to payment earned
under Leases for the operation of ongoing retail businesses such as newsstands,
concession stands, barbershops, beauty shops, gift shops,

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cafeterias, dining rooms, restaurants, lounges, vending machines, physicians’
offices, pharmacies, laboratories, gymnasiums, swimming pools, tennis courts,
golf courses, recreational centers and specialty shops, liquidated damages
following default and all proceeds payable under any policy of insurance
covering loss of rents resulting from untenantability due to destruction or
damage to the Individual Property, together with the immediate and continuing
right to collect and receive the same, whether now due or hereafter becoming
due, and together with all rights and claims of any kind that Owner may have
against any tenant, lessee or licensee under the Leases or against any other
occupant of the Individual Property.
          “Replacement Interest Rate Cap Agreement” means an interest rate cap
agreement from an Acceptable Counterparty with terms identical to the Interest
Rate Cap Agreement except that the same shall be effective in connection with
replacement of the Interest Rate Cap Agreement (a) following a downgrade,
withdrawal or qualification of the long-term unsecured debt rating of the
Counterparty or (b) in connection with each Extension Option pursuant to
Section 2.10 hereof; provided that to the extent any such interest rate cap
agreement does not meet the foregoing requirements, a “Replacement Interest Rate
Cap Agreement” shall be such interest rate cap agreement approved in writing by
each of the Rating Agencies with respect thereto.
          “Replacement Operating Lease” shall mean for each Individual Property
with respect to which an Operating Lease has expired or terminated, a
replacement operating lease for such Individual Property with a Qualified
Operator whose terms and provisions are approved by Lender, in accordance with
Section 5.1.20.
          “Required Repairs” shall have the meaning set forth in the Senior Loan
Agreement.
          “Reserve Funds” shall mean any reserve fund established pursuant to
the Loan Documents. “Reserve Funds” shall not include any reserve funds
established and held pursuant to the Senior Loan Documents.
          “Resident Account” shall mean any account payable by any Resident
Payor in respect of any Lease.
          “Resident Payor” shall mean any resident or other Person occupying any
Facility pursuant to a Lease who is responsible for making payment of any
Resident Account.
          “Restoration” shall mean the repair and restoration of an Individual
Property after a Casualty or Condemnation as nearly as possible to the condition
the Individual Property was in immediately prior to such Casualty or
Condemnation, with such alterations as may be reasonably approved by Lender.
Restoration shall include the planning and permitting associated with such work.
          “Restoration Threshold” shall mean one million and No/100 Dollars
($1,000,000.00).
          “Restricted Party” shall mean, collectively Borrower and Principal.

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          “S&P” shall mean Standard & Poor’s Ratings Group, a division of the
McGraw-Hill Companies.
          “Sale or Pledge” shall mean a voluntary or involuntary sale,
conveyance, assignment, transfer, encumbrance or pledge of a legal or beneficial
interest.
          “Securities” shall have the meaning set forth in Section 9.1 hereof.
          “Securities Act” shall have the meaning set forth in Section 9.2(a)
hereof.
          “Securitization” shall have the meaning set forth in Section 9.1
hereof.
          “Security Agreement” shall have the meaning set forth in
Section 2.5.1(a)(vi) hereof.
          “Security Documents” shall mean collectively, (i) the Pledge, (ii) a
notice of pledge to Owner, and (iii) all Uniform Commercial Code financing
statements required by this Agreement to be filed with respect to the security
interests in personal property created pursuant to the Security Documents.
          “Senior Lender” shall mean Column Financial, Inc. or any successor
holder of the Senior Loan.
          “Senior Loan” shall mean the mortgage loan made by Senior Lender to
Owner in accordance with the Senior Loan Agreement in the outstanding principal
balance of $250,000,000.00 on the date hereof.
          “Senior Loan Agreement” shall mean the Amended and Restated Loan
Agreement dated as of March 29, 2007 between Senior Lender and Owner, as amended
by a certain Modification Agreement dated as of the date hereof and as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time in accordance with the provisions of this Agreement. Notwithstanding
anything to the contrary herein, the term “Senior Loan Agreement” does not
include any intercreditor agreement or similar agreement to which Owner is not a
signatory.
          “Senior Loan Cash Management Agreement” shall mean the Amended and
Restated Cash Management Agreement dated as of March 29, 2007 by and between
Owner and Senior Lender, as modified by a certain Modification Agreement dated
as of the date hereof.
          “Senior Loan Documents” shall mean the “Loan Documents” as defined in
the Senior Loan Agreement.
          “Senior Lockbox Account” shall have the meaning set forth in
Section 2.6.1(a) hereof.
          “Senior Note” shall mean the Second Amended and Restated Promissory
Note dated as of July 31, 2007 in the original principal amount of
$250,000,000.00 made by Owner and payable to Senior Lender.

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          “Servicer” shall have the meaning set forth in Section 9.5 hereof.
          “Servicing Agreement” shall have the meaning set forth in Section 9.5
hereof.
          “Severed Loan Documents” shall have the meaning set forth in
Section 8.2(c) hereof.
          “Social Security Act” shall mean 42 U.S.C. 401 et seq., as enacted in
1935, and amended, restated or otherwise supplemented thereafter from time to
time and all rules and regulations promulgated thereunder.
          “Special Purpose Entity” shall mean a corporation, limited partnership
or limited liability company which at all times on and after the date hereof:
     (a) is organized solely for the purpose of (i) acquiring, developing,
owning, holding, selling, leasing, financing, transferring and exchanging the
Properties or the Collateral, entering into this Agreement with the Lender,
performing its obligations under the Loan Documents, refinancing the Properties
in connection with a permitted repayment of the Loan, and transacting lawful
business that is incident, necessary and appropriate to accomplish the
foregoing; or (ii) acting as a general partner of one or more of the limited
partnerships that owns an Individual Property or as a member of a limited
liability company that owns one or more of the Properties;
     (b) is not engaged, directly or indirectly, and will not engage in any
business unrelated to (i) the acquisition, development, ownership or financing
of the Properties or the Collateral, (ii) acting as general partner of one or
more limited partnerships that owns an Individual Property or (iii) acting as a
member of a limited liability company that owns an Individual Property, as
applicable;
     (c) does not have and will not have any assets other than those related to
the Properties or its partnership interest in any such limited partnership or
member interest in any such limited liability company that owns an Individual
Property or acts as the general partner or managing member thereof, as
applicable;
     (d) has not engaged, sought or consented to and will not, to the extent
permitted by applicable law, engage in, seek or consent to any dissolution,
winding up, liquidation, consolidation, merger, sale of all or substantially all
of its assets, transfer of partnership or membership interests (if such entity
is a general partner in a limited partnership or a member in a limited liability
company) or amendment of its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable) with respect to the matters set forth in this
definition;
     (e) if such entity is a limited partnership, has, as its only general
partners, Special Purpose Entities that are corporations, limited partnerships
or limited liability companies;
     (f) if such entity is a corporation, has at least two (2) Independent
Directors, and has not caused or allowed and will not cause or allow the board
of directors of such entity

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to take any action requiring the unanimous affirmative vote of one hundred
percent (100%) of the members of its board of directors unless two Independent
Directors shall have participated in such vote;
     (g) if such entity is a limited liability company with more than one
member, has at least one member that is a Special Purpose Entity that is a
corporation that has at least two Independent Directors and that owns at least
one percent (1.0%) of the equity of the limited liability company;
     (h) if such entity is a limited liability company with only one member, is
a limited liability company organized in the State of Delaware that has (i) as
its only member a non-managing member, (ii) at least two Independent Directors
or Independent Managers and has not caused or allowed and will not cause or
allow the board of managers of such entity to take any action requiring the
unanimous affirmative vote of one hundred percent (100%) of the managers unless
two Independent Directors or Independent Managers, as applicable, shall have
participated in such vote and (iii) at least one springing member that will
become the non-managing member of such entity upon the dissolution of the
existing non-managing member;
     (i) if such entity is (i) a limited liability company, has articles of
organization, a certificate of formation and/or an operating agreement, as
applicable, (ii) a limited partnership, has a limited partnership agreement, or
(iii) a corporation, has a certificate of incorporation or articles that, in any
such case, provide that such entity will not, to the extent permitted by
applicable law: (A) dissolve, merge, liquidate, consolidate; (B) sell all or
substantially all of its assets or the assets of the Borrower (as applicable);
(C) engage in any other business activity, or amend its organizational documents
with respect to the matters set forth in this definition, in any case without
the consent of the Lender; or (D) without the affirmative vote of two
Independent Directors and of all other directors of the corporation (that is
such entity or the general partner or managing or co-managing member of such
entity), file a bankruptcy or insolvency petition or otherwise institute
insolvency proceedings with respect to itself or to any other entity in which it
has a direct or indirect legal or beneficial ownership interest;
     (j) is and will remain solvent and pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its
assets as the same shall become due, and is maintaining and will maintain
adequate capital for the normal obligations reasonably foreseeable in a business
of its size and character and in light of its contemplated business operations;
     (k) subject to such entity being treated as a “disregarded entity” or
“qualified REIT subsidiary” for tax purposes has not failed and will not fail to
correct any known misunderstanding regarding the separate identity of such
entity;
     (l) subject to such entity being treated as a “disregarded entity” or
“qualified REIT subsidiary” for tax purposes has maintained and will maintain
its accounts, books and records separate from any other Person and will file its
own tax returns, except to the extent that it is part of a consolidated group
filing a consolidated return or returns;

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     (m) subject to such entity being treated as a “disregarded entity” or
“qualified REIT subsidiary” for tax purposes has maintained and will maintain
its own records, books, resolutions and agreements;
     (n) other than as provided in or contemplated by the Cash Management
Agreement and the Loan Documents, (i) has not commingled and will not commingle
its funds or assets with those of any other Person and (ii) has not participated
and will not participate in any cash management system with any other Person;
     (o) other than as provided in or contemplated by the Cash Management
Agreement and the Loan Documents, has held and will hold its assets in its own
name;
     (p) has conducted and will conduct its business in its name or in a name
franchised or licensed to it by an entity other than an Affiliate of Borrower,
except for services rendered under a business management services agreement with
an Affiliate that complies with the terms contained in Subsection (dd) below, so
long as the manager, or equivalent thereof, under such business management
services agreement holds itself out as an agent of the Borrower;
     (q) has maintained and will maintain its financial statements, accounting
records and other entity documents separate from any other Person and has not
permitted and will not permit its assets to be listed as assets on the financial
statement of any other entity except as required by GAAP, or except to the
extent that such entity is treated as a disregarded entity for tax purposes or
is otherwise required to file consolidated tax returns by law, and, if part of a
consolidated group, is shown as a separate member of such group;
     (r) has paid and will pay its own liabilities and expenses, including the
salaries of its own employees, if any, out of its own funds and assets, and has
maintained and will maintain a sufficient number of employees, if any, in light
of its contemplated business operations;
     (s) has observed and will observe all partnership, corporate or limited
liability company formalities, as applicable;
     (t) has and will have no Indebtedness other than (i) Obligations under the
Loan, (ii) unsecured trade payables incurred in the ordinary course of business
relating to the ownership and operation of the Properties, in an amount not to
exceed three and one-half per cent (3.5%) of the principal amount of
indebtedness under the Loan Agreement, which unsecured trade payables are not
more than sixty (60) days past the date incurred, are not evidenced by a
promissory note, and (iii) such other liabilities that are contemplated or
permitted pursuant to the Loan Documents;
     (u) has not and will not assume or guarantee or become obligated for the
debts of any other Person or hold out its credit as being available to satisfy
the obligations of any other Person except in each case as contemplated or
permitted pursuant to the Loan Documents;

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     (v) has not and will not acquire obligations or securities of its partners,
members or shareholders or any other Affiliate;
     (w) has allocated and will allocate fairly and reasonably any overhead
expenses that are shared with any Affiliate, including, but not limited to,
paying for shared office space and services performed by any employee of an
Affiliate;
     (x) maintains and uses and will maintain and use separate stationery,
invoices and, except as provided in or contemplated by the Cash Management
Agreement or other Loan Documents, checks bearing its name. The stationery,
invoices, and checks utilized by the Special Purpose Entity or utilized to
collect its funds or pay its expenses shall bear its own name and shall not bear
the name of any other entity unless such entity is clearly designated as being
the Special Purpose Entity’s agent, except as provided in or contemplated by the
Cash Management Agreement or other Loan Documents;
     (y) has not pledged and will not pledge its assets for the benefit of any
other Person, except as permitted by the Loan Documents;
     (z) has held itself out and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of
Borrower and not as a division or part of any other Person, except for services
rendered under a business management services agreement with an Affiliate that
complies with the terms contained in Subsection (dd) below, so long as the
manager, or equivalent thereof, under such business management services
agreement holds itself out as an agent of the Borrower;
     (aa) has maintained and will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;
     (bb) has not made and will not make loans to any Person or hold evidence of
indebtedness issued by any other Person or entity (other than cash and
investment-grade securities issued by an entity that is not an Affiliate of or
subject to common ownership with such entity);
     (cc) has not identified and will not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and
has not identified itself and shall not identify itself as a division of any
other Person;
     (dd) has not entered into or been a party to, and will not enter into or be
a party to, any transaction with its partners, members, shareholders or
Affiliates other than on terms which are intrinsically fair, commercially
reasonable and are no less favorable to it than would be obtained in a
comparable arm’s-length transaction with an unrelated third party;
     (ee) has not and will not have any obligation to, and will not, indemnify
its partners, officers, directors or members, as the case may be, unless such an
obligation is fully subordinated to the Debt and will not constitute a claim
against it in the event that

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cash flow in excess of the amount required to pay the Debt is insufficient to
pay such obligation;
     (ff) if such entity is a corporation, it shall consider the interests of
its creditors in connection with all corporate actions;
     (gg) does not and will not have any of its obligations guaranteed by any
Affiliate (other than as contemplated or required by or permitted pursuant to
the Loan Documents); and
     (hh) has complied and will comply in all material respects with all of the
terms and provisions contained in its organizational documents. The statements
of fact contained in its organizational documents are and will remain true and
correct in all material respects.
          “Spread” shall mean four percent (4.0%).
          “State” shall mean, with respect to an Individual Property, the State
or Commonwealth in which such Individual Property or any part thereof is
located.
          “Strike Price” shall mean six and three quarters percent (6.75%).
          “Successor Owner” shall have the meaning set forth in Section 2.5.3
hereof.
          “Survey” shall mean an ALTA survey of the Individual Property in
question prepared pursuant to the requirements contained in Section 4.1.27
hereof.
          “Taxes” shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents and other governmental charges, now or
hereafter levied or assessed or imposed against any Individual Property or part
thereof.
          “Threshold Amount” shall have the meaning set forth in Section 5.1.21
hereof.
          “Title Insurance Policy” or when referred to collectively “Title
Insurance Policies” shall mean, with respect to each Individual Property, an
ALTA mortgagee title insurance policy in a form acceptable to Lender (or, if an
Individual Property is in a State which does not permit the issuance of such
ALTA policy, such form as shall be permitted in such State and reasonably
acceptable to Lender) and any Modification Title Endorsements required by Lender
issued with respect to such Individual Property and insuring the lien of the
Mortgage encumbering such Individual Property.
          “Transfer” shall have the meaning set forth in Section 5.2.10(b)
hereof.
          “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial
Code as in effect in the State of formation of Borrower.
          “UCC Policy” shall mean the Eagle 9 UCC title policy issued to Lender
and insuring the lien of the Pledge on the Collateral.

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          “U.S. Obligations” shall mean non-redeemable securities evidencing an
obligation to timely pay principal and/or interest in a full and timely manner
that are direct obligations of the United States of America for the payment of
which its full faith and credit is pledged.
          “Veterans Administration” shall mean the United States Department of
Veterans Affairs
          Section 1.2. Principles of Construction. All references to sections
and schedules are to sections and schedules in or to this Agreement unless
otherwise specified. All uses of the word “including” shall mean “including,
without limitation” unless the context shall indicate otherwise. Unless
otherwise specified, the words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
specified, all meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so defined. All
references to the Senior Loan Agreement, the Senior Note or any other Senior
Loan Document shall mean the Senior Loan Agreement, the Senior Note or such
other Senior Loan Document as in effect on the date hereof, as each of the same
may hereafter be amended, restated, replaced, supplemented or otherwise
modified, but only to the extent that, if Lender’s consent is required by the
terms of this Agreement, Lender has consented to the foregoing pursuant to
Section 3.4 of this Agreement. With respect to terms defined by cross-reference
to the Senior Loan Documents, such defined terms shall have the definitions set
forth in the Senior Loan Documents as of the date hereof, and no modifications
to the Senior Loan Documents shall have the effect of changing such definitions
for the purposes of this Agreement unless Lender expressly agrees that such
definitions as used in this Agreement have been revised.
          II. GENERAL TERMS
          Section 2.1. Loan Commitment; Disbursement to Borrower.
               2.1.1. Agreement to Lend and Borrow. Subject to and upon the
terms and conditions set forth herein, Lender hereby agrees to make and Borrower
hereby agrees to accept the Loan on the Closing Date.
               2.1.2. Single Disbursement to Borrower. Borrower may request and
receive only one borrowing hereunder in respect of the Loan and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
               2.1.3. The Note, Pledge and Loan Documents. The Loan shall be
evidenced by the Note and secured by the Pledge and the other Loan Documents.
               2.1.4. Use of Proceeds. Borrower shall use the proceeds of the
Loan solely to make a capital contribution to Owner.
          Section 2.2. Interest Rate.

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               2.2.1. Interest Rate Generally. Interest on the outstanding
principal balance of the Loan shall accrue from the Closing Date to but
excluding the Maturity Date at the Applicable Interest Rate (including all
interest that would accrue on the outstanding principal balance of the Loan
through the end of the Interest Period during which the Maturity Date occurs
(even if such period extends beyond the Maturity Date). Interest on the
outstanding principal balance of the Loan existing on the commencement of an
Interest Period shall accrue for the entire Interest Period and shall be owed by
Borrower for the entire Interest Period regardless of whether any principal
portion of the Loan is repaid prior to the expiration of such Interest Period.
               2.2.2. Interest Calculation. Interest on the outstanding
principal balance of the Loan shall be calculated by multiplying (a) the actual
number of days elapsed in the period for which the calculation is being made by
(b) a daily rate based on a three hundred sixty (360) day year by (c) the
outstanding principal balance.
               2.2.3. Determination of Interest Rate.
          (a) The Applicable Interest Rate with respect to the Loan shall be:
(i) LIBOR plus the Spread with respect to the applicable Interest Period for a
LIBOR Loan or (ii) the Prime Rate plus the Prime Rate Spread for a Prime Rate
Loan if the Loan is converted to a Prime Rate Loan pursuant to the provisions of
Section 2.2.3(c) or (f).
          (b) Subject to the terms and conditions of this Section 2.2.3, the
Loan shall be a LIBOR Loan and Borrower shall pay interest on the outstanding
principal amount of the Loan at LIBOR plus the Spread for the applicable
Interest Period. Any change in the rate of interest hereunder due to a change in
the Applicable Interest Rate shall become effective as of the opening of
business on the first day on which such change in the Applicable Interest Rate
shall become effective. Each determination by Lender of the Applicable Interest
Rate shall be conclusive and binding for all purposes, absent manifest error.
          (c) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR, then
Lender shall forthwith give notice by telephone of such determination, confirmed
in writing, to Borrower at least one (1) day prior to the last day of the
related Interest Period. If such notice is given, the related outstanding LIBOR
Loan shall be converted, on the last day of the then current Interest Period, to
a Prime Rate Loan.
          (d) If, pursuant to the terms of this Agreement, any portion of the
Loan has been converted to a Prime Rate Loan and Lender shall determine (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that the event(s) or circumstance(s) which resulted in such conversion
shall no longer be applicable, Lender shall give notice by telephone of such
determination, confirmed in writing, to Borrower at least one (1) day prior to
the last day of the related Interest Period. If such notice is given, the
related outstanding Prime Rate Loan shall be converted to a LIBOR Loan on the
last day of the then current Interest Period.

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          (e) With respect to a LIBOR Loan, all payments made by Borrower
hereunder shall be made free and clear of, and without reduction for or on
account of, income, stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, reserves or withholdings imposed, levied, collected, withheld
or assessed by any Governmental Authority, which are imposed, enacted or become
effective after the date hereof (such non-excluded taxes being referred to
collectively as “Foreign Taxes”), excluding income and franchise taxes of the
United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico). If any Foreign Taxes are required to
be withheld from any amounts payable to Lender hereunder, the amounts so payable
to Lender shall be increased to the extent necessary to yield to Lender (after
payment of all Foreign Taxes) interest or any such other amounts payable
hereunder at the rate or in the amounts specified hereunder. Whenever any
Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as
possible thereafter, Borrower shall send to Lender an original official receipt,
if available, or certified copy thereof showing payment of such Foreign Tax.
Borrower hereby indemnifies Lender for any incremental taxes, interest or
penalties that may become payable by Lender which may result from any failure by
Borrower to pay any such Foreign Tax when due to the appropriate taxing
authority or any failure by Borrower to remit to Lender the required receipts or
other required documentary evidence.
          (f) If any requirement of law or any change therein or in the
interpretation or application thereof, shall hereafter make it unlawful for
Lender to make or maintain a LIBOR Loan as contemplated hereunder (i) the
obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime Rate
Loan to a LIBOR Loan shall be canceled forthwith and (ii) any outstanding LIBOR
Loan shall be converted automatically to a Prime Rate Loan on the next
succeeding Payment Date or within such earlier period as required by law.
Borrower hereby agrees promptly to pay Lender, upon demand, any additional
amounts necessary to compensate Lender for any costs incurred by Lender in
making any conversion in accordance with this Agreement, including, without
limitation, any interest or fees payable by Lender to lenders of funds obtained
by it in order to make or maintain the LIBOR Loan hereunder. Lender’s notice of
such costs, as certified to Borrower, shall be conclusive absent manifest error.
          (g) In the event that any change in any requirement of law or in the
interpretation or application thereof, or compliance by Lender with any request
or directive (whether or not having the force of law) hereafter issued from any
central bank or other Governmental Authority:
               (i) shall hereafter impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of, advances or
loans by, or other credit extended by, or any other acquisition of funds by, any
office of Lender which is not otherwise included in the determination of LIBOR
hereunder;
               (ii) shall hereafter have the effect of reducing the rate of
return on Lender’s capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such adoption, change
or

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compliance (taking into consideration Lender’s policies with respect to capital
adequacy) by any amount deemed by Lender to be material; or
               (iii) shall hereafter impose on Lender any other condition and
the result of any of the foregoing is to increase the cost to Lender of making,
renewing or maintaining loans or extensions of credit or to reduce any amount
receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable which Lender deems to be material as determined by
Lender. If Lender becomes entitled to claim any additional amounts pursuant to
this Section 2.2.3(g), Lender shall provide Borrower with not less than ninety
(90) days notice specifying in reasonable detail the event by reason of which it
has become so entitled and the additional amount required to fully compensate
Lender for such additional cost or reduced amount. A certificate as to any
additional costs or amounts payable pursuant to the foregoing sentence submitted
by Lender to Borrower shall be conclusive in the absence of manifest error. This
provision shall survive payment of the Note and the satisfaction of all other
obligations of Borrower under this Agreement and the Loan Documents.
          (h) Borrower agrees to indemnify Lender and to hold Lender harmless
from any loss or expense which Lender sustains or incurs as a consequence of
(i) any default by Borrower in payment of the principal of or interest on a
LIBOR Loan, including, without limitation, any such loss or expense arising from
interest or fees payable by Lender to lenders of funds obtained by it in order
to maintain a LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or
mandatory) of the LIBOR Loan on a day that (A) is not the Payment Date
immediately following the last day of an Interest Period with respect thereto or
(B) is the Payment Date immediately following the last day of an Interest Period
with respect thereto if Borrower did not give the prior notice of such
prepayment required pursuant to the terms of this Agreement, including, without
limitation, such loss or expense arising from interest or fees payable by Lender
to lenders of funds obtained by it in order to maintain the LIBOR Loan hereunder
and (iii) the conversion (for any reason whatsoever, whether voluntary or
involuntary) of the Applicable Interest Rate from LIBOR plus the Spread to the
Prime Rate plus the Prime Rate Spread with respect to any portion of the
outstanding principal amount of the Loan then bearing interest at LIBOR plus the
Spread on a date other than the Payment Date immediately following the last day
of an Interest Period, including, without limitation, such loss or expenses
arising from interest or fees payable by Lender to lenders of funds obtained by
it in order to maintain a LIBOR Loan hereunder (the amounts referred to in
clauses (i), (ii) and (iii) are herein referred to collectively as the “Breakage
Costs”); provided, however, Borrower shall not indemnify Lender from any loss or
expense arising from Lender’s willful misconduct or gross negligence. This
provision shall survive payment of the Note in full and the satisfaction of all
other obligations of Borrower under this Agreement and the other Loan Documents.
          (i) Lender shall not be entitled to claim compensation pursuant to
this Section 2.2.3 for any Foreign Taxes, increased cost or reduction in amounts
received or receivable hereunder, or any reduced rate of return, which was
incurred or which accrued more than ninety (90) days before the date Lender
notified Borrower of the change in law or

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other circumstance on which such claim of compensation is based and delivered to
Borrower a written statement setting forth in reasonable detail the basis for
calculating the additional amounts owed to Lender under this Section 2.2.3,
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.
               2.2.4. Additional Costs. Lender will use reasonable efforts
(consistent with legal and regulatory restrictions) to maintain the availability
of the LIBOR Loan and to avoid or reduce any increased or additional costs
payable by Borrower under Section 2.2.3, including, if requested by Borrower, a
transfer or assignment of the Loan to a branch, office or Affiliate of Lender in
another jurisdiction, or a redesignation of its lending office with respect to
the Loan, in order to maintain the availability of the LIBOR Loan or to avoid or
reduce such increased or additional costs, provided that the transfer or
assignment or redesignation (a) would not result in any additional costs,
expenses or risk to Lender that are not reimbursed by Borrower and (b) would not
be disadvantageous in any other respect to Lender as determined by Lender in its
sole discretion.
               2.2.5. Default Rate. In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, the outstanding
principal balance of the Loan and, to the extent permitted by law, all accrued
and unpaid interest in respect of the Loan and any other amounts due pursuant to
the Loan Documents, shall accrue interest at the Default Rate, calculated from
the date such payment was due without regard to any grace or cure periods
contained herein, with respect to an Event of Default under clauses (i), (vi) or
(vii) of Section 8.1, and calculated from the date Lender gives a notice to
Borrower stating that an Event of Default has occurred, in all other instances.
               2.2.6. Usury Savings. This Agreement, the Note and the other Loan
Documents are subject to the express condition that at no time shall Borrower be
obligated or required to pay interest on the principal balance of the Loan at a
rate which could subject Lender to either civil or criminal liability as a
result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default
Rate, as the case may be, shall be deemed to be immediately reduced to the
Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate
shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the Maximum Legal Rate of interest from time to time in effect and
applicable to the Loan for so long as the Loan is outstanding.
               2.2.7. Interest Rate Cap Agreement.
          (a) On or prior to the Closing Date, Borrower shall enter into an
Interest Rate Cap Agreement with a LIBOR strike price equal to the Strike Price.
The Interest Rate Cap Agreement (i) shall be in a form and substance reasonably
acceptable to Lender, (ii) shall be with an Acceptable Counterparty, (iii) shall
direct such Acceptable Counterparty to deposit

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directly into the Lockbox Account any amounts due Borrower under such Interest
Rate Cap Agreement so long as any portion of the Debt exists, (iv) shall
initially be for a period ending on the Initial Maturity Date, and (v) shall
have an initial notional amount equal to the principal balance of the Loan.
Borrower shall collaterally assign to Lender, pursuant to the Collateral
Assignment of Interest Rate Cap Agreement, all of its right, title and interest
to receive any and all payments under the Interest Rate Cap Agreement, and shall
deliver to Lender an executed counterpart of such Interest Rate Cap Agreement
(which shall, by its terms, authorize the assignment to Lender and require that
payments be deposited directly into the Lockbox Account).
          (b) Borrower shall comply with all of its obligations under the terms
and provisions of the Interest Rate Cap Agreement. All amounts paid by the
Counterparty under the Interest Rate Cap Agreement to Borrower or Lender shall
be deposited immediately into the Lockbox Account or if the Lockbox Account is
not then required to be in effect, into such account as specified by Lender.
Borrower shall take all actions reasonably requested by Lender to enforce
Lender’s rights under the Interest Rate Cap Agreement in the event of a default
by the Counterparty and shall not waive, amend or otherwise modify any of its
rights thereunder.
          (c) In the event of any downgrade, withdrawal or qualification of the
rating of the Counterparty by S&P or Moody’s, Borrower shall replace the
Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement not
later than ten (10) Business Days following receipt of notice from Lender of
such downgrade, withdrawal or qualification. Notwithstanding the foregoing, the
provision of this Section 2.2.7(b) shall not be applicable if the Counterparty
is Lender or an Affiliate thereof.
          (d) In the event that Borrower fails to purchase and deliver to Lender
the Interest Rate Cap Agreement or fails to maintain the Interest Rate Cap
Agreement in accordance with the terms and provisions of this Agreement, Lender
may purchase the Interest Rate Cap Agreement and the cost incurred by Lender in
purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender
with interest thereon at the Default Rate from the date such cost was incurred
by Lender until such cost is reimbursed by Borrower to Lender.
          (e) In connection with the Interest Rate Cap Agreement, Borrower shall
obtain and deliver to Lender an opinion from counsel (which counsel may be
in-house counsel for the Counterparty) for the Counterparty (upon which Lender
and its successors and assigns may rely) which shall provide, in relevant part,
that: the Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has the organizational
power and authority to execute and deliver, and to perform its obligations
under, the Interest Rate Cap Agreement; the execution and delivery of the
Interest Rate Cap Agreement by the Counterparty, and any other agreement which
the Counterparty has executed and delivered pursuant thereto, and the
performance of its obligations thereunder have been and remain duly authorized
by all necessary action and do not contravene any provision of its certificate
of incorporation or by-laws (or equivalent organizational documents) or any law,
regulation or contractual restriction binding on or affecting it or its
property; all consents, authorizations and approvals required for the execution
and delivery by

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the Counterparty of the Interest Rate Cap Agreement, and any other agreement
which the Counterparty has executed and delivered pursuant thereto, and the
performance of its obligations thereunder have been obtained and remain in full
force and effect, all conditions thereof have been duly complied with, and no
other action by, and no notice to or filing with any governmental authority or
regulatory body is required for such execution, delivery or performance; the
Interest Rate Cap Agreement, and any other agreement which the Counterparty has
executed and delivered pursuant thereto, has been duly executed and delivered by
the Counterparty and constitutes the legal, valid and binding obligation of the
Counterparty, enforceable against the Counterparty in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); depending on the nature of the transaction, the
Counterparty’s opinion shall contain such additional opinions on such other
matters relating to the Interest Rate Cap Agreement and/or the confirmation as
Lender shall reasonably require, including the following additional opinions if
the Counterparty is a foreign entity: (A) that the jurisdiction where the
Counterparty is located will respect and give effect to the choice of law
provisions of the Interest Rate Cap Agreement and the confirmation, and (B) that
a judgment obtained in the courts of the State of New York is enforceable in the
jurisdiction where the Counterparty is located; and the Counterparty’s opinion
shall be addressed to Lender and its successors and assigns and shall state that
it may be relied upon by (A) any assignee of Lender’s interest in the Loan,
(B) any participant of Lender’s interest in the Loan, (C) any servicer of the
Loan, (D) any purchaser of the Loan or any portion thereof in any
Securitization, (E) any Rating Agency involved in a Securitization of the Loan,
(F) the issuer of securities in a Securitization of the Loan, and (G) any
trustee or servicer appointed in connection with a Securitization of the Loan.
          Section 2.3. Loan Payment.
               2.3.1. Payments Generally. Borrower shall pay to Lender on the
August Payment Date and each Payment Date thereafter up to and including the
Maturity Date, (x) interest accruing on the Loan during the entire Interest
Period in which such Payment Date occurs, and (y) the Monthly Principal Payment
Amount. For purposes of making payments hereunder, but not for purposes of
calculating interest accrual periods, if the day on which such payment is due is
not a Business Day, then amounts due on such date shall be due on the
immediately preceding Business Day and with respect to payments of principal due
on the Maturity Date, interest shall be payable at the Applicable Interest Rate
or the Default Rate, as the case may be, through and including the day
immediately preceding such Maturity Date. All amounts due pursuant to this
Agreement and the other Loan Documents shall be payable without setoff,
counterclaim, defense or any other deduction whatsoever.
               2.3.2. Payment on Maturity Date. Borrower shall pay to Lender on
the Maturity Date the outstanding principal balance of the Loan, all accrued and
unpaid interest and all other amounts due hereunder and under the Note, the
Mortgages and the other Loan Documents.
               2.3.3. Late Payment Charge. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower by the date on
which it is due, Borrower

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shall pay to Lender upon demand an amount equal to the lesser of three percent
(3%) of such unpaid sum or the maximum amount permitted by applicable law in
order to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such amount shall be secured by the Pledge and the other
Loan Documents to the extent permitted by applicable law.
               2.3.4. Method and Place of Payment. Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Note shall be made to Lender not later than 1:00 p.m., New York City
time, on or before the date when due and shall be made in lawful money of the
United States of America in immediately available funds at Lender’s office or as
otherwise directed by Lender, and any funds received by Lender after such time
shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.
          Section 2.4. Prepayments.
               2.4.1. Voluntary Prepayments. Prior to the Lockout Release Date,
the outstanding principal amount of the Loan may not be prepaid in whole or in
part. On any Payment Date occurring on, or after, the Lockout Release Date,
Borrower may, at its option and upon thirty (30) days prior notice to Lender,
prepay the Debt in whole but not in part, (except as expressly set forth
herein); provided that such prepayment is accompanied by the Prepayment Premium,
if applicable. If the prepayment occurs after the date that is six (6) months
prior to the Initial Maturity Date, there shall be no Prepayment Premium or
other prepayment fee, premium or penalty. If a prepayment under this
Section 2.4.1 is made on a day other than a Payment Date, then in connection
with such prepayment, Borrower shall pay to Lender, simultaneously with such
prepayment (i) all interest on the principal balance of the Loan then being
prepaid which would have accrued through the end of the Interest Period then in
effect notwithstanding that such Interest Period extends beyond the date of
prepayment and (ii) the Prepayment Premium; provided, however, that if the date
of prepayment is a date on or after the Determination Date in such calendar
month and prior to the first day of the Interest Period that commences in such
calendar month, Borrower shall also pay to Lender in connection with such
prepayment all interest on the principal balance of the Loan then being prepaid
which would have accrued through the end of the next succeeding Interest Period.
Any prepayment received by Lender on a date other than a Payment Date shall be
held by Lender as collateral security for the Loan and shall be applied to the
Debt on the next Payment Date.
               2.4.2. Liquidation Events. (a) Subject to the provisions of
Section 2.4.1 hereof, in the event of any Liquidation Event, Borrower shall,
subject to the rights of Senior Lender and Operator Tenants, cause the related
Net Liquidation Proceeds After Debt Service to be deposited directly into the
Cash Management Account, which shall then be applied by Lender on the next
succeeding Payment Date toward payment of the Debt. Other than during the
continuance of an Event of Default, no Prepayment Premium or other prepayment
fee, premium or penalty shall be due in connection with any prepayment made
pursuant to this Section 2.4.2(a).
          (b) Borrower shall promptly notify Lender of the pendency of any
Liquidation Event once Borrower has knowledge of such event. Borrower shall be
deemed to have

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knowledge of the pendency of (i) a sale (other than a foreclosure sale) of an
Individual Property on the date on which a contract of sale for such sale is
entered into, and a foreclosure sale, on the date notice of such foreclosure
sale is given, and (ii) a refinancing of an Individual Property or the Senior
Loan, on the date on which a commitment for such refinancing has been entered
into. The provisions of this Section 2.4.2 shall not be construed to contravene
in any manner the restrictions and other provisions (including, without
limitation, any provision relating to the application of proceeds thereof)
regarding refinancing of the Senior Loan, Transfer of the Properties,
substitution or release of any Individual Property or the application of Net
Proceeds set forth in this Agreement, the other Loan Documents or the Senior
Loan Documents.
                    2.4.3. Prepayments After Default. If during the continuance
of an Event of Default, payment of all or any part of the Debt is tendered by
Borrower or otherwise recovered by Lender (including through application of any
Reserve Funds), such tender or recovery shall be (a) made on the next occurring
Payment Date together with the monthly payment of Debt Service (including
interest accruing through and including the end of the Interest Period in which
such Payment Date occurs), and (b) if such payment occurs prior to the Lockout
Release Date, deemed a voluntary prepayment by Borrower in violation of the
prohibition against prepayment set forth in Section 2.4.1 and Borrower shall
pay, in addition to the Debt, an amount equal to five percent (5%) of the
principal balance of the Loan to be prepaid or satisfied. Such deemed voluntary
prepayment by itself shall not constitute an Event of Default.
          Section 2.5. Release of Collateral. Except as set forth in this
Section 2.5, no repayment or prepayment of all or any portion of the Note shall
cause, give rise to a right to require, or otherwise result in, the release of
any Lien of the Pledge on any Collateral.
                    2.5.1. Release of Individual Collateral. If (i) Owner has
elected to prepay a portion of the Senior Loan on or after the Lockout Release
Date pursuant to Section 2.5.1 of the Senior Loan Agreement and obtain the
release of one or more Individual Properties from the Liens(s) of the
Mortgage(s) thereon and (ii) Borrower has elected to prepay a portion of the
Loan on or after the Lockout Release Date and the requirements of this
Section 2.5 have been satisfied, Borrower may obtain (A) the release of the
Individual Collateral relating to the Individual Property to be released from
the Lien of the Pledge thereon (and related Loan Documents); (B) the release of
the obligations of Borrower and Guarantor under the Loan Documents with respect
to such Individual Collateral (other than those expressly stated to survive) and
(C) the release of the Owner Entity that is the owner of the Individual Property
from all obligations under the Loan Documents (other than those expressly stated
to survive), upon the satisfaction of each of the following conditions:
          (a) Borrower shall submit to Lender, not less than thirty (30) days
prior to the date of such release, a partial release of the Liens created by the
Pledge (and related Loan Documents) for the Individual Collateral for execution
by Lender. Such partial release shall contain a release of the Pledged
Collateral relating to the Individual Property, shall be in a form appropriate
for such Individual Collateral and shall contain standard provisions, if any,
protecting the rights of the releasing lender. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with

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such partial release, together with an Officer’s Certificate certifying that, to
such officer’s knowledge, such documentation (i) is in compliance with all Legal
Requirements, (ii) will effect such partial release in accordance with the terms
of this Agreement, and (iii) will not impair or otherwise adversely affect the
Liens, security interests and other rights of Lender under the Loan Documents
not being released (or as to the parties to the Loan Documents and Collateral
subject to the Loan Documents not being released);
          (b) Owner has satisfied, or Senior Lender has waived, the conditions
set forth in Section 2.5.1 of the Senior Loan Agreement;
          (c) After giving effect to such release, the Debt Service Coverage
Ratio for the Properties then remaining subject to the Liens of the Mortgages
shall be equal to or greater than the Debt Service Coverage Ratio for the twelve
(12) full calendar months immediately preceding the date of such release;
          (d) After giving effect to such release, the Lease Debt Service
Coverage Ratio for the Properties then remaining subject to the Liens of the
Mortgages shall be equal to or greater than the Lease Debt Service Coverage
Ratio for the twelve (12) full calendar months immediately preceding the date of
such release;
          (e) The Individual Property to be released pursuant to the Senior Loan
Documents shall be conveyed to a Person other than Owner;
          (f) The Owner Entity which owns the Individual Property being released
is dissolved and liquidated;
          (g) Borrower shall pay to Lender an amount equal to the Adjusted
Release Amount and such amount paid to Lender in connection with any such
partial release shall be applied (i) first, to prepay Principal in an amount
equal to the Release Amount of each Individual Collateral being released,
(ii) second, to the payment of the Prepayment Premium, if any, applicable to the
principal amount of the Loan being prepaid, and (iii) third, the balance, to
prepay Principal and the Release Amounts of each Individual Collateral remaining
subject to the Lien of the Pledge immediately following such release shall be
proportionately reduced by the Principal so prepaid pursuant to this clause
(iii); and
          (h) After giving effect to such partial release, in no event may the
aggregate Release Amounts for all of the Collateral released from the Lien of
the Pledge thereon pursuant to this Section 2.5.1 or pursuant to Section 2.5.2,
Section 2.5.3, Section 2.8 or Section 8.1(c) exceed in the aggregate 10% of the
original principal amount of the Loan.
               2.5.2. Release of Property with Options to Purchase. (a) With
respect to the Individual Property known as Upland, IN (the “Upland Property”),
the Operator Tenant under the Operating Lease for the Upland Property has an
option to purchase the Upland Property on or prior to the Lockout Release Date.
If such Operator Tenant timely and properly exercises its option to purchase the
Upland Property in accordance with the terms and provisions of its Operating
Lease on or prior to the Lockout Release Date, then Borrower shall have the
obligation to prepay a portion of the Loan in an amount equal to the Adjusted
Release Amount of the Individual Collateral relating to the Upland Property, and
Lender shall release

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the Individual Collateral relating to the Upland Property from the Lien of the
Mortgage thereon as provided in Section 2.5.1.
          (b) With respect to the Upland Property, if the Operator Tenant timely
and properly exercises its option to purchase the Upland Property in accordance
with the terms and provisions of its Operating Lease and the closing of the
Upland Property takes place after the Lockout Release Date, the terms and
provisions of Section 2.5.1 shall be applicable.
               2.5.3. Release of Special Financing Individual Properties. With
respect to the Individual Properties located in (1) Las Vegas, NM, (2) Hilliard,
OH, (3) Canton, OH, (4) Mobile, AL, (5) Wichita, KS, (6) Frankston, TX,
(7) Yorktown, IN, (8) Chesterton, IN and (9) Denver, CO (collectively, the “SF
Individual Properties”), Borrower shall have the right to prepay a portion of
the Loan in an amount equal to the Adjusted Release Amount of the Individual
Collateral relating to such Individual Property, in which event Borrower shall
pay to Lender in addition thereto a prepayment premium equal to five percent
(5%) of the principal prepaid, and Lender shall release such Individual
Collateral from the Lien of the Pledge as provided in Section 2.5 and
automatically and immediately release Borrower’s, Owner’s, Principal’s, Maryland
Guarantor’s and Guarantor’s respective obligations under the Loan Documents with
respect to each such Individual Collateral and Individual Property (other than
those expressly stated to survive).
               2.5.4. Release on Payment in Full. Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of all principal
and interest due on the Loan and all other amounts due and payable under the
Loan Documents in accordance with the terms and provisions of the Note and this
Agreement, release the Lien of the Pledge on Collateral not theretofore
released.
          Section 2.6. Cash Management.
               2.6.1. Lockbox Account. (a) Owner has established and Borrower
shall cause Owner to maintain a segregated Eligible Account (the “Senior Lockbox
Account”) with Lockbox Bank in trust for the benefit of Senior Lender, which
Senior Lockbox Account shall be in the name of Owner but shall be under the sole
dominion and control of Senior Lender.
          (b) To the extent not done previously, Borrower shall cause Owner to
deliver written instructions to all Operator Tenants under the Operating Leases
to deliver all Rents payable thereunder directly to the Senior Lockbox Account.
Borrower shall cause Owner to deposit all amounts received by Owner constituting
Rents under the Operating Leases into the Senior Lockbox Account within two (2)
Business Days after receipt.
          (c) Borrower has obtained from Senior Lockbox Bank its agreement to
transfer to the Senior Cash Management Account in immediately available funds by
federal wire transfer all amounts on deposit in the Senior Lockbox Account once
every Business Day throughout the term of the Loan. A copy of such agreement has
been delivered by Borrower to Lender.
          (d) If, at any time during the Term, Senior Lender has waived
compliance with Section 2.6.1 of the Senior Loan Agreement (or the Senior Loan
has been refinanced or

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otherwise repaid in full in accordance with the terms of this Agreement), then
Lender shall have the right, at its option, to require compliance with
provisions similar to Section 2.6.1 of the Senior Loan Agreement.
               2.6.2. Cash Management Account. (a) Lender shall establish and
maintain a segregated Eligible Account (the “Cash Management Account”) to be
held by Servicer in trust for the benefit of Lender, which Cash Management
Account shall be under the sole dominion and control of Lender. The Cash
Management Account shall be entitled “Column Financial, Inc. as Lender, pursuant
to Mezzanine Loan Agreement dated as of July 31, 2007 — Cash Management Account”
Borrower hereby grants to Lender a first priority security interest in the Cash
Management Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Cash Management
Account, including, without limitation, executing and filing UCC-1 Financing
Statements and continuations thereof. Borrower will not in any way alter or
modify the Cash Management Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make withdrawals from
the Cash Management Account and all costs and expenses for establishing and
maintaining the Cash Management Account shall be paid by Borrower.
          (b) Provided no Event of Default shall have occurred and be
continuing, on each Payment Date (or, if such Payment Date is not a Business
Day, on the immediately preceding Business Day) all funds on deposit in the Cash
Management Account shall be applied by Lender to the payment of the following
items in the order indicated:
          (i) First, payment of the Debt Service for such Interest Period,
applied first to the payment of accrued and unpaid interest for such period
computed at the Applicable Interest Rate and then applied to the payment of the
Monthly Principal Payment Amount for such period;
          (ii) Second, if Lender has delivered the Deposit Notice to Senior Cash
Management Bank as described in Section 3(a) of the Cash Management Agreement,
and if Senior Cash Management Bank has complied with the instructions contained
in such notice, deposits into the Subaccounts pursuant to Section 7.1:
          (iii) Third, if Lender has delivered the ED-CTP Notice to Senior Cash
Management Bank as described in Section 3(a) of the Cash Management Agreement
during a period other than a Cash Trap Period, and if Senior Cash Management
Bank has complied with the instructions contained in such notice, payments to
the Lender of any other amounts then due and payable under the Loan Documents;
          (iv) Fourth, if Lender has delivered the ED-CTP Notice to Senior Cash
Management Bank as described in Section 3(a) of the Cash Management Agreement
during a Cash Trap Period, and if Senior Cash Management Bank has complied with
the instructions contained in such notice, Excess Cash Flow will be retained in
the Cash Management Account; and

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          (v) Fifth, payment of any excess amounts (“Excess Cash Flow”) to
Borrower.
          (c) The insufficiency of funds on deposit in the Cash Management
Account shall not relieve Borrower from the obligation to make any payments, as
and when due pursuant to this Agreement and the other Loan Documents, and such
obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.
          (d) All funds on deposit in the Cash Management Account during the
continuance of an Event of Default may be applied by Lender in such order and
priority as Lender shall determine.
          (e) The provisions above regarding cash management are further
detailed in the Cash Management Agreement.
               2.6.3. Payments Received Under the Cash Management Agreement.
Notwithstanding anything to the contrary contained in this Agreement and the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower’s obligations with respect to payment of Debt Service and
any other payment reserves established pursuant to this Agreement or any other
Loan Document shall be deemed satisfied to the extent sufficient amounts are
deposited in the Cash Management Account established pursuant to the Cash
Management Agreement to satisfy such obligations on the dates each such payment
is required, regardless of whether any of such amounts are so applied by Lender.
          Section 2.7. Expiring Or Terminating Operating Leases.
          (a) No later than five (5) days prior to the expiration of an
Operating Lease and no earlier than sixty (60) days prior to such expiration and
no later than thirty (30) days after the termination of an Operating Lease for
any reason, Borrower shall (i) deliver to Lender a Letter of Credit in an equal
amount to the Release Amount for the Individual Collateral relating to the
Individual Property subject to such Operating Lease; or (ii) (1) on or prior to
the Lockout Release Date, pay to Lender an amount equal to the Adjusted Release
Amount of such Individual Collateral, or (2) after the Lockout Release Date,
prepay a portion of the Loan in order to obtain a release of such Individual
Collateral pursuant to Section 2.5. If Borrower delivers a Letter of Credit in
accordance with clause (i), then (1) such Letter of Credit shall be additional
security for the repayment of the Debt and may be drawn upon by Lender (A) upon
the occurrence and during the continuance of an Event of Default or (B) at any
time less than thirty (30) days prior to the expiration date of such Letter of
Credit if such Letter of Credit is not renewed prior thereto, or if a substitute
Letter of Credit is not delivered to Lender prior thereto, in which event Lender
shall hold the proceeds of such Letter of Credit as Reserve Funds until the
earlier of the occurrence of an Event of Default (in which event the provisions
of Section 7.7 shall be applicable) or Borrower becomes entitled to the
disbursement thereof as provided below, and (2) upon the date that an Operator
Tenant satisfactory to Lender under a Replacement Operating Lease approved by
Lender in possession of the Individual Property, has commenced paying fixed rent
and has delivered to Lender an estoppel certificate in form and substance
reasonably satisfactory to Lender, the

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Letter of Credit (or the proceeds thereof) will be released to Borrower provided
that no Event of Default is then in effect.
          (b) If Borrower makes a payment in accordance with clause (ii)(1) of
Section 2.7(a), then such payment shall be held as Reserve Funds and as
additional security for the repayment of the Debt and may be drawn upon by
Lender (A) upon the occurrence and during the continuance of an Event of
Default, or (B) as a prepayment of the Loan in accordance with Section 2.5.1
upon the later to occur of (x) the Lockout Release Date, and (y) thirty
(30) days after the expiration or termination of such Operating Lease. Upon the
date that an Operator Tenant satisfactory to Lender under a Replacement
Operating Lease approved by Lender takes possession of the Individual Property,
has commenced paying fixed rent and has delivered to Lender an estoppel
certificate in form and substance reasonably satisfactory to Lender, the payment
deposited in accordance with clause (ii)(1) will be released to Borrower
provided that no Event of Default is then in effect. In order to comply with the
rules and regulations applicable to REMIC Trusts under the Code, in the event
that the aggregate face amount of Letters of Credit and all payments held
pursuant to clause (ii)(1) exceeds ten percent (10%) of the Debt, then Lender
may apply any such sums in excess of ten percent (10%) of the Debt to the
payment of the Debt in any order in its sole discretion.
     Section 2.8. Substitution of Individual Properties. At any time after the
date hereof, Owner may obtain the release of one or more Individual Properties
from the Lien of the Mortgage thereon (other than those expressly stated to
survive) (each such Individual Property, a “Substituted Property”), by
substituting therefor one or more properties (such properties, individually and
collectively as the context requires, “Substitute Property”), upon the
satisfaction of the conditions set forth in Section 2.8 of the Senior Loan
Agreement. Concurrently, with the release of the Substituted Property, Borrower
may obtain the partial release of the Individual Collateral relating to such
Individual Property (the “Substituted Collateral”) by substituting therefore the
ownership interests in the owner of the Substitute Property (such ownership,
interest, the “Substitute Collateral”) upon the satisfaction of each of the
following conditions:
          (a) After giving effect to the proposed substitution, no Default or
Event of Default shall be continuing;
          (b) Lender shall have received at least thirty (30) days’ prior
written notice of the proposed substitution (or a shorter period of time if
permitted by Lender in its sole discretion), which notice shall be revocable at
any time provided that Borrower pays all of Lender’s actual costs and expenses
incurred in connection with the revoked notice;
          (c) The Release Amount of the Substituted Collateral, when taken
together with the Release Amounts of all other Substituted Collateral
substituted pursuant to this Section 2.8, does not exceed 25% of the Loan Amount
in the aggregate;
          (d) The number of Properties (including the Substitute Property but
excluding the Substituted Property) located in any one State will not exceed 25%
of the total number of Properties in all states immediately after such
substitution;

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          (e) Lender shall have received an Officer’s Certificate that each of
the representations and warranties contained in this Agreement and the other
Loan Documents shall be true and correct with respect to the Substitute Property
Owner and the Substitute Property as of the applicable Substitution Effective
Date (on a pro forma basis giving effect to the proposed substitution);
          (f) The Substitute Property shall not have suffered a Casualty or
Condemnation which has not been fully restored;
          (g) The entity owning the Substitute Property (the “Substitute
Property Owner”) shall have indefeasible fee title to the Substitute Property
free and clear of any lien or other encumbrance except for Permitted
Encumbrances;
          (h) Simultaneously with the substitution, the Substituted Property
shall be conveyed to a Person other than Borrower or an Owner;
          (i) The “as is” appraised value of the Substitute Property and the
“leased fee value” as shown in the related Appraisal dated no earlier than
forty-five (45) days prior to the proposed substitution date is equal to or
exceeds the “as is” appraised value of the Substituted Property and the “leased
fee value” immediately prior to the substitution;
          (j) The Net Operating Income calculated with respect to the Substitute
Property for the twelve (12) calendar month period immediately preceding the
substitution is equal to or exceeds the Net Operating Income calculated with
respect to the Substituted Property for the twelve (12) calendar month period
immediately preceding the substitution;
          (k) Borrower shall have obtained and delivered to Lender prior written
confirmation from the applicable Rating Agencies that the substitution will not
cause a downgrade, withdrawal or qualification of the then-current ratings of
the Securities or any class thereof;
          (l) Each Substitute Property Owner shall be a newly formed
single-member limited liability company organized in the State of Delaware
pursuant to a certificate of formation and a limited liability company operating
agreement in the form approved by Lender in connection with the closing of the
Loan, which entity is a Special Purpose Entity, 100% owned (directly or
indirectly) by Borrower and at least 51% of the membership interests of which
are owned, directly or indirectly, by Guarantor;
          (m) Lender shall have received such certified charter documents, good
standing certificates, qualifications to do business, resolutions and consents
for the Substitute Property Owner (including any general partner thereof) and
the Substitute Property Operator (including any general partner thereof) in
connection with the substitution as would be required by a reasonably prudent
lender originating commercial mezzanine loans similar to the Loan;
          (n) The operator of the Facility located on the Substitute Property
shall be a Qualified Operator (the “Substitute Property Operator”), which
Substitute Property

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Operator shall have applied for and obtained the Health Care Licenses necessary
to operate the Facility located on the Substitute Property;
          (o) The Facility located on the Substitute Property shall be operated
as a skilled nursing facility or an assisted living facility;
          (p) Borrower shall have caused to be executed and delivered to Lender
(i) an Operating Lease with respect to the Substitute Property between the
Substitute Property Owner, as landlord, and the Substitute Property Operator, as
operator tenant, which Operating Lease provides for a base rent which equals or
exceeds the base rent payable under the Operating Lease affecting the
Substituted Property and is otherwise acceptable to and approved by Lender.
          (q) Borrower shall have executed, acknowledged and delivered to Lender
an agreement whereby Borrower acknowledges that the Substitute Property is an
Individual Property for all purposes under, and is otherwise in all respects
subject to, the Loan Documents (including, without limitation, the Environmental
Indemnity);
          (r) Borrower shall have executed and delivered to Lender a
ratification and confirmation of the Environmental Indemnity which also adds the
Substitute Property to the properties covered by the Environmental Indemnity and
Borrower shall have caused Guarantor to have executed and delivered to Lender a
ratification and confirmation of the Guaranty;
          (s) Borrower shall have executed (as appropriate), acknowledged (as
appropriate) and delivered to Lender (i) an amendment to the Pledge and other
Security Documents which adds the Substituted Collateral to the Collateral and
subjects the Substituted Collateral to the provisions of the Pledge and the
other Security Documents and originals of the certificates evidencing ownership
of the Substituted Collateral (collectively, the “Substitute Collateral Lien
Documents”), and (ii) a UCC-3 Amendment in form appropriate for recording in the
State of Delaware amending the UCC Financing Statement filed in the State of
Delaware at the closing of the Loan adding the Substituted Collateral as
additional Collateral (and together with an executed authorization to file in
the form provided to Lender at the closing of the Loan);
          (t) Lender shall have received such other modifications and amendments
to this Agreement, the other Loan Documents as would be requested by a
reasonably prudent lender originating commercial mezzanine loans similar to the
Loan in order to reflect and effect the substitution and to protect and preserve
the Liens and security interests of Lender in and to the Collateral;
          (u) Lender shall have received such lien, credit, bankruptcy,
litigation and judgment searches with respect to the Substitute Property, the
Substitute Property Owner, the Substitute Property Operator, any former owner
and/or operator of the Substitute Property and any direct or indirect owner of
any thereof as would be required by, and acceptable to, a reasonably prudent
lender originating commercial mezzanine loans similar to the Loan;

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          (v) Lender shall have received such evidence that the Substitute
Property, the Facility thereon and the operations thereof are in compliance with
all Health Care Requirements as would be acceptable to a reasonably prudent
lender originating commercial mezzanine loans similar to the Loan;
          (w) Lender shall have received (i) an endorsement to the UCC Policy,
or a new UCC Policy, evidencing the substitution of the Substitute Collateral
for the Substituted Collateral, and (ii) copies of paid receipts or other
evidence as would be acceptable to a reasonably prudent lender originating
commercial mezzanine loans similar to the Loan confirming that all premiums in
respect of such endorsement to the UCC Policy or a new UCC Policy have been
fully paid;
          (x) Intentionally Omitted;
          (y) Lender shall have received a recent signed and sealed survey with
respect to the Substitute Property, which survey shall (i) be certified to the
title insurance company, Lender and Lender’s successors and assigns, which
certification shall be in substantially the same form and substance as the
certification of the Survey of the Substituted Property (including a
certification of whether the Improvements located on the Substitute Property are
located in a federally designated “special flood hazard area”), (ii) be prepared
(x) by a professional land surveyor licensed in the State in which the
Substitute Property is located, and (y) in accordance with the most recently
established Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys and otherwise substantially in the same form and substance as the
Surveys delivered at the closing of the Loan, and (iii) reflect the same legal
description contained in the Title Insurance Policy relating to such Substitute
Property and include, among other things, a metes and bounds description of the
real property comprising part of such Substitute Property or other type of real
property description (e.g., block and lot) that is customarily used in the
jurisdiction in which the Substitute Property is located;
          (z) Lender shall have received valid certificates of insurance
evidencing insurance coverage with respect to the Substitute Property, which
insurance coverage (including any required flood, earthquake and/or coastal
windstorm insurance) and the insurance companies providing such coverage shall
be in compliance with the requirements of Section 6.1 (including clause
(g) hereof) hereof, together with evidence of the payment of all Insurance
Premiums for such insurance payable for the existing policy period;
          (aa) Lender shall have received a Phase I environmental report and, if
recommended under the Phase I environmental report, a Phase II environmental
report, which concludes that the Substitute Property does not contain any
Hazardous Substances (as defined in the Environmental Indemnity) requiring
remediation under any Environmental Law (as defined in the Environmental
Indemnity) and is not subject to any known risk of contamination from any
off-site Hazardous Substance;
          (bb) Lender shall have received a physical condition report with
respect to the Substitute Property evidencing that the Substitute Property is in
good condition and repair and free of material damage or waste, which physical
condition report shall be (i) prepared by an

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engineer that prepared one or more of the Physical Condition Reports delivered
at the closing of the Loan or by a licensed and experienced engineer, (ii) in
form and substance substantially similar to the Physical Condition Reports
delivered at the closing of the Loan, and (iii) certified to Lender and its
successors and assigns. If the physical condition report recommends any
immediate repairs to the Substitute Property and such repairs cannot be
completed prior to the Substitution Effective Date, a substitution shall not be
permitted with respect to such proposed Substitute Property at any time prior to
a Securitization. If, subsequent to a Securitization, the physical condition
report recommends any immediate repairs to the Substitute Property, such
physical condition report shall include an estimate of the cost of such
immediate repairs and Borrower shall deposit with Senior Lender into the
Required Repairs Reserve Account established under the Senior Loan Agreement an
amount equal to one hundred twenty-five percent (125%) of such estimated cost,
which amount shall be held and/or disbursed in the same manner as Required
Repairs Reserve Funds pursuant to Section 7.1 of the Senior Loan Agreement;
          (cc) Lender shall have received a zoning report certifying that the
Substitute Property and its use comply in all material respects with all
applicable building laws and zoning ordinances or constitute a legal
non-conforming use or structure thereunder, which zoning report shall be
(i) prepared by a nationally recognized zoning review consultant, (ii) in form
and substance substantially similar to the zoning reports delivered at the
closing of the Loan, and (iii) certified to Lender and its successors and
assigns;
          (dd) If the Substitute Property is located in the State of California
or a seismic area designated as Zone 3 or 4, Lender shall have received a PML
study and a seismic report which would be acceptable to a reasonably prudent
lender originating commercial mezzanine loans similar to the Loan and, if such
study and report are so acceptable, Borrower shall have obtained such earthquake
insurance with respect to the Substitute Property as would be acceptable to a
reasonably prudent lender originating commercial mezzanine loans similar to the
Loan;
          (ee) Lender shall have received the following opinions of Borrower’s
counsel: (i) an opinion or opinions of counsel admitted in New York and Delaware
opining as to such matters with respect to the Borrower, the Collateral and the
documents and instruments delivered with respect to the substitution and with
such qualifications and assumptions as the opinions with respect to the Borrower
and the Collateral delivered by Hogan & Hartson LLP and Richards, Layton &
Finger at the closing of the Loan, which opinions and the counsel issuing the
same would be acceptable to a reasonably prudent lender originating commercial
mezzanine loans similar to the Loan, (ii) an opinion of counsel acceptable to
the Rating Agencies with respect to such health care regulatory matters as are
required by the Rating Agencies, and (iii) an opinion of counsel acceptable to
the Rating Agencies that the substitution does not constitute a “significant
modification” of the Loan under Section 1001 of the Code or otherwise cause a
tax to be imposed on a “prohibited transaction” by any REMIC Trust;
          (ff) Borrower shall have caused all Taxes and Other Charges relating
to the Substitute Property to be current;

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          (gg) Borrower shall have made such additional deposits to the reserve
funds established under the Senior Loan Agreement (or to the Reserve Funds
pursuant to Section 7.1) in respect of the Substitute Property in connection
with the substitution as is required by Senior Lender pursuant to the Senior
Loan Agreement;
          (hh) Lender shall have received with respect to the Substitute
Property Owner and the Substitute Property, as applicable, (i) annual operating
statements for the three (3) years (or such shorter period of time that the
Facility located on such Substitute Property has been in operation but in no
event less than one (1) year) immediately prior to the Substitution Effective
Date, (ii) audited financial statements for the most current completed Fiscal
Year in accordance with the requirements of Section 5.1.11 hereof, (iii) a
current operating statement, (iv) a Borrower Annual Budget for the Substitute
Property; and (v) an Officer’s Certificate certifying that each of the foregoing
presents fairly the financial condition and the results of operations of the
Substitute Property Owner and the Substitute Property;
          (ii) Lender shall have received such other information and further
approvals, opinions, documents, instruments and information in connection with
the substitution as the Rating Agencies reasonably require;
          (jj) Borrower shall submit to Lender, not less than ten (10) Business
Days prior to the date of such partial release, a partial release of Lien (and
related Loan Documents) for the Substituted Collateral for execution by Lender.
Such partial release shall contain a release of the Pledged Collateral relating
to the Individual Property, shall be in a form appropriate for such Pledged
Collateral and shall contain standard provisions, if any, protecting the rights
of Lender. In addition, Borrower shall provide all other documentation in
connection with such partial release as would be required by a reasonably
prudent lender originating commercial mezzanine loans similar to the Loan,
together with an Officer’s Certificate certifying that to Borrower’s knowledge
such documentation (i) is in compliance with all Legal Requirements and
applicable Health Care Requirements, (ii) will effect such release in accordance
with the terms of this Agreement, and (iii) will not impair or otherwise
adversely affect the Liens, security interests and other rights of Lender under
the Loan Documents not being released (or as to the parties to the Loan
Documents and the Collateral subject to the Loan Documents not being released);
          (kk) Borrower shall have paid or reimbursed Lender for all reasonable
out-of-pocket costs and expenses incurred by Lender (including, without
limitation, reasonable attorneys fees and disbursements) in connection with the
substitution and Borrower shall have paid all recording charges, filing fees,
transfer recordation or similar taxes or other expenses (including, without
limitation, mortgage and intangibles taxes and documentary stamp taxes) payable
in connection with the substitution. Borrower shall have paid all costs and
expenses and fees of the Rating Agencies incurred in connection with the
substitution;
          (ll) If the Substitute Property Owner has leasehold title to the
Substitute Property, Lender shall have received (i) a copy of the related ground
lease, together with an Officer’s Certificate certifying that such ground lease
is true, accurate and complete, and (ii) a ground lessor estoppel certificate
certifying to such matters as would be acceptable to a

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reasonably prudent lender originating commercial mezzanine loans similar to the
Loan. Such ground lease and the terms and provisions thereof shall meet Rating
Agency requirements; and
          (mm) Owner has satisfied, or Senior Lender has waived, all of the
conditions set forth in Section 2.8 of the Senior Loan Agreement
          Upon the date of satisfaction of the foregoing conditions precedent,
(i) Lender shall effect the partial release of the Substituted Collateral from
the Lien of the Loan Documents and the release of Borrower’s, Principal’s and
Guarantor’s respective obligations under the Loan Documents with respect to each
such Substituted Collateral (other than those expressly stated to survive),
(ii) the Substitute Property shall be deemed to be an Individual Property for
all purposes under this Agreement and the other Loan Documents, (iii) the
Substitute Property Owner shall be deemed to be an Owner Entity for all purposes
under this Agreement and the other Loan Documents, (iv) the Substituted Owner
shall be released from its obligations under the Loan and the Loan Documents
except for those obligations that expressly survive, (v) the Substitute Property
Operating Lease shall be deemed to be an approved Operating Lease for all
purposes under this Agreement and the other Loan Documents, (vi) the Release
Amount of the Substitute Collateral shall be equal to the Release Amount of the
Substituted Collateral (and, if there is more than one Substitute Collateral,
the Release Amount of the Substituted Collateral shall be allocable to each such
Substitute Collateral on a pro rata basis according to the appraised value
thereof), (vii) the Adjusted Release Amount of the Substitute Collateral shall
be equal to the Adjusted Release Amount of the Substituted Collateral (and, if
there is more than one Substitute Collateral, the Adjusted Release Amount of the
Substituted Collateral shall be allocable to each such Substitute Property on a
pro rata basis according to the appraised value thereof) (such date, the
“Substitution Effective Date”), and (viii) Borrower shall cause the Substituted
Property Owner to dissolve and liquidate.
          Section 2.9. Intentionally Omitted.
          Section 2.10 Extension of the Initial Maturity Date. Borrower shall
have the option to extend the term of the Loan beyond the Initial Maturity Date
(each such option, an “Extension Option”) for three (3) successive terms (each
such term, an “Extension Term”) of one (1) year each (the Initial Maturity Date
following the exercise of each such option is defined herein as the “Extended
Maturity Date”) upon satisfaction of each of the following terms and conditions:
          (a) no Event of Default shall have occurred and be continuing at the
time the applicable Extension Option is exercised and on the date that the
applicable Extension Term is commenced;
          (b) Borrower shall notify Lender of its irrevocable election to extend
the Maturity Date as aforesaid not earlier than nine (9) months, and no later
than thirty (30) days, prior to (i) with respect to the first Extension Option,
the Initial Maturity Date, (ii) with respect to the second Extension Option, the
end of the first Extension Option, and (iii) with respect to the third Extension
Option, the end of the second Extension Option;

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          (c) if the Interest Rate Cap Agreement is scheduled to mature prior to
the applicable Extended Maturity Date, Borrower shall obtain and deliver to
Lender not later than the Business Day prior to the first day of each Extension
Option (provided that the form of such Replacement Interest Rate Cap shall have
been delivered to Lender not later than ten (10) Business Days prior to the
first day of such Extension Option), a Replacement Interest Rate Cap Agreement
from an Acceptable Counterparty which Replacement Interest Rate Cap Agreement
shall be effective commencing on the first date of such Extension Option and
shall have a maturity date not earlier than the applicable Extended Maturity
Date;
          (d) in connection with each Extension Option, Borrower shall have
delivered to Lender together with its notice pursuant to Subsection (b) of this
Section 2.10 and as of the commencement of the applicable Extension Option, an
Officer’s Certificate in form acceptable to Lender certifying that each of the
representations and warranties of Borrower contained in the Loan Documents is
true, complete and correct in all material respects as of the date of such
Officer’s Certificate to the extent such representations and warranties are not
matters which by their nature can no longer be true and correct as a result of
the passage of time;
          (e) Borrower shall have paid to Lender all reasonable costs actually
incurred by Lender in connection with the exercise of the Extension Option
(including reasonable attorneys’ fees).
          III. SENIOR LOAN
          Section 3.1. Notices Under Senior Loan Documents. Borrower shall (or
shall cause Owner to): (a) promptly notify Lender of the giving of any notice by
Senior Lender to Owner or Borrower of any default by Owner in the performance or
observance of any of the terms, covenants or conditions of the Senior Loan
Documents on the part of Owner to be performed or observed and deliver to Lender
a true copy of each such notice; and (b) deliver a true, correct and complete
copy of all notices, demands, requests or material correspondence (including
electronically transmitted items) given or received by Owner or Guarantor to or
from the Senior Lender or its agent. In the event of a refinancing of the Senior
Loan permitted by the terms of this Agreement, Borrower will cause all reserves
on deposit with Senior Lender to be utilized by Owner to reduce the amount due
and payable to the Senior Lender or alternatively shall be remitted to Lender as
a mandatory prepayment of the Loan.
          Section 3.2. Senior Loan Defaults.
          (a) Without limiting the generality of the other provisions of this
Agreement, and without waiving or releasing Borrower from any of its obligations
hereunder, if there shall occur any default under the Senior Loan Documents,
Borrower hereby expressly agrees that Lender shall have the immediate right,
without prior notice to Borrower, but shall be under no obligation to pay all or
any part of the Senior Loan and any other sums that are then due and payable in
an amount not exceeding the amount necessary to cure such default, and to
perform any act or take any action on behalf of Borrower and/or Owner as may be
appropriate to cure such default. All sums so paid and the actual out of pocket
costs and expenses incurred by Lender in exercising rights under this
Section 3.2 (including reasonable attorneys’ fees) (i) shall constitute
additional advances of the Loan to Borrower, (ii) shall increase the then

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unpaid Principal, (iii) shall bear interest at the Default Rate for the period
from the date that such costs or expenses were incurred to the date of payment
to Lender, (iv) shall constitute a portion of the Debt, (v) shall be secured by
the Pledge and (vi) may be reimbursed by Borrower without prepayment penalty or
fee (but with accrued interest at the Default Rate through the date of payment
to Lender), which reimbursement shall cure any Event of Default under the Loan
Documents directly and solely relating thereto, provided such repayment occurs
within thirty (30) days of Lender giving written notice to Borrower of such
payment or incurrence of costs or expenses by Lender.
          (b) Borrower hereby indemnifies Lender from and against all
liabilities, obligations, losses, damages, penalties, assessments, actions, or
causes of action, judgments, suits, claims, demands, costs, expenses (including
attorneys’ and other professional fees, whether or not suit is brought, and
settlement costs) and disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against Lender as a result of the actions
taken by Lender pursuant to Section 3.2(a). Lender shall have no obligation to
Borrower, Owner or any other party to make any such payment or performance
pursuant to Section 3.2(a). Borrower shall not impede, interfere with, hinder or
delay, and shall not permit Owner to impede, interfere with, hinder or delay,
any action taken by Lender pursuant to Section 3.2(a) to cure any Event of
Default under the Senior Loan, or to otherwise protect or preserve Lender’s
interests in the Loan and the Collateral following a default or asserted default
under the Senior Loan.
          (c) Any Event of Default under the Senior Loan Documents shall
constitute an Event of Default, without regard to any subsequent payment or
performance of any such obligations by Lender unless and until Senior Lender
waives or revokes such Event of Default in writing or such Event of Default is
cured to Senior Lender’s satisfaction. Borrower hereby grants Lender and any
person designated by Lender, subject to the rights of Operator Tenants, the
right to enter upon the Property at any time following the occurrence and during
the continuance of any default, or the assertion by Senior Lender that a default
has occurred and is continuing under the Senior Loan Documents, for the purpose
of taking any such appropriate action or to appear in, defend or bring any
action or proceeding to protect Borrower’s, Owner’s and/or Lender’s interest.
Lender may take such action as Lender deems reasonably necessary or desirable to
carry out the intents and purposes of this subsection (including communicating
with Senior Lender with respect to any Senior Loan defaults), without prior
notice to, or consent from, Borrower. Lender shall have no obligation to
complete any cure or attempted cure undertaken or commenced by Lender.
          (d) If Lender shall receive a copy of any notice of default under the
Senior Loan Documents sent by Senior Lender to Owner, such notice shall
constitute full protection to Lender for any appropriate action taken or omitted
to be taken by Lender, in good faith, in reliance thereon. As a material
inducement to Lender’s making the Loan, Borrower hereby absolutely and
unconditionally releases and waives all claims against Lender arising out of
Lender’s exercise of its rights and remedies provided in this Section 9.2,
except for Lender’s gross negligence or willful misconduct.
          Section 3.3. Senior Loan Estoppels. Borrower shall (or shall cause
Owner to), from time to time, upon written request of Lender, made not more
frequently than once in

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any calendar quarter (but without any obligation to incur any cost or expense)
to obtain from Senior Lender such certificates of estoppel with respect to
compliance by Owner with the terms of the Senior Loan Documents as may be
reasonably requested by Lender. From time to time upon written request of Lender
made not more frequently than once in any calendar quarter, Borrower will cause
Owner to execute and deliver to Lender an estoppel certificate which states that
(i) the Senior Loan Documents have not been modified (or if modified, giving
particulars of all such modifications) and (ii) to Owner’s actual knowledge,
that there are no defaults by Owner under the Senior Loan Documents (or if such
is not the case, giving particulars of each such default).
          Section 3.4. No Amendments to Senior Loan Documents. Without obtaining
the prior written consent of Lender, Borrower shall not cause or permit Owner to
(i) enter into any amendment or modification of any of the Senior Loan
Documents, other than an amendment or modification which does not adversely
affect Lender and reasonably would not be expected to adversely affect Lender.
Borrower shall cause Owner to provide Lender with a copy of any amendment or
modification to the Senior Loan Documents (whether or not Lender’s consent is
required with respect thereto) within five (5) days after the execution thereof.
          Section 3.5. Acquisition of the Senior Loan. Neither Borrower,
Guarantor or Owner or any Affiliate of any of them shall acquire or agree to
acquire (a) the Senior Loan, or any portion thereof or any interest therein, or
(b) 10% or more of the direct or indirect ownership interests in or any
controlling interest (direct or indirect) in the holder of the Senior Loan, via
purchase, transfer, exchange or otherwise; and (i) any breach of clause
(a) above shall constitute an Event of Default hereunder and (ii) any breach of
clause (b) above shall constitute an Event of Default hereunder only if
(1) Guarantor or an Affiliate of Guarantor (other than Borrower or Owner)
acquires such interest and (2) once Borrower has knowledge that clause (b) was
breached, neither Guarantor nor any Affiliate thereof exercises any rights or
remedies under the Senior Loan Documents and such ownership interest is disposed
within 30 days after Borrower has knowledge of such breach, in which case the
breach shall be deemed cured.
          Section 3.6. Deed in Lieu of Foreclosure. Without the express prior
written consent of Lender, Borrower shall not, and Borrower shall not cause,
suffer or permit Owner to, enter into any deed-in-lieu or consensual foreclosure
with or for the benefit of Senior Lender or any of its affiliates. Without the
express prior written consent of Lender, Borrower shall not, and Borrower shall
not cause, suffer or permit Owner to, enter into any consensual sale or other
transaction in connection with the Senior Loan which could diminish, modify,
terminate, impair or otherwise adversely affect the interests of Lender or
Borrower, the Collateral or any portion thereof or any interest therein or of
Owner in the Properties or portion thereof or any interest therein.
          Section 3.7. Refinancing or Prepayment of the Senior Loan. Neither
Borrower, nor Guarantor nor Owner shall make any partial or full prepayments of
amounts owing under the Senior Loan (except as expressly permitted in the Senior
Loan Agreement) or refinance the Senior Loan (it being understood that an
amendment or restatement of some or all of the Senior Loan Documents made in
accordance with Section 3.4 hereof whether together with or separate from a
Securitization or other sale or disposition by Senior Lender, shall not

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constitute a refinance) without the prior written consent of Lender, unless such
refinancing results in the concurrent payment in full of the Debt.
          Section 3.8. Intercreditor Agreement. Borrower hereby acknowledges and
agrees that any intercreditor agreement or other agreement entered into between
Lender and Senior Lender (the “Intercreditor Agreement”) will be solely for the
benefit of, and solely bind, Lender and Senior Lender, and that Borrower and
Owner shall not be intended third-party beneficiaries of any of the provisions
therein, shall have no rights or obligations thereunder and shall not be
entitled to rely on any of the provisions contained therein, and shall not bind
Borrower or Owner. Lender and Senior Lender shall have no obligation to disclose
to Borrower the contents of the intercreditor agreement. Borrower’s obligations
hereunder are and will be independent of such intercreditor agreement and shall
remain unmodified by the terms and provisions thereof.
          IV. REPRESENTATIONS AND WARRANTIES
          Section 4.1. Borrower Representations. Borrower represents and
warrants as of March 29, 2007 that, except as otherwise set forth on Schedule VI
annexed hereto:
               4.1.1. Organization. Each of Borrower and Owner has been duly
organized and is validly existing and in good standing with requisite power and
authority to own its properties and to transact the businesses in which it is
now engaged. Each of Borrower and Owner is duly qualified to do business and is
in good standing in each jurisdiction where it is required to be so qualified in
connection with its properties, businesses and operations. Each of Borrower and
Owner possesses all material rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged, and the sole business of
Borrower is the ownership of the Collateral. The ownership interests of Borrower
are as set forth on the organizational chart attached hereto as Schedule IV.
               4.1.2. Proceedings. Borrower has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
               4.1.3. No Conflicts. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrower will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower or Owner pursuant to the terms of any indenture, mortgage,
deed of trust, loan agreement, partnership agreement, management agreement or
other agreement or instrument to which Borrower or Owner is a party or by which
any of Borrower’s or Owner’s property or assets is subject, nor will such action
result in any material

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violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority or Health Care Authority having jurisdiction over
Borrower, Owner or any of Borrower’s or Owner’s properties or assets, and any
material consent, approval, authorization, order, registration or qualification
of or with any such Governmental Authority or Health Care Authority required for
the execution, delivery and performance by Borrower of this Agreement or any
other Loan Documents has been obtained and is in full force and effect.
               4.1.4. Litigation. There are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or Health Care
Authority or other agency now pending or threatened against or affecting
Borrower, Owner, Principal, Guarantor, the Collateral or, to Borrower’s actual
knowledge, any Individual Property or any Operator Tenant, which actions, suits
or proceedings, if determined against Borrower, Owner, Principal, Guarantor, the
Collateral or any Individual Property, could reasonably be expected to
materially adversely affect the condition (financial or otherwise) or business
of Borrower, Owner, Principal, any Operator Tenant, Guarantor, the Collateral or
the condition or ownership of any Individual Property.
               4.1.5. Agreements. Neither Borrower nor Owner is a party to any
agreement or instrument or subject to any restriction which might materially and
adversely affect Borrower, Owner, the Collateral or any Individual Property, or
Borrower’s or Owner’s business, properties or assets, operations or condition,
financial or otherwise. Neither Borrower nor Owner is in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party or, to Borrower’s actual knowledge, by which Borrower, Owner, any of the
Collateral or any of the Properties are bound. Borrower has no material
financial obligation under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Borrower is a party or, to
Borrower’s knowledge, by which Borrower, Owner or the Collateral is otherwise
bound, other than (a) obligations incurred in the ordinary course of the
ownership of the Properties as permitted pursuant to clause (t) of the
definition of “Special Purpose Entity” set forth in Section 1.1 hereof and
(b) obligations under the Loan Documents and the Senior Loan Documents.
               4.1.6. Title. Owner has good, marketable and insurable fee simple
title to the real property comprising part of the Properties and has good title
to the balance of the Properties, free and clear of all Liens whatsoever except
the Permitted Encumbrances and the Liens created by the Senior Loan Documents.
The Permitted Encumbrances in the aggregate do not materially and adversely
affect the value, operation or use of the Properties (as currently used) or
Borrower’s ability to repay the Loan. The Pledge together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, created a valid, perfected first priority lien on the Pledged
Collateral, subject only to Permitted Encumbrances and the Liens created by the
Loan Documents. To Borrower’s actual knowledge, there are no claims for payment
for work, labor or materials affecting the Properties which are or could
reasonably be expected to become a Lien prior to, or of equal priority with, the
Liens created by the Loan Documents.
               4.1.7. Solvency. Borrower has (a) not entered into the Loan or
executed the Note, this Agreement or any other Loan Documents with the actual
intent to hinder, delay or

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defraud any creditor and (b) received reasonably equivalent value in exchange
for its obligations under such Loan Documents. The fair saleable value of
Borrower’s assets exceeds and will, immediately following the making of the
Loan, exceed Borrower’s total liabilities, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Borrower’s assets is and will, immediately following the
making of the Loan, be greater than Borrower’s probable liabilities. Borrower’s
assets do not and, immediately following the making of the Loan will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debt and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such debt and liabilities as they
mature (taking into account the timing and amounts of cash to be received by
Borrower and the amounts to be payable on or in respect of obligations of
Borrower). No petition in bankruptcy has been filed against Borrower or any
constituent Person, and neither Borrower nor any constituent Person has ever
made an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors. Neither Borrower nor any of its
constituent Persons are contemplating either the filing of a petition by it
under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of Borrower’s assets or properties, and Borrower has no
knowledge of any Person contemplating the filing of any such petition against it
or such constituent Persons.
               4.1.8. Full and Accurate Disclosure. To Borrower’s knowledge, no
statement of fact made by Borrower in this Agreement or in any of the other Loan
Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading at the time such statement was made by Borrower. To Borrower’s
knowledge, there is no material fact presently known to Borrower which has not
been disclosed to Lender which materially and adversely affects, nor as far as
Borrower can foresee, reasonably could materially and adversely affect, all or
any part of the Collateral or the business, operations or condition (financial
or otherwise) of Borrower.
               4.1.9. No Plan Assets. Borrower is not an “employee benefit
plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and
none of the assets of Borrower constitutes “plan assets” of one or more such
plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of
ERISA and (b) transactions by or with Borrower are not subject to any state
statute regulating investments of, or fiduciary obligations with respect to,
governmental plans similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code currently in effect, which prohibit or otherwise
restrict the transactions contemplated by this Loan Agreement.
               4.1.10. Compliance. Borrower, Owner and, except as disclosed in
the Zoning Reports and the Physical Conditions Reports, the Properties
(including the use thereof) comply in all material respects with all applicable
Legal Requirements, and, to Borrower’s actual knowledge, Health Care
Requirements, including, without limitation, building and zoning ordinances and
codes and Prescribed Laws. None of Borrower or Owner or, to Borrower’s actual
knowledge, any Operator Tenant is in default or violation of any material order,
writ, injunction, decree or demand of any Governmental Authority or, to
Borrower’s actual knowledge, any Health Care Authority. There has not been
committed by Borrower or Owner

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or, to Borrower’s actual knowledge, any Operator Tenant or any other Person in
occupancy of or involved with the operation or use of one or more of the
Properties any act or omission affording the federal government or any other
Governmental Authority or Health Care Authority the right of forfeiture as
against any Individual Property or any part thereof or any monies paid in
performance of Borrower’s obligations under any of the Loan Documents.
               4.1.11. Financial Information. All financial data, including,
without limitation, the statements of cash flow and income and operating
expense, prepared by or on behalf of Borrower, Owner or Guarantor and delivered
to Lender in connection with the Loan (i) are true, complete and correct in all
material respects, (ii) accurately represent the financial condition of the
Borrower as of the date of such reports, and (iii) to the extent prepared or
audited by an independent certified public accounting firm, have been prepared
in accordance with GAAP throughout the periods covered, except as disclosed
therein. Except for Permitted Encumbrances, Borrower does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments
that are known to Borrower and reasonably likely to have a materially adverse
effect on the Collateral or any Individual Property or the operation thereof as
a skilled nursing facility or assisted living facility, as applicable, except as
referred to or reflected in said financial statements. Since the date of such
financial statements, there has been no Material Adverse Effect.
               4.1.12. Condemnation. To Borrower’s actual knowledge, and except
as has been disclosed in the Title Insurance Policies and Zoning Reports, no
Condemnation or other proceeding has been commenced or is threatened or
contemplated with respect to all or any material portion of any Individual
Property or for the relocation of roadways providing access to any Individual
Property.
               4.1.13. Federal Reserve Regulations. No part of the proceeds of
the Loan have been or will be used for the purpose of purchasing or acquiring
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by applicable Legal Requirements or by
the terms and conditions of this Agreement or the other Loan Documents.
               4.1.14. Utilities and Public Access. Except as disclosed by the
Surveys, each Individual Property has rights of access to public ways and is
served by water, sewer, sanitary sewer and storm drain facilities reasonably
adequate to service such Individual Property for its respective intended uses.
Except as disclosed by the Surveys, all public utilities necessary or convenient
to the full use and enjoyment of each Individual Property are located either in
the public right-of-way abutting such Individual Property (which are connected
so as to serve such Individual Property without passing over other property) or
in recorded easements serving such Individual Property and such easements are
set forth in and insured by the Title Insurance Policies. Except as disclosed by
the Surveys, all roads necessary for the use of each Individual Property for
their current respective purposes have been completed and dedicated to public
use and accepted by all Governmental Authorities or are in recorded easements.

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               4.1.15. Not a Foreign Person. Borrower is not a “foreign person”
within the meaning of §1445(f)(3) of the Code.
               4.1.16. Separate Lots. Except as disclosed by the Surveys, each
Individual Property is comprised of one (1) or more parcels which constitute a
separate tax lot or lots and does not constitute a portion of any other tax lot
not a part of such Individual Property.
               4.1.17. Assessments. Except as disclosed by the Title Insurance
Policies, there are no pending or proposed special or other assessments for
public improvements or otherwise materially adversely affecting any Individual
Property, nor, to Borrower’s actual knowledge, are there any contemplated
improvements to any Individual Property that could reasonably be expected to
result in such special or other assessments.
               4.1.18. Enforceability. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by Borrower, Principal or
Guarantor, including the defense of usury, nor would the operation of any of the
terms of the Loan Documents, or the exercise of any right thereunder, render the
Loan Documents unenforceable (subject to principles of equity and bankruptcy,
insolvency and other laws generally affecting creditors’ rights and the
enforcement of debtors’ obligations in the several states in which the
Individual Properties are located), and Borrower, Principal and Guarantor have
not asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
               4.1.19. No Prior Assignment. There are no prior assignments by
Borrower of the Leases or any portion of the Rents due and payable or to become
due and payable which are presently outstanding.
               4.1.20. Insurance. Borrower has obtained and has delivered to
Lender certificates of all Policies reflecting the insurance coverages, amounts
and other requirements set forth in this Agreement. To Borrower’s actual
knowledge, no claims have been made under any such Policies, and no Person,
including Borrower, has done, by act or omission, anything which could
reasonably be expected to impair the coverage of any such Policies.
               4.1.21. Use of Property. Each Individual Property is used
exclusively as a skilled nursing facility, an assisted living facility and other
appurtenant and related uses.
               4.1.22. Certificate of Occupancy; Licenses. Except as disclosed
by the Zoning Reports or the Physical Conditions Reports, all certifications,
permits, licenses and approvals, including without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of each Individual Property as a skilled nursing facility or assisted
living facility (collectively, the “Licenses”), have been obtained and are in
full force and effect. Except as disclosed by the Zoning Reports, the use being
made of each Individual Property is in conformity with the certificate of
occupancy issued for such Individual Property.
               4.1.23. Flood Zone. Except as disclosed by the Surveys, none of
the Improvements on any Individual Property are located in an area as identified
by the Federal Emergency Management Agency as an area having special flood
hazards or, if so located, the

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flood insurance required pursuant to Section 6.1(a)(i) is in full force and
effect with respect to each such Individual Property.
               4.1.24. Physical Condition. Except as disclosed by the Physical
Conditions Reports, each Individual Property, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects; except as disclosed by the Physical
Conditions Reports, there exists no structural or other material defects or
damages in any Individual Property, whether latent or otherwise, and Borrower
has not received notice from any insurance company or bonding company of any
defects or inadequacies in any Individual Property, or any part thereof, which
would materially adversely affect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
               4.1.25. Boundaries. Except as disclosed by the Surveys, all of
the material improvements which were included in determining the appraised value
of each Individual Property, excluding parking spaces, lie wholly within the
boundaries and building restriction lines of such Individual Property, and no
improvements on adjoining properties encroach upon such Individual Property, and
no easements or other encumbrances upon the applicable Individual Property
encroach upon any of the improvements, so as to affect the value or
marketability of the applicable Individual Property except those which are
insured against by the Title Insurance Policy.
               4.1.26. Leases. The Properties are not subject to any Leases
other than the Operating Leases described in Schedule II attached hereto and
made a part hereof and residency agreements with residents of the Facilities.
Owner is the owner and lessor of landlord’s interest in the Operating Leases. No
Person has any possessory interest in any Individual Property or right to occupy
the same except under and pursuant to the provisions of the Operating Leases and
residency agreements with residents of the Facilities. The current Operating
Leases are in full force and effect and, to Borrower’s knowledge, there are no
defaults thereunder by either party and there are no conditions that, with the
passage of time or the giving of notice, or both, would constitute defaults
thereunder. Except as disclosed in Schedule II attached hereto, no Rent has been
paid more than one (1) month in advance of its due date. All work to be
performed by Owner under each Operating Lease has been performed as required and
has been accepted by the applicable Operator Tenant, and any payments, free
rent, partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Borrower to any Operator Tenant has already
been received by such Operator Tenant. To Borrower’s knowledge, and except as
disclosed in Schedule II attached hereto, all work to be performed by the
applicable Operator Tenant under each Operating Lease has been performed. There
has been no prior sale, transfer or assignment, hypothecation or pledge of any
Lease or of the Rents received therein which is still in effect. No Operator
Tenant listed on Schedule II has assigned its Operating Lease or sublet all or
any portion of the premises demised thereby, no such tenant holds its leased
premises under assignment or sublease, nor does anyone except such tenant and
its employees occupy such leased premises. Other than as set forth on
Schedule II, no Operator Tenant under any Operating Lease has a right or option
pursuant to such Operating Lease or

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otherwise to purchase all or any part of the leased premises or the building of
which the leased premises are a part. No tenant under any Lease has any right or
option for additional space in the Improvements.
               4.1.27. Survey. The Survey for each Individual Property delivered
to Lender in connection with this Agreement has been prepared in accordance with
the provisions of Section 3.1.3(c) hereof, and, to Borrower’s knowledge, does
not fail to reflect any material matter affecting such Individual Property or
the title thereto.
               4.1.28. Principal Place of Business; State of Organization.
Borrower’s principal place of business as of the date hereof is the address set
forth in the introductory paragraph of this Agreement. The Borrower is organized
under the laws of the state of Delaware.
               4.1.29. Filing and Recording Taxes. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements and
applicable Health Care Requirements currently in effect in connection with the
transfer of the Properties to Owner have been paid. All mortgage, mortgage
recording, stamp, intangible or other similar tax required to be paid by any
Person under applicable Legal Requirements and applicable Health Care
Requirements currently in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the Loan
Documents, including, without limitation, the Mortgages, have been paid, and,
under current Legal Requirements and applicable Health Care Requirements, each
of the Mortgages is enforceable in accordance with their respective terms by
Lender (or any subsequent holder thereof), subject to principles of equity and
bankruptcy, insolvency and other laws generally applicable to creditors’ rights
and the enforcement of debtors’ obligations.
               4.1.30. Special Purpose Entity/Separateness. (a)  Until the Debt
has been paid in full, Borrower hereby represents, warrants and covenants that
(i) Borrower is, shall be and shall continue to be a Special Purpose Entity, and
(ii) Principal is, shall be and shall continue to be a Special Purpose Entity.
          (b) The representations, warranties and covenants set forth in
Section 4.1.30(a) shall survive for so long as any amount remains payable to
Lender under this Agreement or any other Loan Document.
          (c) All of the assumptions made in the Insolvency Opinion, including,
but not limited to, any exhibits attached thereto, are true and correct in all
respects and any assumptions made in any subsequent non-consolidation opinion
required to be delivered in connection with the Loan Documents (an “Additional
Insolvency Opinion”), including, but not limited to, any exhibits attached
thereto, will have been and shall be true and correct in all respects. Borrower
has complied and will comply with, and Principal has complied and Borrower will
cause Principal to comply with, all of the assumptions made with respect to
Borrower and Principal in the Insolvency Opinion. Borrower will have complied
and will comply with all of the assumptions made with respect to Borrower and
Principal in any Additional Insolvency Opinion. Each entity other than Borrower
and Principal with respect to

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which an assumption shall be made in any Additional Insolvency Opinion will have
complied and will comply with all of the assumptions made with respect to it in
any Additional Insolvency Opinion.
               4.1.31. Management. Owner is not a party to any property
management agreements with respect to any of the Individual Properties.
               4.1.32. Illegal Activity. No portion of any Individual Property
has been or will be purchased by Owner with proceeds of any illegal activity.
               4.1.33. No Change in Facts or Circumstances; Disclosure. All
information submitted by Borrower or Owner to Lender and in all financial
statements, rent rolls, Occupancy Reports, other reports, certificates and other
documents submitted in connection with the Loan or in satisfaction of the terms
thereof and all statements of fact made by Borrower in this Agreement or in any
other Loan Document, are accurate, complete and correct in all material
respects. There has been no material adverse change in any condition, fact,
circumstance or event that would make any such information inaccurate,
incomplete or otherwise misleading in any material respect in light of the
circumstances known by Borrower to be existing at the time such information was
submitted. Borrower has disclosed to Lender all material facts and has not
failed to disclose any material fact that could cause any Provided Information
or representation or warranty made herein to be materially misleading at the
time made or provided.
               4.1.34. Investment Company Act. Borrower is not (a) required to
be registered as an “investment company” or a company “controlled” by a Person
required to be registered as an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; (b) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (c) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
               4.1.35. Embargoed Person. At all times throughout the term of the
Loan, including after giving effect to any Transfers permitted pursuant to the
Loan Documents, (a) none of the funds or other assets of Borrower, Principal and
Guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to trade restrictions
under U.S. law, including, but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act,
50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
thereunder with the result that the investment in Borrower, Principal or
Guarantor, as applicable (whether directly or indirectly), is prohibited by law
or the Loan made by the Lender is in violation of law (“Embargoed Person”);
(b) no Embargoed Person has any interest of any nature whatsoever in Borrower,
Principal or Guarantor, as applicable, with the result that the investment in
Borrower, Principal or Guarantor, as applicable (whether directly or
indirectly), is prohibited by law or the Loan is in violation of law; and
(c) none of the funds of Borrower, Principal or Guarantor, as applicable, have
been derived from any unlawful activity with the result that the investment in
Borrower, Principal or Guarantor, as applicable (whether directly or
indirectly), is prohibited by law or the Loan is in violation of law.

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               4.1.36. Cash Management Account. (a) This Agreement, together
with the other Loan Documents, creates a valid and continuing security interest
(as defined in the Uniform Commercial Code of the State of Delaware) in the Cash
Management Account in favor of Lender, which security interest is prior to all
other Liens, other than Permitted Encumbrances, and is enforceable as such
against creditors of and purchasers from Borrower. Other than in connection with
the Loan Documents and except for Permitted Encumbrances, Borrower has not sold
or otherwise conveyed the Cash Management Account;
          (b) The Cash Management Account constitute a “deposit account” or
“securities account” within the meaning of the Uniform Commercial Code of the
State of Delaware);
          (c) The Cash Management Account is not in the name of any Person other
than Borrower or its designee approved by Lender, as pledgor, or Lender, as
pledgee.
          Section 4.2. Health Care Representations. Notwithstanding anything
contained in this Section 4.2 to the contrary, (i) with respect to each
Individual Property that is subject to an Effective Operating Lease, any breach
of the representations, warranties, covenants or agreements set forth in this
Section 4.2 which does not have and which would not reasonably be expected to
have a Material Adverse Effect, such breach shall not be a Default or an Event
of Default hereunder as long as Borrower is using reasonable and diligent
efforts to cause Owner to enforce its rights under the applicable Effective
Operating Lease to cause the Operator Tenant thereunder to cure such breach and
(ii) with respect to each Individual Property that is a LC Covered Property, any
breach of the representations, warranties, covenants or agreements set forth in
this Section 4.2 which does not subject Lender to any criminal liability shall
not be a Default hereunder as long as such Individual Property remains an LC
Covered Property.
          Borrower, for itself and its successors and assigns, does hereby
represent and warrant to Lender, its successors and assigns, as of March 29,
2007, and except as set forth on Schedule VI attached hereto, that:
          (a) To Borrower’s actual knowledge, all Medicare and Medicaid provider
agreements, certificates of need, if applicable, certifications, governmental
licenses, permits, regulatory agreements or other agreements and approvals,
including certificates of operation, completion and occupancy, and state nursing
facility licenses or other licenses required by Health Care Authorities for the
legal use, occupancy and operation of each Facility (collectively, the “Health
Care Licenses”) have been obtained and are in full force and effect, including
approved provider status in any approved provider payor program. To Borrower’s
actual knowledge, Owner or Operator Tenants own and possess and hold free from
restrictions or conflicts with the rights of others, all such Health Care
Licenses and will operate or cause each Facility to be operated in such a manner
that the Health Care Licenses shall remain in full force and effect;
          (b) Each Facility is duly licensed as a skilled nursing facility or
assisted living facility as required under the applicable laws of the state in
which such Facility is located. The licensed bed capacity of each Facility is as
set forth on Schedule V attached hereto.

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Neither Owner nor, to the actual knowledge of Borrower, any Operator Tenant, nor
the manager of the operations or Facility has applied to reduce the number of
licensed or certified beds of any Facility or to move or transfer the right to
any and all of the licensed or certified beds of any Facility to any other
location or to amend or otherwise change any Facility and/or the number of beds
approved by the state health department or equivalent (or any subdivision) or
other applicable state licensing agency, and there are no proceedings or actions
pending or contemplated to reduce the number of licensed or certified beds of
any Facility;
          (c) To the actual knowledge of Borrower, each License with respect to
a Facility (i) has not been (A) transferred to any location other than the
applicable Facility or (B) pledged as collateral security, (ii) is held free
from restrictions or known conflicts that would materially impair the use or
operation of the applicable Facility as intended, and (iii) is not provisional,
probationary, or restricted in any way, except in instances where a Governmental
Authority or Health Care Authority has issued a provisional, probationary or
restricted license, permit or certification in the ordinary course pending
issuance of a final license, permit or certification;
          (d) To the actual knowledge of Borrower, no Tenant, Operator Tenant
and/or the manager of the operations, or Facility has taken any action to
rescind, withdraw, revoke, amend, modify, supplement or otherwise alter the
nature, tenor or scope of any License or applicable provider payment program
participation;
          (e) To the actual knowledge of Borrower, Owner, each Operator Tenant,
and/or the manager of the operations (and the operation of each Facility) are in
material compliance with the applicable provisions of the laws, ordinances,
statutes, regulations, orders, standards, policies, restrictions or rules of any
Health Care Authority having jurisdiction over the ownership, use, occupancy or
operation of any Facility, including (i) staffing requirements, (ii) health and
fire safety codes including quality and safety standards, (iii) accepted
professional standards and principles that apply to professionals providing
services at each Facility, (iv) federal, state or local laws, rules, regulations
or published interpretations or policies relating to the prevention of fraud and
abuse, (v) insurance, reimbursement and cost reporting requirements, government
payment program requirements and disclosure of ownership and related information
requirements, (vi) requirements of applicable Health Care Authorities, including
those relating to each Facility’s physical structure and environment, licensing,
quality and adequacy of medical care, distributions of pharmaceuticals, rate
setting, equipment, personnel, operating policies, additions of Facilities and
services and fee splitting, and (vii) any other applicable laws, regulations or
agreements for reimbursement for the type of care or services provided by
Operator Tenants and/or the manager of the operations with respect to each
Facility. As used in Sections 4.2(e) and 4.2(f), “material compliance” means a
level of compliance that would keep the Borrower, Operator Tenants, and/or the
manager of the operations (and the operation of the Facility) free from any
proceedings or sanctions by any Governmental Authority or Health Care Authority
having jurisdiction over the operation of any Facility and would not adversely
affect Owner’s, each Operator’s Tenant’s and/or the manager’s operations,
including, but not limited to, its right to receive reimbursement or insurance
payments;

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          (f) To Borrower’s actual knowledge, Owner, each Operator Tenant,
and/or the manager of the operations are each in material compliance with the
requirements for participation in the Medicare and Medicaid programs with
respect to each Facility that currently participates in such programs and has a
current provider agreement under Title XVIII and/or XIX of the Social Security
Act which is in full force and effect. To Borrower’s actual knowledge, none of
Owner, any Operator Tenant nor the manager of the operations has had any
deficiencies on its most recent survey (standard or complaint) that would result
in a denial of payment for new admissions with no opportunity to correct prior
to termination, and no statement of charges or deficiencies has been made and no
penalty enforcement action has been taken under the last survey cycle. To
Borrower’s actual knowledge, none of Owner, any Operator Tenant nor the manager
of the operations had any deficiencies at “level G” or above on its most recent
survey (standard or complaint), nor has Operator or the manager of the
operations been cited with any substandard quality of care deficiencies (as that
term is defined in Part 488 of 42 C.F.R.) for the past two consecutive surveys.
To Borrower’s actual knowledge, no Facility has been the subject of a “double G”
determination for the last three (3) years. To Borrower’s actual knowledge, no
Facility has been designated as a Special Focus Facility (as such term is
defined by the Centers of Medicare and Medicaid Service Special Focus Facility
Program);
          (g) None of Owner, or, to Borrower’s actual knowledge, any Operator
Tenant nor the manager of the operations is a target of, participant in, or
subject to any action, proceeding, suit, audit, investigation or sanction by any
Health Care Authority or any other administrative or investigative body or
entity or any other third party or any patient or resident (including, without
limitation, whistleblower suits, or suits brought pursuant to federal or state
False Claims Acts, and Medicaid/Medicare/State fraud/abuse laws) which could
reasonably be expected to result, directly or indirectly or with the passage of
time, in the imposition of a fine, penalty, alternative, interim or final
sanction, a lower rate certification, recoupment, recovery, suspension or
discontinuance of all or part of reimbursement from any Health Care Authority,
third-party payor, insurance carrier or private payor, a lower reimbursement
rate for services rendered to eligible patients, or any other civil or criminal
remedy, or which could reasonably be expected to have a material adverse effect
on Owner, Borrower, any Operator Tenant, and/or the manager of the operations,
or the operation of any Facility, including any Facility’s ability to accept or
retain residents, or which could result in the appointment of a receiver or
manager, or in the modification, limitation, annulment, revocation, transfer,
surrender, suspension or other impairment of a License, or affect Owner’s,
Borrower’s, any Operator Tenants and/or manager’s participation in the Medicare,
Medicaid, or third-party payor program, as applicable, or any successor program
thereto, at current rate certification, nor has any such action, proceeding,
suit, investigation or audit been threatened;
          (h) To Borrower’s actual knowledge, there are no agreements with
residents of any Facility, or with any other persons or organizations, that
deviate in any material adverse respect from, or that conflict with, any
statutory or regulatory requirements; and all resident records at each Facility,
including patient and/or resident accounts records, are true, complete, and
correct in all material respects;
          (i) Neither the execution and delivery of the Note, this Agreement,
the Pledge or the other Loan Documents, Borrower’s performance thereunder,
(i) adversely affects

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Owner’s, any Operator Tenant’s or manager’s right to receive Medicaid, Medicare,
insurance company, managed care company, or other third-party insurance payments
or reimbursements or to receive private payor payments or reimbursements,
(ii) materially reduces the Medicaid, Medicare, insurance company, managed care
company, or other third-party insurance payments or reimbursements or materially
reduce private payor payments or reimbursements which Owner, any Operator
Tenant, or manager is receiving as of the date hereof, or (iii) adversely
affects the Health Care Licenses. As used in this Section 4.2(i), “materially
reduce” means any change, effect, event, circumstance, occurrence or state of
facts that is adverse to the financial condition or results of operations of any
Facility.
          (j) Other than the Medicare and Medicaid programs, neither Owner nor,
to Borrower’s actual knowledge, any Operator Tenant nor the manager of the
operations is a participant in any federal, state or local program whereby any
federal, state or local government or quasi-governmental body, or any
intermediary, agency, board or other authority or entity has the right to
recover funds with respect to any Individual Property by reason of the advance
of federal, state or local funds, including, without limitation, those
authorized under the Hill-Burton Act (42 U.S.C. 291, et seq.). Neither Borrower
nor Owner has received any notice, or is aware of any violation of applicable
antitrust laws by any Operator Tenant with respect to the Properties;
          (k) Except as set forth in Schedule VI attached hereto, Owner and, to
Borrower’s actual knowledge, Operator Tenant’s and manager’s private payor,
Medicaid, Medicare, and/or managed care company, insurance company or other
third-party insurance accounts receivable with respect to each Individual
Property are free of any liens and neither Owner, nor, to Borrower’s actual
knowledge, any Operator Tenant, or manager has pledged any of its receivables as
collateral security for any loan or indebtedness;
          (l) To Borrower’s actual knowledge, none of Owner, any Operator Tenant
nor the manager of the operations is a party to any collective bargaining
agreement or other labor contract applicable to persons employed by it at any
Facility and there are no threatened or pending labor disputes at any Facility;
          (m) Owner, and, to Borrower’s actual knowledge, each Operator Tenant
and/or the manager of the operations each have instituted, and each Facility is
operated in material compliance with, a compliance plan which follows applicable
guidelines established by Health Care Authorities;
          (n) Owner, and, to Borrower’s actual knowledge, each Operator Tenant
and/or the manager of the operations are in compliance with the Healthcare
Insurance Portability and Accountability Act of 1996, and the regulations
promulgated thereunder;
          (o) To Borrower’s actual knowledge, there is no threatened or pending
revocation, suspension, termination, probation, restriction, limitation, or
non-renewal affecting Owner, any Operator Tenant, and/or the manager of the
operations, or any Facility or provider agreement with any third-party payor,
Medicare or Medicaid;

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          (p) To Borrower’s actual knowledge, all Medicare, Medicaid, and
private insurance cost reports and financial reports submitted by or on behalf
of each Facility are materially accurate and complete and have not been
misleading in any material respects, (i) there are no current, pending or
outstanding Medicare, Medicaid or Third-Party Payor Programs reimbursement
audits or appeals pending at any of the Facilities, (ii) there are no cost
report years that are subject to audits, no cost reports remain “open” or
unsettled, and (iii) there are no current or pending Medicare, Medicaid or
third-party payor programs recoupment efforts at any Facility;
          (q) To Borrower’s actual knowledge, each Facility and the use thereof
complies in all material respects with all applicable local, state, and federal
building codes, fire codes, health care, nursing facility, and other similar
regulatory requirements and no waivers of such physical plant standards exist at
any of the Facilities;
          (r) To Borrower’s actual knowledge, any existing agreement relating to
the management or operation of each Facility is in full force and effect and is
not in default by any party. In the event any management or operating agreement
is terminated or in the event of foreclosure or other acquisition, the
subsequent operator or manager need not obtain a certificate of need prior to
applying for and receiving a license to operate a Facility or prior to receiving
Medicare or Medicaid payments, as applicable;
          (s) None of Owner, or to Borrower’s actual knowledge, any Operator
Tenant or the manager of the operations, nor any Facility has or will, other
than in the normal course of business, change the terms of any of the Medicare,
Medicaid or third-party payor programs or its normal billing payment or
reimbursement policies and related procedures, including the amount and timing
of finance charges, fees and write-offs; and
          (t) To Borrower’s actual knowledge, Borrower has delivered to Lender a
true, correct and complete Occupancy Report for each Individual Property.
          (u) Litigation. To Borrower’s actual knowledge, there are no actions
suits or proceedings at law or in equity by any person or entity, including any
Governmental Authority or any Health Care Authority or other agency now pending
or threatened against or affecting Borrower, Owner any Operator Tenant and/or
the manager of the operations, or Facility, which actions, suits or proceedings,
individually or collectively, if determined against Borrower, Owner, any
Operator Tenant and/or the manager of the operations, or Facility, might
materially adversely affect the condition (financial or otherwise or business of
Borrower, Owner, Master Tenant, any Operator Tenant and/or the manager of the
operations, or the condition or ownership of any Facility.
          Section 4.3. Survival of Representations. Borrower agrees that all of
the representations and warranties of Borrower set forth in Sections 4.1 and 4.2
and elsewhere in this Agreement and in the other Loan Documents shall survive
for so long as any amount remains owing to Lender under this Agreement or any of
the other Loan Documents by Borrower; provided that they are and shall be deemed
made solely as of the March 29, 2007. All representations, warranties, covenants
and agreements made in this Agreement or in the

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other Loan Documents by Borrower shall be deemed to have been relied upon by
Lender notwithstanding any investigation heretofore or hereafter made by Lender
or on its behalf.
          V. BORROWER COVENANTS
          Section 5.1. Affirmative Covenants. From the date hereof and until
payment and performance in full of all obligations of Borrower under the Loan
Documents or the earlier release of the Liens of the Pledge encumbering the
Collateral (and all related obligations) in accordance with the terms of this
Agreement and the other Loan Documents, Borrower hereby covenants and agrees
with Lender that:
               5.1.1. Existence; Compliance with Legal Requirements.
(a) Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its and Owner’s existence, material
rights, licenses, permits and franchises and comply with all Legal Requirements
and all Health Care Requirements of all Governmental Authorities and Health Care
Authorities applicable to Borrower or Owner including, without limitation,
Prescribed Laws. Borrower shall use reasonable and diligent efforts to enforce
the terms and provisions of the Operating Leases requiring Operator Tenants to
do all things necessary to preserve, renew and keep in full force and effect all
licenses and permits required to operate a skilled nursing facility or an
assisted living facility on the Properties and to comply with all Legal
Requirements and all Health Care Requirements of all Governmental Authorities
and Health Care Authorities applicable to Operator Tenants and the Properties,
including, without limitation, Prescribed Laws. Borrower shall keep and
maintain, or shall cause Owner or Operator Tenants to keep and maintain, in full
force and effect all Licenses and Health Care Licenses necessary for the
operation of the Facility on each Individual Property. Borrower shall cause the
Facility located on the applicable Individual Property to remain in operation
without interruption in accordance with all Legal Requirements and Health Care
Requirements. There shall never be committed by Borrower or Owner and Borrower
shall not permit Owner or any Operator Tenant any other Person in occupancy of
or involved with the operation or use of the Properties to commit any act or
omission affording the federal government or any state or local government the
right of forfeiture against any Individual Property or any part thereof or any
monies paid in performance of Borrower’s obligations under any of the Loan
Documents. Borrower hereby covenants and agrees not to commit, permit or suffer
to exist any act or omission affording such right of forfeiture. Borrower shall
at all times maintain, preserve and protect all material franchises and trade
names and preserve all the remainder of its material property used or useful in
the conduct of its or Owner’s business and shall keep the Properties in good
working order and repair, and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in the Mortgages. Borrower
shall keep the Properties insured at all times, as is more fully provided in
this Agreement. Borrower shall use reasonable efforts to cause any Individual
Property that is the subject of the O&M Agreement to be operated in accordance
with the terms and provisions thereof in all material respects. After prior
notice to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding promptly initiated and conducted in good faith and with due
diligence, the validity of any Legal Requirement or Health Care Requirement, the
applicability of any Legal Requirement or Health Care Requirement to Borrower,
any Operator Tenant or any Individual Property or any alleged violation of any
Legal Requirement or Health Care Requirement, provided that (i) intentionally
omitted; (ii)  such

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proceeding shall be conducted in accordance with all applicable statutes, laws
and ordinances; (iii) no Individual Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, cancelled or
lost; (iv) Borrower shall promptly upon final determination thereof comply with
any such Legal Requirement or Health Care Requirement determined to be valid or
applicable or cure any violation of any Legal Requirement or Health Care
Requirement; (v) if such Legal Requirement has not been complied with, such
proceeding shall suspend the enforcement of the contested Legal Requirement or
Health Care Requirement against Borrower and any Individual Property; and
(vi) Borrower shall furnish such security as is required in the proceeding, or
as is reasonably requested by Lender, to insure compliance with such Legal
Requirement or Health Care Requirement, together with all interest and penalties
payable in connection therewith. Lender may apply any such security, as
necessary to cause compliance with such Legal Requirement at any time when, in
the reasonable judgment of Lender, the validity, applicability or violation of
such Legal Requirement or Health Care Requirement is finally established or any
Individual Property (or any part thereof or interest therein) shall be in danger
of being sold, forfeited, terminated, cancelled or lost. Notwithstanding the
foregoing, no such security will be required if Owner has provided security for
such Alteration to Senior Lender pursuant to the Senior Loan Documents.
          (b) Notwithstanding anything contained in this Section 5.1.1 to the
contrary, (i) with respect to each Individual Property that is subject to an
Effective Operating Lease or (ii) an LC Covered Property, any breach of the
covenants or agreements set forth in this Section 5.1.1 which does not have and
which would not reasonably be expected to have a Material Adverse Effect, such
breach shall not be a Default or Event of Default as long as Borrower is using
reasonable and diligent efforts to enforce Owner’s rights under the applicable
Effective Operating Lease to cause the Operator Tenant thereunder to cure such
breach and (ii) with respect to each Individual Property that is a LC Covered
Property, any breach of the covenants or agreements set forth in this
Section 5.1.1 which does not subject Lender to any criminal liability shall not
be a Default hereunder as long as such Individual Property remains an LC Covered
Property.
     5.1.2. Taxes and Other Charges. Borrower shall pay or shall cause Owner or
Operator Tenants to pay all Taxes and Other Charges now or hereafter levied or
assessed or imposed against the Properties or any part thereof prior to
delinquency. Borrower shall furnish to Lender receipts or other reasonable
evidence for the payment of Taxes and Other Charges within five (5) days of
Lender’s written request after the same shall become delinquent. Borrower shall
promptly cause to be paid and discharged any Lien or charge whatsoever which may
be or become a Lien or charge against the Properties. After prior notice to
Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (a) intentionally omitted; (b) such
proceedings shall be conducted in accordance with all applicable statutes, laws
and ordinances; (c) no Individual Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, cancelled or
lost by reason thereof; (d) Borrower shall promptly upon final determination
thereof pay the amount of any such Taxes or Other Charges, together with all
costs, interest and penalties which are payable in connection therewith; (e) if
such Taxes have not been paid, such proceeding shall suspend the collection of
such contested Taxes or Other Charges from the applicable Individual Property;
and (f) Borrower shall furnish such security as

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is required in the proceeding, or as is reasonably requested by Lender, to
insure the payment of any such Taxes or Other Charges, if found to be valid,
together with all interest and penalties thereon. Lender may pay over any such
cash deposit or part thereof held by Lender to the claimant entitled thereto at
any time when, in the reasonable judgment of Lender, the entitlement of such
claimant is established or any Individual Property (or part thereof or interest
therein) shall be in danger of being sold, forfeited, terminated, cancelled or
lost or there shall be any danger of the Lien of any Mortgage being primed by
any related Lien. Notwithstanding the foregoing, no such security will be
required if Owner has provided security for such Alteration to Senior Lender
pursuant to the Senior Loan Documents.
               5.1.3. Litigation. Borrower shall give prompt notice to Lender of
any litigation or governmental proceedings of which Borrower has knowledge which
is pending or threatened against Borrower, Owner, Principal, any Operator Tenant
or Guarantor which could reasonably be expected to materially adversely affect
Borrower’s, Owner’s, Principal’s or Guarantor’s condition (financial or
otherwise) or business or any Individual Property.
               5.1.4. Access to Properties. Subject to the rights of Operator
Tenants under the Operating Leases Borrower shall and shall cause Owner to
permit agents, representatives and employees of Lender to inspect the Properties
or any part thereof at reasonable hours upon reasonable advance notice.
               5.1.5. Notice of Default. Borrower shall promptly advise Lender
of any material adverse change in Borrower’s, Owner’s, Principal’s any Operator
Tenant’s or Guarantor’s condition, financial or otherwise, or of the occurrence
of any Default or Event of Default of which Borrower has knowledge.
               5.1.6. Cooperate in Legal Proceedings. Borrower shall and shall
cause Owner to cooperate fully with Lender with respect to any proceedings
before any court, board or other Governmental Authority or Health Care Authority
which could reasonably be expected to materially adversely affect the rights of
Lender hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
               5.1.7. Perform Loan Documents. Borrower shall observe, perform
and satisfy all the terms, provisions, covenants and conditions of, and shall
pay when due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
               5.1.8. Award and Insurance Benefits. Borrower shall and shall
cause Owner to cooperate with Lender in obtaining for Lender the benefits of any
Awards or Insurance Proceeds to which Lender is entitled under this Agreement
which are lawfully or equitably payable in connection with any Individual
Property, and Lender shall be reimbursed for any reasonable expenses incurred in
connection therewith (including reasonable attorneys’ fees and disbursements,
and the payment by Borrower of the expense of an appraisal on behalf of and
reasonably requested by Lender in case of Casualty or Condemnation affecting any
Individual Property or any part thereof) out of such Insurance Proceeds.

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               5.1.9. Further Assurances. Borrower shall and shall cause Owner
to, at Borrower’s sole cost and expense:
          (a) furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document, certificate, agreement and instrument required to be furnished
by Borrower pursuant to the terms of the Loan Documents or which are reasonably
requested by Lender in connection therewith;
          (b) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts reasonably
necessary or desirable, to evidence, preserve and/or protect the collateral at
any time securing or intended to secure the obligations of Borrower under the
Loan Documents promptly following written request of Lender; and
          (c) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents promptly
following written request of Lender.
               5.1.10. Mortgage Tax. Intentionally Omitted.
               5.1.11. Financial Reporting. (a) Borrower will keep and maintain
or will cause to be kept and maintained on a Fiscal Year basis, in accordance
with GAAP (or such other accounting basis acceptable to Lender), proper and
accurate books, records and accounts reflecting all of the financial affairs of
Borrower and Owner and all items of income and expense payable or paid to or by
Owner in connection with Owner’s ownership of the Properties. Lender shall have
the right from time to time at all times during normal business hours upon
reasonable notice to examine such books, records and accounts at the office of
Borrower or any other Person maintaining such books, records and accounts and to
make such copies or extracts thereof as Lender shall desire. After the
occurrence and during the continuance of an Event of Default, Borrower shall pay
any costs and expenses incurred by Lender to examine Borrower’s accounting
records, as Lender shall determine to be necessary or appropriate in the
protection of Lender’s interest.
          (b) Commencing with the fiscal year ending on December 31, 2007,
Borrower will furnish to Lender annually, within one hundred twenty (120) days
following the end of each Fiscal Year of Borrower, a complete copy of Borrower’s
and Owner’s consolidated annual financial statements audited by Ernst & Young,
another “Big Four” accounting firm or other independent certified public
accountant acceptable to Lender in accordance with GAAP (or such other
accounting basis acceptable to Lender) including a worksheet covering the
combined Owner for such Fiscal Year and containing statements of profit and loss
and a balance sheet for Borrower and Owner. Such statements shall set forth the
financial condition and the results of operations of Borrower and Owner for such
Fiscal Year. Borrower’s and Owner annual financial statements shall each be
accompanied by (i) an unqualified opinion of a “Big Four” accounting firm or
other independent certified public accountant reasonably acceptable to Lender,
(ii) a list of tenants, under Operating Leases, (iii) a breakdown showing

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the year in which each Lease then in effect expires, and (iv) an Officer’s
Certificate certifying that each annual financial statement presents fairly the
financial condition and the results of operations of Borrower or Owner, as
applicable, and that such financial statements have been prepared in accordance
with GAAP and as of the date thereof whether there exists an event or
circumstance which constitutes an Event of Default under the Loan Documents
executed and delivered by, or applicable to, Borrower or Owner, as applicable,
and if such Event of Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy the same.
          (c) Borrower will furnish, or cause to be furnished, to Lender on or
before sixty (60) days after the end of each the first three calendar quarters,
and one hundred (100) days after the end of each calendar year, the following
items, accompanied by an Officer’s Certificate stating that such items (other
than the items described in clause (ii) below and the Debt Service Coverage
Ratio) are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of Borrower on a combined
basis as well as each Individual Property (subject to normal year-end
adjustments) as applicable: (i) a rent roll for the subject calendar quarter
(with respect to those Operating Leases of which Borrower is the landlord);
(ii) to the extent such information is available to Borrower, quarterly and
year-to-date operating statements (including Capital Expenditures) prepared for
each calendar month, noting Net Operating Income, Gross Income from Operations,
and Operating Expenses (not including any contributions to the Replacement
Reserve Fund and the Rollover Reserve Fund), and, upon Lender’s request, other
information reasonably necessary to fairly represent the financial condition and
results of Borrower during such calendar month, and containing a comparison of
budgeted income and expenses and the actual income and expenses together with a
detailed explanation of any variances of five percent (5%) or more between
budgeted and actual amounts for such periods, all in form reasonably
satisfactory to Lender; and (iii) a calculation reflecting the annual Lease Debt
Service Coverage Ratio and, to the extent such information is available to
Borrower, Debt Service Coverage Ratio for the immediately preceding twelve (12)
month period as of the last day of such calendar quarter. In addition, such
Officer’s Certificate shall also state that the representations and warranties
of Borrower set forth in Section 4.1.30 are true and correct as of the date of
such certificate and that there are no trade payables of Borrower outstanding
for more than sixty (60) days, other than those which are being contested in
good faith.
          (d) With respect to each Individual Property subject to an Operating
Lease, Borrower will use reasonable and diligent efforts (subject to the terms
and provisions of the applicable Operating Lease) to obtain from the applicable
Operator Tenant and deliver to Lender income and expense statements, a statement
showing Net Cash Flow, Net Operating Income, Gross Income from Operations and
Operating Expenses (audited if available) and all other financial information or
documents relating to such Individual Property reasonably requested by Lender.
Borrower shall not be obligated to prepare or provide any financial statements
or information pursuant to this Section 5.1.11 with respect to the operation by
Operating Tenants of any of the Individual Properties except those obtained by
Borrower pursuant to the foregoing sentence.
          (e) Intentionally omitted.

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          (f) Intentionally omitted.
          (g) Intentionally omitted.
          (h) Intentionally omitted.
          (i) Intentionally omitted.
          (j) Borrower shall furnish Lender, within ten (10) days of the receipt
by Borrower or Owner, any and all notices (regardless of form) from any Health
Care Authority and/or any insurance company, managed care company, or other
third-party payor that any Operator Tenant’s license, Medicare or Medicaid
certification, or accreditation or ranking by any Health Care Authority,
insurance company, managed care company, or other third-party payor is being, or
could be, downgraded, revoked, or suspended, that action is pending, being
considered or being, or could be, taken to downgrade, revoke, or suspend such
license or certification or to fine, penalize or impose remedies upon the
Operator Tenant, or that action is pending, being considered, or being, or could
be, taken, to discontinue, suspend, deny, decrease or recoup any payments due,
made or coming due to the Operator Tenants or related to the operation of any
Individual Property.
          (k) Borrower shall use reasonable and diligent efforts to cause each
Operator Tenant to file all required Medicare or Medicaid cost reports on or
prior to the date such reports are due and, upon written request from Lender,
shall furnish Lender, within thirty (30) days of the date of filing, or, in the
event such filing is made by an Operator Tenant, within thirty (30) days of
receipt by Borrower or Owner, a complete and accurate copy of such annual
Medicare or Medicaid cost report in Borrower’s or Owner’s possession or control,
and promptly furnish Lender any amendments filed with respect to such reports
and all notices, responses, audit reports or inquiries with respect to such
reports.
          (l) If received by Borrower or Owner from an Operator Tenant, Borrower
shall furnish Lender, within thirty (30) days of the receipt by Borrower or
Owner, the annual Medicaid and Medicare provider agreement(s) and the annual
Medicaid and Medicare reimbursement rate sheets. Borrower shall cause Owner to
use reasonable efforts to obtain the items referenced in this clause.
          (m) Borrower shall furnish Lender, within ten (10) Business Days of
receipt by Borrower or Owner, a copy of any Medicare, Medicaid or other
licensing or accreditation or ranking agency or entity survey, report, warning
letter, or notice, and any statement of deficiencies, and within the time period
required by the particular agency for furnishing a plan of correction also
furnish or cause to be furnished to Lender a copy of the plan of correction
generated from such survey, report, warning letter, or notice for Owner or such
Operator Tenant and by subsequent correspondence related thereto, and correct or
cause to be corrected any deficiency, the curing of which is a condition of
continued licensure or of full participation in Medicare or Medicaid or a care
program offered by an insurance company, managed care company, or other
third-party payor by the date required for cure by such agency or entity (plus
extensions granted by such agency or entity). Notwithstanding anything contained
in this clause (m) to the contrary, with respect to each Individual Property
that is

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subject to an Effective Operating Lease, any breach of the covenant to correct
or cause to be corrected any deficiency as set forth in this clause (m) which
does not have and which would not reasonably be expected to have a Material
Adverse Effect, such breach shall not be a Default or Event of Default hereunder
as long as Owner is using reasonable and diligent efforts to enforce its rights
under the applicable Effective Operating Lease to cause the Operator Tenant
thereunder to cure such breach.
          (n) Borrower shall furnish Lender, within ten (10) days of receipt by
Borrower or Owner, any other notices or charges issued relating to the
non-compliance by Owner or any Operator Tenant with any Health Care Authority,
insurance company, managed care company, or other third-party payor laws,
regulations, requirements, licenses, permits, certificates, authorizations or
approvals.
          (o) Borrower shall furnish Lender, within ten (10) days of receipt by
Borrower or Owner, any new, revised or amended Medicare or Medicaid
reimbursement rate sheets for Owner or any Operator Tenant which may be issued
subsequent to the annual reimbursement rate sheets.
          (p) Any reports, statements or other information required to be
delivered under this Agreement shall, at Borrower’s option, be delivered (i) in
paper form, (ii) on a diskette, and (iii) if requested by Lender and within the
capabilities of Borrower’s or Owner’s data systems without change or
modification thereto, in electronic form and prepared using a Microsoft Word for
Windows or WordPerfect for Windows files (which files may be prepared using a
spreadsheet program and saved as word processing files). Borrower agrees that
Lender may disclose information regarding the Properties, Owner and Borrower
that is provided to Lender pursuant to this Section in connection with the
Securitization to such parties requesting such information in connection with
such Securitization.
               5.1.12. Business and Operations. Borrower will continue to engage
in the businesses presently conducted by it as and to the extent the same are
necessary for the ownership and leasing of the Properties by Owner. Borrower
will qualify to do business and will remain in good standing under the laws of
each jurisdiction as and to the extent the same are required for the ownership
and leasing of the Properties.
               5.1.13. Title to the Properties. Borrower will warrant and defend
(a) the title of Owner to each Individual Property and every part thereof,
subject only to the Permitted Encumbrances (b) the title of Borrower to the
Collateral, subject only to the Permitted Encumbrances and (c) the validity and
priority of the Liens of the Mortgages and the Assignments of Leases, subject
only to the Permitted Encumbrances, in each case against the claims of all
Persons whomsoever. Borrower shall reimburse Lender for any losses, costs,
damages or expenses (including reasonable attorneys’ fees and court costs)
incurred by Lender if an interest in the Collateral or any part thereof, other
than as permitted hereunder, is claimed by another Person.
               5.1.14. Costs of Enforcement. In the event (a) that any Security
Document is foreclosed in whole or in part or any Security Document is put into
the hands of an attorney for collection, suit, action or foreclosure, (b) of the
foreclosure of any pledge agreement prior to

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or subsequent to the Pledge in which proceeding Lender is made a party, or
(c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Borrower, Principal or Guarantor or an assignment by Borrower,
Principal or Guarantor for the benefit of their creditors, Borrower, its
successors or assigns, shall be chargeable with and agrees to pay all reasonable
costs of collection and defense, including reasonable attorneys’ fees and costs,
incurred by Lender or Borrower in connection therewith and in connection with
any appellate proceeding or post-judgment action involved therein, together with
all required service or use taxes.
               5.1.15. Estoppel Statement. (a) After written request by Lender,
Borrower shall within ten (10) Business Days furnish Lender with a statement,
duly certified, setting forth (i) the original principal amount of the Loan,
(ii) to Borrower’s knowledge, the then unpaid principal amount of the Loan,
(iii) the Applicable Interest Rate of the Loan, (iv) to Borrower’s knowledge,
the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any then known, and (vi) that
the Loan Documents are valid, legal and binding obligations of the parties
thereto and have not been modified or if modified, giving particulars of such
modification.
          (b) Following a written request from Lender, Borrower shall cause
Owner to use reasonable efforts to obtain from Tenant and shall deliver to
Lender estoppel certificates from each Operator Tenant with respect to the
Operating Leases in form and substance reasonably satisfactory to Lender
provided that Borrower shall not be required to deliver such certificates from
any Operator Tenant more frequently than two (2) times in any calendar year.
               5.1.16. Loan Proceeds. Borrower shall use the proceeds of the
Loan received by it on the Closing Date only for the purposes set forth in
Section 2.1.4.
               5.1.17. Performance by Borrower. Borrower shall in a timely
manner observe, perform and fulfill each and every covenant, term and provision
of each Loan Document executed and delivered by, or applicable to, Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document executed and
delivered by, or applicable to, Borrower without the prior consent of Lender.
               5.1.18. Intentionally Omitted.
               5.1.19. No Joint Assessment. Each of Borrower and Owner shall not
suffer, permit or initiate the joint assessment of any Individual Property
(a) with any other real property constituting a tax lot separate from such
Individual Property, and (b) which constitutes real property with any portion of
such Individual Property which may be deemed to constitute personal property, or
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to such real
property portion of the Individual Property.
               5.1.20. Leasing Matters. (a) Borrower shall not permit Owner to
execute any Lease or license agreement for all or any portion of any Individual
Property (a “New Lease”), except for any Non-Material Lease, without Lender’s
prior written consent, which

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consent of Lender will not, be unreasonably withheld if the Lease complies with
the requirements of the first sentence of clause (b) below (and, with respect to
a Major Lease, if a Securitization shall have occurred, Borrower shall have
obtained and delivered to Lender prior written confirmation from the applicable
Rating Agencies that such New Lease will not cause a downgrade, withdrawal or
qualification of the then-current ratings of the Securities or any class
thereof); provided, however, that, so long as there is no material adverse
economic effect on the subject Lease, it shall be unreasonable for Lender to
premise its refusal to consent to any New Lease proposed by Borrower or any
provision or characteristic of such new Lease which is reasonably necessary,
within the reasonable discretion of Borrower, to preserve the status of
CapitalSource Inc. (or any of its Affiliates) as a REIT. Borrower shall at all
times cause Owner to promptly and faithfully perform (or cause to be performed)
in all material respects, all of the covenants, conditions and agreements
contained in each Lease, now or hereafter existing, except for any Non-Material
Lease, on the part of the landlord and tenant thereunder to be kept and
performed. Borrower shall cause Owner to use commercially reasonable efforts to
ensure that no act or omission of Owner will result in a material default by
Owner under any Lease or allow the tenant thereunder to withhold any payment or
rent. Borrower shall cause Owner not to further assign, sublet or otherwise
Transfer or permit the assignment, sublet or other Transfer of, any Lease or any
Rents or other payments (except to the extent required under such Lease or
permitted without Owner’s consent). Borrower, at no cost or expense to Lender,
shall use commercially reasonable efforts to cause Owner to enforce, or cause to
be enforced the performance and observance of each and every material condition
and covenant of Owner and Operator Tenants under each Lease, except for any
Non-Material Lease, and except with the prior written consent of Lender, such
consent not to be unreasonably withheld. Borrower shall cause Owner to not,
without the prior written consent of Lender, such consent not to be unreasonably
withheld and, with respect to a Major Lease, if a Securitization shall have
occurred, Borrower shall have obtained and delivered to Lender prior written
confirmation that such modification, amendment, supplement or restatement will
not cause a downgrade withdrawal or qualification of the then-current ratings of
the Securities or any class thereof), modify, amend, supplement or restate (or
permit the modification, amendment, supplement or restatement of) any material
term of any New Lease or any Operating Lease, terminate or accept the surrender
(or permit the termination or surrender) of any New Lease or any Operating
Lease, or waive or release (or permit the waiver or release of) any tenant from
the performance or observance of any material obligation or condition under any
New Lease, and at all times during the term of the Loan, Borrower shall cause
Owner to not, without the prior written consent of Lender permit the prepayment
of any rents under the Operating Leases or any New Lease for more than one (1)
month prior to the due date thereof. All proposed Leases shall be on
commercially reasonable terms and shall not contain any terms which would, taken
as a whole, materially adversely affect the value of any Individual Property or
the Loan.
          (b) All New Leases shall provide that they are subordinate to the
Mortgage encumbering the applicable Individual Property and that the lessee
agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of
sale. Borrower shall cause Owner to (i)  observe and perform the obligations
imposed upon the lessor under the Leases in a commercially reasonable manner;
(ii) enforce and may amend or terminate the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed or
performed in a commercially reasonable manner and in a manner not to impair the
value of the Individual Property involved except that no termination by Owner or
acceptance

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of surrender by a tenant of any Leases shall be permitted unless by reason of a
tenant default and then only in a commercially reasonable manner to preserve and
protect the Individual Property; (iii)  not collect any of the rents more than
one (1) month in advance (other than security deposits); (iv)  not execute any
other assignment of lessor’s interest in the Leases or the Rents (except as
contemplated by the Loan Documents); (v)  not alter, modify or change the
economic terms or the material non-economic terms of the Leases; without the
consent of Lender, such consent not be unreasonably withheld. and (vi)  execute
and deliver at the request of Lender all such further assurances, confirmations
and assignments in connection with the Leases as Lender shall from time to time
reasonably require.
               5.1.21. Alterations. Borrower shall obtain Lender’s prior consent
to any alterations to any Improvements, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Lender’s consent shall not be required
in connection with any alterations that will not have a material adverse effect
on Owner’s financial condition, the value of the applicable Individual Property
or the Net Operating Income, provided that such alterations (a) do not
materially and adversely affect any structural component of any Improvements,
any utility or HVAC system contained in any Improvements or the exterior of any
building constituting a part of any Improvements and the aggregate cost thereof
does not exceed Five Hundred Thousand and 00/100 Dollars ($500,000) or (b) are
performed in connection with the Restoration of an Individual Property after the
occurrence of a Casualty or Condemnation in accordance with the terms and
provisions of this Agreement. If the total unpaid amounts due and payable with
respect to alterations to the Improvements at any Individual Property (other
than such amounts to be paid or reimbursed by tenants under the Leases) shall at
any time exceed Two Hundred Thousand and 00/100 Dollars ($200,000) (the
“Threshold Amount”), Borrower shall promptly deliver to Lender as security for
the payment of such amounts and as additional security for Borrower’s
obligations under the Loan Documents any of the following: (A) cash, (B) U.S.
Obligations, (C) other securities having a rating acceptable to Lender and that
the applicable Rating Agencies have confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or qualification of the initial, or,
if higher, then current ratings assigned to any Securities or any class thereof
in connection with any Securitization, or (D) a completion and performance bond
or an irrevocable letter of credit (payable on sight draft only) issued by a
financial institution having a rating by S&P of not less than “A-1+” if the term
of such bond or letter of credit is no longer than three (3) months or, if such
term is in excess of three (3) months, issued by a financial institution having
a rating that is acceptable to Lender and that the applicable Rating Agencies
have confirmed in writing will not, in and of itself, result in a downgrade,
withdrawal or qualification of the initial, or, if higher, then current ratings
assigned to any Securities or any class thereof in connection with any
Securitization. Such security shall be in an amount equal to the excess of the
total unpaid amounts with respect to alterations to the Improvements on the
applicable Individual Property (other than such amounts to be paid or reimbursed
by tenants under the Leases) over the Threshold Amount and Lender may apply such
security from time to time at the option of Lender to pay for such alterations.
Upon substantial completion of such alterations, Lender shall promptly return
such security to Borrower. This Section 5.1.21 shall not apply to any
alterations for which any amounts have been reserved under Article 7 hereof.
Notwithstanding the foregoing, no such security will be required if Owner has
provided security for such Alteration to Senior Lender pursuant to the Senior
Loan Documents.

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               5.1.22. Intentionally Omitted.
               5.1.23. Certain Further Covenants. Notwithstanding anything
contained in this Section 5.1.23 to the contrary, (i) with respect to each
Individual Property that is subject to an Effective Operating Lease, any breach
of the covenants or agreements set forth in this Section 5.1.23 which does not
have and which would not reasonably be expected to have a Material Adverse
Effect, such breach shall not be a Default or an Event of Default hereunder as
long as Owner is using reasonable and diligent efforts to enforce its rights
under the applicable Effective Operating Lease to cause the Operator Tenant
thereunder to cure such breach and with respect to each Individual Property that
is a LC Covered Property, any breach of the covenants or agreements set forth in
this Section 5.1.23 which does not subject Lender to any criminal liability
shall not be a Default hereunder as long as such Individual Property remains an
LC Covered Property.
          Borrower covenants and agrees with Lender as follows:
          (a) The operations conducted or to be conducted at the Facility shall
at all times, at a minimum, be conducted in a manner consistent with or better
than (x) Legal Requirements, (y) the level of operation of the Facility as of
the Closing Date, and (z) with the level of operation of other such facilities
in the industry, and, in connection therewith:
          (i) A standard of care will be maintained for the residents of each
Facility at all times at a level necessary to insure a level of quality care for
the residents of such Facility in compliance with applicable Legal Requirements
and comparable to or better than that existing on the Closing Date;
          (ii) A standard of care will be maintained in the storage, use,
transportation and disposal of all medical equipment, medical supplies, medical
products or gases, and medical waste, of any kind and in any form, that is in
accordance with, at least, that of the highest prudent industry standard and in
conformity with all applicable regulations and laws;
          (iii) Each Facility will be operated in a prudent manner in
substantial and material compliance with applicable laws and regulations
relating thereto and cause all Health Care Licenses, reimbursement or care
contracts, and any other agreements necessary for the certification, licensure,
accreditation or operation of such Facility as could reasonably be expected to
be necessary for participation in the Medicare or Medicaid reimbursement
programs, managed care company, insurance company, or other third-party payor
reimbursement programs will remain in effect without reduction in the number of
licensed beds or beds authorized for use in Medicare or Medicaid reimbursement
programs, managed care company, insurance company, or other third-party payor
reimbursement programs;
          (iv) The Facilities will be operated in a manner that will not result
in a reduction, suspension, denial or elimination of reimbursement for services
from,

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or material recoupment by, Medicare or Medicaid, or any managed care company,
insurance company, or other third-party payor; and
     (v) All deposits, including, without limitation, deposits relating to
residents or residency agreements will be maintained in accordance with
applicable law. To the extent Owner has such right under the applicable
Operating Lease, if such deposits are in cash, Borrower shall cause Owner to
cause each Operator Tenant, and/or manager of the operations to deposit and hold
such deposits, in accordance with applicable law, at such commercial or savings
bank or banks as may be reasonably satisfactory to Lender. To the extent Owner
has such right under the applicable Operating Lease, if such deposits are in any
other form, such deposits are to be maintained as Lender may expressly permit.
To the extent Borrower has such right under the applicable Operating Lease,
Borrower shall cause Owner to cause any bond or other instrument which the
applicable Operator Tenant and/or manager of the operations is permitted to hold
in lieu of cash deposits under any applicable legal requirements to be
maintained in full force and effect unless replaced by cash deposits as
hereinabove described, to be issued by an institution reasonably satisfactory to
Lender, to, if permitted pursuant to any legal requirements, name Lender as
payee or Lender thereunder (or at Lender’s option, be fully assignable to
Lender) and to, in all respects, comply with any applicable legal requirements
and otherwise be reasonably satisfactory to Lender. Borrower shall, upon
request, provide Lender with evidence reasonably satisfactory to Lender of
Borrower’s and Owner’s compliance with the foregoing.
          (b) Borrower shall not assign or transfer or permit Owner to assign or
transfer or permit (unless required or permitted pursuant to the applicable
Operating Lease) any Operator Tenant and/or any manager of the operations, to
assign or transfer, any of its interest in any Health Care Licenses or
reimbursement or care contracts (including rights to payment thereunder),
including any Medicare, Medicaid, managed care company, insurance company, or
other third-party payor agreements pertaining to Borrower, Owner, any Operator
Tenant and/or manager of the operations or any Facility, or assign or transfer,
or remove or permit any other person to assign, transfer or remove, any records
pertaining to any Facility, including, without limitation, resident records,
medical and clinical records (except for removal of such patient resident
records as directed by the patients or residents owning such records), without
Lender’s prior written consent, which consent may be granted or refused in
Lender’s sole discretion.
          (c) Each of Borrower and Owner shall not enter into any transaction
with any Affiliate other than in the ordinary course of its business and on fair
and reasonable terms in compliance with Legal Requirements and, no less
favorable to Borrower or Owner, as applicable, than those it would obtain in a
comparable arms-length transaction with a person or entity not an Affiliate.
          (d) Borrower shall deliver evidence of compliance with any applicable
post-transfer license requirements of Health Care Authorities.

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          (e) Borrower shall cause Owner to direct each Operator Tenant and/or
manager of the operations to (and shall cause Owner to enforce each Operator
Tenant’s, and/or manager’s respective obligations to) file all required Medicare
or Medicaid cost reports on or prior to the date such reports are due and
furnish Lender, within thirty (30) days of the date of filing, a complete and
accurate copy of the annual Medicare or Medicaid cost report each Operator
Tenant, and/or manager of the operations, or as the case may be, which will be
prepared by each Operator Tenant, and/or manager of the operations or as the
case may be, and promptly furnish Lender any amendments filed with respect to
such reports and all notices, responses, audit reports or inquiries with respect
to such reports.
          (f) Borrower shall cause Owner to direct each Operator Tenant and/or
manager of the operations to (and shall cause Owner to enforce each Operator
Tenant’s or manager’s respective obligations to) furnish Lender, within thirty
(30) days of the receipt by each Operator Tenant, or manager as the case may
be), and the annual Medicaid and Medicare reimbursement rate sheets.
          (g) Borrower shall cause Owner to direct each Operator Tenant and/or
manager of the operations to (and shall cause Owner to enforce each Operator
Tenant’s and manager’s, respective obligations to) furnish Lender, within ten
(10) Business Days of receipt but at least five (5) days prior to the earliest
date on which an Operator Tenant and manager, as the case may be is required to
take any action with respect thereto or would suffer any adverse consequence, a
copy of any Medicare, Medicaid or other licensing or accreditation or ranking
agency or entity survey, report, warning letter, or notice, and any statement of
deficiencies, and within the time period required by the particular agency for
furnishing a plan of correction also furnish or cause to be furnished to Lender
a copy of the plan of correction generated from such survey, report, warning
letter, or notice for and by subsequent correspondence related thereto, and
correct or cause to be corrected any deficiency, the curing of which is a
condition of continued licensure or of full participation in Medicare or
Medicaid or a care program offered by an insurance company, managed care
company, or other third party payor by the date required for cure by such agency
or entity (plus extensions granted by such agency or entity).
          (h) Borrower shall cause Owner to direct each Operator Tenant and/or
manager of the operations to (and shall cause Owner to enforce each Operator
Tenant’s and manager’s respective obligations to) furnish Lender, promptly after
receipt thereof by an Operator Tenant or manager, as the case may be, any other
notices or charges issued relating to the non compliance by Owner (or an
Operator Tenant, or manager as the case may be) with any Health Care Authority,
insurance company, managed care company, or other third party payor laws,
regulations, requirements, licenses, permits, certificates, authorizations or
approvals.
          (i) Borrower shall cause Owner to direct each Operator Tenant and/or
manager of the operations to (and shall cause Owner to enforce each Operator
Tenant’s and manager’s respective obligations to) furnish Lender, promptly after
receipt thereof by an Operator Tenant, and manager as the case may be, any new,
revised or amended Medicare or Medicaid reimbursement rate sheets which may be
issued subsequent to the annual reimbursement rate sheets.

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          (j) Borrower shall cause Owner to cause all Leases with residents of
the Facilities to comply with all Legal Requirements.
          (k) Borrower shall furnish to Lender, within ten (10) days of the
receipt by Borrower or Owner, any and all notices (regardless of form) from any
Health Care Authority and/or any insurance company, managed care company, or
other third party payor that Owner’s, an Operator Tenant’s or manager’s license,
Medicare or Medicaid certification, or accreditation or ranking by any Health
Care Authority, insurance company, managed care company, or other third party
payor is being, or could be, downgraded, revoked, or suspended, that action is
pending, being considered or being, or could be, taken to downgrade, revoke, or
suspend Owner’s, an Operator Tenant’s or manager’s license or certification or
to fine, penalize or impose remedies upon Borrower, an Operator Tenant, or
manager, or that action is pending, being considered, or being, or could be,
taken, to discontinue, suspend, deny, decrease or recoup any payments due, made
or coming due to Owner, an Operator Tenant or manager or related to the
operation of any Individual Property.
               5.1.24. Lease Debt Service Coverage Ratio. At no time during the
term of the Loan shall the Lease Debt Service Coverage Ratio as of the last day
of a calendar quarter for the trailing 12 month period for two consecutive
calendar quarters be less than 1.05 to 1.00.
               5.1.25. O&M Programs. Borrower shall cause Owner to use
reasonable and diligent efforts to cause Operator Tenants at the Properties
identified on Attachment A of Schedule VIII attached hereto to, promptly
following the closing of the Loan, implement and thereafter maintain O&M
Programs for asbestos or lead-based paint that set forth the appropriate
procedures and guidelines that, when implemented during facility cleaning,
maintenance, and general operations, will minimize human exposure to asbestos
fibers and lead-based paint, will minimize the release of asbestos fibers and
lead-based paint to the environment, and are in compliance with local, state,
and federal governmental requirements and industry practices.
          Section 5.2. Negative Covenants. From the date hereof until payment
and performance in full of all obligations of Borrower under the Loan Documents
or the earlier release of the Liens of the Pledge in accordance with the terms
of this Agreement and the other Loan Documents, Borrower covenants and agrees
with Lender that it will not do, directly or indirectly, any of the following:
               5.2.1. Operation of Properties. (a)  Borrower shall cause Owner
to not, without Lender’s prior consent, which consent shall not be unreasonably
withheld as long as there is no uncured Event of Default: (i) surrender,
terminate or cancel (or permit to be surrendered, terminated or canceled, unless
a tenant is permitted to surrender, terminate or cancel the Operating Lease
under the applicable Operating Lease) any Operating Lease; (ii) reduce or
consent to the reduction of (or permit the reduction or the consent to the
reduction) of the term of any of the Operating Leases; (iii) decrease or consent
to any decrease (or permit to be decreased or the consent to the decrease) of
the amount of any rent or other charges payable under any of the Operating
Leases; or (iv) otherwise modify, change, supplement, alter or amend, or waive
or release (or permit to be modified, changed, supplemented, altered,

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amended, waived or released) any of the material rights and remedies of Owner or
any Operator Tenant under any of the Operating Leases.
               5.2.2. Liens. Borrower shall not create, incur, assume or suffer
to exist any Lien on any portion of any Collateral or permit any such action to
be taken, except:
          (a) Permitted Encumbrances;
                   (i) Liens created by or permitted pursuant to the Loan
Documents; and
                   (ii) Liens for Taxes or Other Charges not yet due.
               5.2.3. Dissolution. Except for Transfers permitted under
Section 5.2.10, Borrower shall not (a) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (b) engage in
any business activity not related to the ownership of the Collateral or permit
Owner to engage in any business activity not related to the ownership and
leasing of the Properties, (c) transfer, lease or sell, in one transaction or
any combination of transactions, the assets or all or substantially all of the
properties or assets of Borrower except to the extent permitted by the Loan
Documents or (d) modify, amend, waive or terminate its organizational documents
or its qualification and good standing in any jurisdiction.
               5.2.4. Change in Business. Except for Transfers permitted under
Section 5.2.10, Borrower shall not permit Owner to enter into any line of
business other than the ownership and leasing of the Properties, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.
               5.2.5. Debt Cancellation. Borrower shall not cancel or otherwise
forgive or release any material claim or debt (other than termination or
modification of Leases in accordance herewith) owed to Borrower by any Person,
except for adequate consideration and in the ordinary course of Borrower’s
business.
               5.2.6. Zoning. Each of Borrower and Owner shall not initiate or
consent to any zoning reclassification of any portion of any Individual Property
or seek any variance under any existing zoning ordinance or use or permit the
use of any portion of any Individual Property in any manner that could
reasonably be expected to result in such use becoming a non-conforming use under
any applicable zoning ordinance or other land use law, rule or regulation,
without the prior consent of Lender.
               5.2.7. Intentionally Omitted.
               5.2.8. Principal Place of Business and Organization. Borrower
shall not change its principal place of business set forth in the introductory
paragraph of this Agreement without first giving Lender thirty (30) days prior
notice. Borrower shall not change the place of its organization as set forth in
Section 4.1.28 without the consent of Lender, which consent shall not be
unreasonably withheld. Upon Lender’s request, Borrower shall execute and deliver
additional financing statements, security agreements and other instruments which
may be

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necessary to effectively evidence or perfect Lender’s security interest in the
Collateral as a result of such change of principal place of business or place of
organization.
               5.2.9. ERISA. (a)  Neither Borrower nor Owner shall engage in any
transaction which would cause any obligation, or action taken or to be taken,
hereunder (or the exercise by Lender of any of its rights under the Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA.
          (b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as reasonably requested by Lender, that (i) each of  Borrower and Owner is
not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a “governmental plan” within the meaning of
Section 3(32) of ERISA; (ii) neither Borrower nor Owner is subject to any state
statute regulating investments of, or fiduciary obligations with respect to,
governmental plans; and (iii) one or more of the following circumstances is
true:
     (A) Equity interests in Borrower and Owner are publicly offered securities,
within the meaning of 29 C.F.R. §2510.3-101(b)(2);
     (B) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower and Owner is held by “benefit plan investors” within the
meaning of 29 C.F.R. §2510.3-101(f)(2); or
     (C) Borrower qualifies as an “operating company” or a “real estate
operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).
               5.2.10. Transfers. (a) Borrower acknowledges that Lender has
examined and relied on the experience of Owner and its beneficial owners in
owning properties such as the Properties in agreeing to make the Loan, and will
continue to rely on Owner’s ownership of the Properties as a means of
maintaining the value of the Collateral as security for repayment of the Debt
and the performance of the obligations contained in the Loan Documents. Borrower
acknowledges that Lender has a valid interest in maintaining the value of the
Properties so as to ensure that, should Borrower default in the repayment of the
Debt or the performance of the obligations contained in the Loan Documents,
Lender can recover the Debt by a sale of the Collateral.
          (b) Without the prior written consent of Lender and except to the
extent otherwise expressly permitted and set forth in Article 2 or this
Section 5.2.11, Borrower shall not, shall not permit Owner to and shall not
permit any Restricted Party to, (i) sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer
or dispose of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) any Individual Property or any part thereof or any legal or beneficial
interest therein, (ii) permit a Sale or Pledge of a direct or indirect ownership
interest in any Restricted Party (collectively, a “Transfer”), other than
pursuant to Leases of space in the Improvements to tenants in accordance with
the provisions of Section 5.1.20 or (iii) permit a Sale or Pledge of all or any
part of the Collateral.

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          (c) A Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein Owner agrees to sell an Individual Property
or any part thereof for a price to be paid in installments; (ii) an agreement by
Owner leasing all or a substantial part of an Individual Property for other than
actual occupancy or actual operation by a tenant or operator thereunder or a
sale, assignment or other transfer of, or the grant of a security interest in,
Borrower’s right, title and interest in and to any Leases or any Rents; (iii) if
a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge
of such corporation’s stock or the creation or issuance of new stock; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of any general
partner or any profits or proceeds relating to such partnership interest, or the
Sale or Pledge of limited partnership interests or any profits or proceeds
relating to such limited partnership interest or the creation or issuance of new
limited partnership interests; (v) if a Restricted Party is a limited liability
company, any merger or consolidation or the change, removal, resignation or
addition of a managing member or non-member manager (or if no managing member,
any member) or the Sale or Pledge of the membership interest of a managing
member (or if no managing member, any member) or any profits or proceeds
relating to such membership interest, or the Sale or Pledge of non-managing
membership interests or the creation or issuance of new non-managing membership
interests; or (vi) if a Restricted Party is a trust or nominee trust, any
merger, consolidation or the Sale or Pledge of the legal or beneficial interest
in a Restricted Party or the creation or issuance of new legal or beneficial
interests.
          (d) Notwithstanding the provisions of this Section 5.2.10 or any other
provisions of any Loan Document, the following shall be permitted without the
consent of Lender or Servicer: (i) the Sale or Pledge or other Transfer, in one
or a series of transactions, of indirect ownership interests in Borrower
provided that immediately after such Transfer Guarantor must continue to Control
Borrower and own, directly or indirectly, at least a 51% interest in Borrower
and the Sale or Pledge or other Transfer of any ownership interest in Guarantor.
As used herein, the term “Control” means the possession, directly or indirectly
of the power to direct or cause the direction of the management and policies of
the Person in question through the ownership of voting securities, by contract
or otherwise.
          (e) No consent to any assumption of the Loan shall occur on or before
the first anniversary of the first Payment Date. Thereafter, Lender reserves the
right to condition the consent required hereunder upon (a) a modification of the
terms hereof, the Note, the Pledge or the other Loan Documents; (b) an
assumption of this Agreement, the Note, the Pledge and the other Loan Documents
as so modified by the proposed transferee, subject to the provisions of
Section 9.4 hereof; (c) payment of all of fees and expenses incurred in
connection with such Transfer including, without limitation, the cost of any
third party reports, legal fees and expenses, Rating Agency fees and expenses or
required legal opinions; (d) the payment of a non-refundable $5,000 application
fee and an assumption fee equal to one percent (1%) of the outstanding principal
balance of the Loan; (e) the delivery of a nonconsolidation opinion reflecting
the proposed transfer satisfactory in form and substance to Lender; (f) the
proposed transferee’s continued compliance with the representations and
covenants set forth in Section 4.1.30 and Section 5.2.9 hereof; (g) the delivery
of evidence satisfactory to Lender that the single purpose nature and bankruptcy
remoteness of Borrower, its shareholders, partners or members, as the case may
be, following such transfers are in accordance with the

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then current standards of Lender and the Rating Agencies; (h) prior to any
release of the Guarantor, a substitute guarantor acceptable to Lender shall have
assumed the Guaranty executed by Guarantor or executed a replacement guaranty
reasonably satisfactory to Lender; (i) if required by Lender, confirmation in
writing from the Rating Agencies to the effect that such transfer will not
result in a re-qualification, reduction or withdrawal of the then current rating
assigned to the Securities or any class thereof in any applicable
Securitization; (j) such other conditions as Lender shall determine in its
reasonable discretion to be in the interest of Lender, including, without
limitation, the creditworthiness, reputation and qualifications of the
transferee with respect to the Loan and the Collateral; and (k) if the
Properties are being transferred, a concurrent assumption of the Senior Loan by
one or more wholly owned subsidiaries of the transferee with the consent of
Senior Lender pursuant to Section 5.2.10(e) of the Senior Loan Agreement.
          (f) Lender shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Debt immediately due and payable upon a Transfer without Lender’s consent.
This provision shall apply to every Transfer other than a Transfer permitted
under Section 5.2.10(b) or (d) regardless of whether voluntary or not, or
whether or not Lender has consented to any previous Transfer.
               5.2.11. Owner Operation of the Properties. Borrower covenants and
agrees that at no time while all or any portion of the Debt is outstanding shall
it, Owner, Principal or Guarantor operate the Properties or permit any residents
to occupy any Property or unless such Property is subject to an effective
Operating Lease or is an LC Covered Property or permit a Facility to be open for
operations unless such Property is subject to an effective Operating Lease or is
an LC Covered Property. Borrower covenants and agrees that at no time while all
or any portion of the Debt is outstanding shall Owner enter into a management
agreement for any Property or self-manage any Property.
          VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
          Section 6.1. Insurance. (a)  Borrower shall obtain and maintain, or
cause Owner or Operator Tenants to obtain and maintain, insurance for Borrower,
Owner and each of the Individual Properties providing at least the following
coverages:
     (i) comprehensive all risk insurance on the Improvements and the Personal
Property, including contingent liability from Operation of Building Laws,
Demolition Costs and Increased Cost of Construction Endorsements, in each case
(A) in an amount equal to one hundred percent (100%) of the “Full Replacement
Cost,” which for purposes of this Agreement shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities and
footings) with a waiver of depreciation, but the amount shall in no event be
less than the outstanding principal balance of the Loan; (B) containing an
agreed amount endorsement with respect to the Improvements and Personal Property
waiving all co-insurance provisions; (C) providing for no deductible in excess
of One Hundred Thousand and Dollars ($100,000) for all such insurance coverage;
and (D) containing an “Ordinance or Law Coverage” or “Enforcement”

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endorsement if any of the Improvements or the use of the Individual Property
shall at any time constitute legal non-conforming structures or uses and
covering the increased cost of construction, demolition cost, value of the
undamaged portion of the structure and any increased time to rebuild due to the
enforcement of building or zoning laws or requirements following a covered loss
to such Individual Properties. In addition, Borrower shall obtain: (x) if any
portion of the Improvements is currently or at any time in the future located in
a federally designated “special flood hazard area”, flood hazard insurance in an
amount equal to the lesser of (1) the outstanding principal balance of the Note
or (2) the maximum amount of such insurance available under the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994, as each may be amended or such greater
amount as Lender shall require; (y) earthquake insurance in amounts and in form
and substance reasonably satisfactory to Lender in the event the Individual
Property is located in an area with a high degree of seismic activity and
(z) coastal windstorm insurance in amounts and in form and substance reasonably
satisfactory to Lender in the event the Individual Property is located in any
coastal region, provided that the insurance pursuant to clauses (x), (y) and
(z) hereof shall be on terms consistent with the comprehensive all risk
insurance policy required under this subsection (i);
     (ii) commercial general liability insurance against claims for personal
injury, bodily injury, death or property damage occurring upon, in or about the
Individual Property, such insurance (A) to be on the so-called “occurrence” form
with a combined limit of not less than Two Million and No/100 Dollars
($2,000,000.00) in the aggregate and One Million and No/100 Dollars
($1,000,000.00) per occurrence (and, if on a blanket policy, containing an
“Aggregate Per Location” endorsement); (B) to continue at not less than the
aforesaid limit until required to be changed by Lender in writing by reason of
changed economic conditions making such protection inadequate; and (C) to cover
at least the following hazards: (1) premises and operations; (2) products and
completed operations on an “if any” basis; (3) independent contractors;
(4) blanket contractual liability for all legal contracts; and (5) contractual
liability covering the indemnities contained in Article 8 of the Mortgages to
the extent the same is available;
     (iii) business income insurance (A) with loss payable to Lender;
(B) covering all risks required to be covered by the insurance provided for in
subsection (i) above; (C) containing an extended period of indemnity endorsement
which provides that after the physical loss to the Improvements and Personal
Property has been repaired, the continued loss of income will be insured until
such income either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the applicable Individual
Property is repaired or replaced and operations are resumed, whichever first
occurs, and notwithstanding that the policy may expire prior to the end of such
period; and (D) in an amount equal to one hundred percent (100%) of the
projected gross income from each Individual Property for a period of twelve (12)

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months from the date of such Casualty (assuming such Casualty had not occurred)
and notwithstanding that the policy may expire at the end of such period. The
amount of such business income insurance shall be determined prior to the
Closing Date and at least once each year thereafter based on Borrower’s
reasonable estimate of the gross income from each Individual Property for the
succeeding twelve (12) month period. Notwithstanding anything to the contrary in
Section 2.6 hereof, all proceeds payable to Lender pursuant to this
subsection shall be held by Lender and shall be applied at Lender’s sole
discretion to (I) the obligations secured by the Loan Documents from time to
time due and payable hereunder and under the Note or (II) Operating Expenses
approved by Lender in its sole discretion; provided, however, that nothing
herein contained shall be deemed to relieve Borrower of its obligations to pay
the obligations secured by the Loan Documents on the respective dates of payment
provided for in the Note and the other Loan Documents except to the extent such
amounts are actually paid out of the proceeds of such business income insurance;
     (iv) at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements, and only if the
Individual Property coverage form does not otherwise apply, (A) owner’s
contingent or protective liability insurance covering claims not covered by or
under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder’s risk completed value form
(1) on a non-reporting basis, (2) against all risks insured against pursuant to
subsection (i) above, (3) including permission to occupy the Individual
Property, and (4) with an agreed amount endorsement waiving co-insurance
provisions;
     (v) if an Individual Property includes commercial property, worker’s
compensation insurance with respect to any employees of Owner, as required by
any Governmental Authority or Legal Requirement;
     (vi) comprehensive boiler and machinery insurance, if applicable, in
amounts as shall be reasonably required by Lender on terms consistent with the
commercial property insurance policy required under subsection (i) above;
     (vii) umbrella liability insurance in an amount not less than Ten Million
and No/100 Dollars ($10,000,000.00) per occurrence on terms consistent with the
commercial general liability insurance policy required under
subsection (ii) above;
     (viii) motor vehicle liability coverage for all owned and non-owned
vehicles, including rented and leased vehicles containing minimum limits per
occurrence, including umbrella coverage, of One Million and No/100 Dollars
($1,000,000.00);
     (ix) if an Individual Property is or becomes a legal “non-conforming” use,
ordinance or law coverage and insurance coverage to compensate for the cost

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of demolition or rebuilding of the undamaged portion of the Individual Property
along with any reduced value and the increased cost of construction in amounts
as requested by Lender;
     (x) the commercial property and business income insurance required under
Sections 6.1(a)(i) and (iii) above shall cover perils of terrorism and acts of
terrorism and Borrower shall maintain commercial property and business income
insurance for loss resulting from perils and acts of terrorism on terms
(including amounts) consistent with those required under Sections 6.1(a)(i) and
(iii) above at all times during the term of the Loan;
     (xi) professional liability and malpractice insurance with commercially
reasonable limits, however, limits of insurance shall be no less than those
required by the operating lease:
     (xii) upon sixty (60) days’ notice, such other reasonable insurance and in
such reasonable amounts as Lender from time to time reasonably requests against
such other insurable hazards which at the time are commonly insured against for
property similar to the Individual Property located in or around the region in
which the Individual Property is located.
          (b) All insurance provided for in Section 6.1(a) shall be obtained
under valid and enforceable policies (collectively, the “Policies” or in the
singular, the “Policy”), and shall be subject to the approval of Lender as to
insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and (i) with respect to
existing Policies obtained by Operator Tenants providing the coverage described
in clauses (i), (iii), (iv)B, (vi), (ix) and (x) of Section 6.1(a) hereof, the
insurance companies issuing such Policies need have a claims paying ability
rating of no less than “A-” or better by S&P or Moody’s or A/X by A. M. Best,
and (ii) with respect to renewals of any such existing Policies obtained by
Operator Tenants providing the coverage described in clauses (i), (iii), (iv)B,
(vi), (ix) and (x) of Section 6.1(a) hereof, such renewals shall not be of a
lesser claims paying ability rating than is in effect on the date hereof and in
no event shall such coverage be less than the amount required by Governmental
Authority. The Policies described in Section 6.1(a) (other than those strictly
limited to liability protection) shall designate Lender as loss payee, subject
to the rights of Senior Lender, after payment in full of the Senior Loan or
after notice by Lender during the continuance of an Event of Default. Not less
than five (5) days prior to the expiration dates of the Policies theretofore
furnished to Lender, binding evidence of insurance reasonably satisfactory to
Lender showing renewal of the Policies described herein shall be delivered by
Borrower to Lender.
          (c) Any blanket insurance Policy shall specifically allocate to the
Individual Property the amount of coverage from time to time required hereunder
and shall otherwise provide the same protection as would a separate Policy
insuring only the Properties in compliance with the provisions of
Section 6.1(a).

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          (d) All Policies provided for or contemplated by Section 6.1(a),
except for the Policy referenced in Section 6.1(a)(v), shall name Owner and,
after payment in full of the Senior Loan or after notice by Lender during the
continuance of an Event of Default, Borrower as the insureds and Lender and
Senior Lender as additional insureds, as their interests may appear, and in the
case of property damage, business income, boiler and machinery, flood and
earthquake insurance, after payment in full of the Senior Loan or after notice
by Lender during the continuance of an Event of Default, shall contain a
so-called New York standard non-contributing mortgagee clause in favor of Lender
providing that, subject to the rights of Senior Lender, which shall be senior to
the rights of Lender, the loss thereunder shall be payable to Lender.
          (e) All Policies provided for in Section 6.1 shall contain clauses or
endorsements to the effect that:
               (i) no act or negligence of Borrower, Owner, or anyone acting for
Borrower, Owner, or of any tenant or other occupant, or failure to comply with
the provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
               (ii) after payment in full of the Senior Loan or after notice by
Lender during the continuance of an Event of Default, the Policies shall not be
materially changed (other than to increase the coverage provided thereby) or
canceled without at least thirty (30) days’ notice to Lender and any other party
named therein as an additional insured;
               (iii) after payment in full of the Senior Loan or after notice by
Lender during the continuance of an Event of Default, the issuers thereof shall
give notice to Lender if the Policies have not been renewed fifteen (15) days
prior to its expiration; and
               (iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
          (f) If at any time Lender is not in receipt of written evidence that
all Policies are in full force and effect, Lender shall have the right, without
notice to Borrower, to take such action as Lender deems necessary to protect its
interest in the Properties, including, without limitation, the obtaining of such
insurance coverage as Lender in its sole discretion deems appropriate. All
premiums incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Borrower to Lender upon
demand and, until paid, shall bear interest at the Default Rate.
          (g) Notwithstanding anything in this Section 6.1 to the contrary but
subject to the provisions of Section 6.1(h), with respect to each Individual
Property subject to an Effective Operating Lease, Borrower will not be in
default under this Section 6.1 if and as long as (i) (1) with respect to the
insurance described in clauses (i), (iii), (iv)B, (vi), (ix) and (x) of
Section 6.1(a), (I) Borrower causes the Operator Tenant to procure and maintain
such

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Policies as it is obligated to procure and maintain under its Operating Lease;
(II) Borrower shall obtain and provide to Lender such certificates and
information with respect to the Policies as the Operator Tenant is obligated to
provide to Borrower; (III) to the extent that the Operating Lease obligates the
Operator Tenant to provide, at the cost of Operator Tenant, one or more
coverages described in Section 6.1(a) only if so requested by Borrower or
Lender, Borrower shall cause Owner to cause Operator Tenant to procure and
maintain such coverages; and (IV) after payment in full of the Senior Loan or
after notice by Lender during the continuance of an Event of Default, to the
extent that the Operating Lease obligates the Operator Tenant to name Lender as
additional insured and/or loss payee under the Policies maintained by them
(subject to the rights of Senior Lender), Borrower shall cause Owner to cause
Operator Tenant to so name Lender; and (2) with respect to all other insurance
required under Section 6.1(a), Borrower is causing Owner to use reasonable and
diligent efforts to cause the Operator Tenant to procure and maintain such
Policies as such Operator Tenant is obligated to provide to Borrower and to
comply with all other provisions of its Operator Lease relating to insurance
policies, and (ii) Borrower, Owner or Operator Tenant obtains and maintains the
supplemental insurance policies described on Schedule VII annexed hereto (the
“BSI Policies”).
          Section 6.2. Casualty. If an Individual Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty (a “Casualty”),
Borrower shall give prompt notice of such damage to Lender and shall or shall
cause Owner to promptly commence and diligently prosecute the completion of the
Restoration of the Individual Property as nearly as possible to the condition
the Individual Property was in immediately prior to such Casualty, with such
alterations as are reasonably approved by Lender and otherwise in accordance
with Section 6.4. Borrower shall pay or shall cause Owner or the Operator Tenant
to pay all costs of such Restoration whether or not such costs are covered by
insurance. Lender may, but shall not be obligated to make proof of loss if not
made promptly by Borrower or Owner. In the event of a Casualty where the loss
does not exceed the Restoration Threshold, Borrower may settle and adjust such
claim; provided that (a) no Event of Default has occurred and is continuing and
(b) such adjustment is carried out in a commercially reasonable and timely
manner. In the event of a Casualty where the loss exceeds the Restoration
Threshold or if an Event of Default then exists, Borrower or Owner may settle
and adjust such claim only with the consent of Lender, and Lender shall have the
opportunity to participate, at Borrower’s cost, in any such settlement or
adjustment discussions with any insurance companies with respect to any Casualty
and Borrower shall deliver to Lender all instruments required by Lender to
permit such participation.
          Section 6.3. Condemnation. Borrower shall promptly give Lender notice
of the actual or threatened commencement of any proceeding for the Condemnation
of any Individual Property and shall deliver or cause Owner to deliver to Lender
copies of any and all papers served on Borrower or Owner in connection with such
proceedings. Lender may participate in any such proceedings, and Borrower shall
from time to time deliver to Lender all instruments reasonably requested by it
to permit such participation. Borrower shall, at its expense, diligently
prosecute any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings. Notwithstanding any taking by any public or quasi-public authority
through Condemnation or otherwise (including, but not limited to, any transfer
made in lieu of or in anticipation of the

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exercise of such taking), Borrower shall continue to pay the Debt at the time
and in the manner provided for its payment in the Note and in this Agreement and
the Debt shall not be reduced until any Award shall have been actually received
and applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited to the interest
paid on the Award by the condemning authority but shall be entitled, subject to
the rights of Senior Lender, to receive out of the Award interest at the rate or
rates provided herein or in the Note. If any Individual Property or any portion
thereof is taken by a condemning authority, Borrower shall promptly commence and
diligently prosecute the Restoration of the applicable Individual Property and
otherwise comply with the provisions of Section 6.4. If any Individual Property
is sold, through foreclosure or otherwise, prior to the receipt by Lender of the
Award, Lender shall have the right, whether or not a deficiency judgment on the
Note shall have been sought, recovered or denied, subject to the rights of
Senior Lender, to receive the Award, or a portion thereof sufficient to pay the
Debt.
          Section 6.4. Restoration. Borrower shall, or shall cause Owner to,
deliver to Lender all reports, plans, specifications, documents and other
materials that are delivered to Senior Lender under Section 6.4 of the Senior
Loan Agreement in connection with the Restoration of an Individual Property
after a Casualty or Condemnation.
          VII. RESERVE FUNDS
          Section 7.1. Reserves. If, at any time during the Term, Senior Lender
waives the obligation of Owner to make one or more of the deposits required
under Article VII of the Senior Loan Agreement (or the Senior Loan has been
refinanced or otherwise repaid in full in accordance with the terms of this
Agreement), including pursuant to Sections 7.1, 7.2, 7.3, 7.4, 7.5 and 7.6 of
the Senior Loan Agreement, then Lender shall have the right, at its option, to
require Borrower to make such waived deposit(s) or such required deposits, as
applicable, to the Cash Management Agreement, in which case such deposits shall
be made by Borrower and held in Subaccounts and disbursed by Lender
substantially in accordance with the provisions of such applicable sections of
the Senior Loan Agreement (including Section 2.6.2 of the Senior Loan Agreement
governing priority and order of application); provided that (1) while the Senior
Loan is outstanding, this Section 7.1 shall apply only to a waiver of an
obligation by Owner to make a deposit, and Lender shall have no right to a
deposit if Senior Lender has miscalculated or misinterpreted the amount of a
reserve or is not collecting the maximum amount it could be collecting under the
Senior Loan Agreement; and (b) if Senior Lender revokes a previous waiver of
reserves, then within five (5) Business Days of written request by Borrower,
Lender shall cause the Cash Management Bank to transfer to the cash management
account maintained under the Senior Loan Documents the monies then being held in
the Cash Management Account with respect to such reserves.
          Section 7.2. Intentionally Omitted.
          Section 7.3. Intentionally Omitted.
          Section 7.4. Intentionally Omitted.
          Section 7.5. Intentionally Omitted.

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          Section 7.6. Intentionally Omitted.
          Section 7.7. Reserve Funds, Generally.
          (a) Borrower grants to Lender a first-priority perfected security
interest in each of the Reserve Funds and any and all monies now or hereafter
deposited in each Reserve Fund as additional security for payment of the Debt.
Until expended or applied in accordance herewith, the Reserve Funds shall
constitute additional security for the Debt. Upon the occurrence of an Event of
Default, Lender may, in addition to any and all other rights and remedies
available to Lender, apply any sums then present in any or all of the Reserve
Funds to the payment of the Debt in any order in its sole discretion. The
Reserve Funds shall not constitute trust funds and may be commingled with other
monies held by Lender in the manner provided in the Cash Management Agreement.
          (b) Borrower shall not, without obtaining the prior consent of Lender,
further pledge, assign or grant any security interest in any Reserve Fund or the
monies deposited therein or permit any lien or encumbrance to attach thereto, or
any levy to be made thereon, or any UCC-1 Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.
          (c) The Reserve Funds shall be held in an Eligible Account and shall
bear interest at a money market rate selected by Lender. All interest or other
earnings on a Reserve Fund shall be added to and become a part of such Reserve
Fund and shall be disbursed in the same manner as other monies deposited in such
Reserve Fund. Borrower shall have the right to direct Lender to invest sums on
deposit in the Eligible Account in Permitted Investments provided (a) such
investments are then regularly offered by Lender for accounts of this size,
category and type, (b) such investments are permitted by applicable federal,
state and local rules, regulations and laws, (c) the maturity date of the
Permitted Investment is not later than the date on which the applicable Reserve
Funds are required for payment of an obligation for which such Reserve Fund was
created, and (d) no Event of Default shall have occurred and be continuing.
Borrower shall be responsible for payment of any federal, state or local income
or other tax applicable to the interest or income earned on the Reserve Funds.
No other investments of the sums on deposit in the Reserve Funds shall be
permitted except as set forth in this Section 7.7. Borrower shall bear all
reasonable costs associated with the investment of the sums in the account in
Permitted Investments. Such costs shall be deducted from the income or earnings
on such investment, if any, and to the extent such income or earnings shall not
be sufficient to pay such costs, such costs shall be paid by Borrower promptly
on demand by Lender. Lender shall have no liability for the rate of return
earned or losses incurred on the investment of the sums in Permitted
Investments.
          (d) Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the
Reserve Funds were established. Borrower shall assign to Lender all rights and
claims Borrower may have against all Persons supplying labor, materials or other
services which are to be paid from or secured by the Reserve Funds; provided,
however, that

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Lender may not pursue any such right or claim unless an Event of Default has
occurred and remains uncured.
          VIII. DEFAULTS
          Section 8.1. Event of Default. (a)  Each of the following events shall
constitute an event of default hereunder (an “Event of Default”):
     (i) if any portion of the Debt is not paid when due (unless with respect to
the payment of the Debt Service due on any Payment Date, either (1) the amount
of money in the Cash Management Account on such Payment Date equals or exceeds
such Debt Service amount) or (2)(w) on such Payment Date there is then no
uncured Event of Default under the Senior Loan Documents, (x) on the Payment
Date in question there are sufficient monies in the cash management account
under the Senior Loan Cash Management Agreement to fully pay in accordance with
the Senior Loan Cash Management Agreement the monthly installment of debt
service due on such Payment Date under the Senior Loan and Debt Service payable
on such Payment Date, (y) on such Payment Date, the cash management bank under
the Senior Loan Cash Management Agreement has failed to transfer to the Cash
Management Account monies in the amount of Debt Service payable on such Payment
Date and (z) Borrower has paid such Debt Service within two (2) Business Days
after such Payment Date);
     (ii) if any of the Taxes or Other Charges are not paid as provided in
Section 5.1.2 and if such default remains uncured for seven (7) days after
written notice to Borrower from Lender;
     (iii) with respect to each Individual Property (other than an LC Covered
Property) if the Policies described in clauses (i) (iii), (iv)(B), (vi),
(ix) and (x) of Section 6.1(a) or the BSI Policies are not kept in full force
and effect (unless Borrower has timely delivered an Insurance Letter of Credit
pursuant to Section 8.1(d)), or if certificates of insurance for such Policies
certified by Borrower are not delivered to Lender upon request or if Borrower is
otherwise in default of its obligations under Section 6.1(g) hereof;
     (iv) if a Transfer occurs without Lender’s prior consent in violation of
the provisions of this Agreement or Article 6 of the Mortgage;
     (v) if any representation or warranty made by Borrower herein or in any
other Loan Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender shall have been false or
misleading in any material respect as of the date the representation or warranty
was made;
     (vi) if Borrower, any Owner Entity, Principal, or Guarantor shall make a
general assignment for the benefit of creditors;

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     (vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
any Owner Entity, Principal, or Guarantor, or any material portion of its
assets, or if Borrower, any Owner Entity, Principal, or Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by, Borrower, any Owner Entity, Principal, or Guarantor, or if any proceeding
for the dissolution or liquidation of Borrower, any Owner Entity, Principal, or
Guarantor shall be instituted; provided, however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower, any Owner Entity, Principal, or Guarantor, upon the same not being
discharged, stayed or dismissed within thirty (30) days;
     (viii) if Borrower attempts to assign its rights under this Agreement or
any of the other Loan Documents or any interest herein or therein in
contravention of the Loan Documents;
     (ix) if Borrower breaches any covenant contained in Section 4.1.30 hereof;
     (x) with respect to any term, covenant or provision set forth in any Loan
Document which specifically contains a notice requirement or grace period, if
Borrower shall be in default under such term, covenant or condition after the
giving of such notice or the expiration of such grace period;
     (xi) if any of the assumptions contained in the Insolvency Opinion
delivered to Lender in connection with the Loan, or in the Additional Insolvency
Opinion delivered subsequent to the closing of the Loan, is or shall become
untrue in any material respect;
     (xii) Borrower breaches any covenant containing in Section 3.7 hereof;
     (xiii) if (A) there shall occur any material default by Owner, as landlord
under any Operating Lease, in the observance or performance of any term,
covenant or condition any Operating Lease on the part of Owner to be observed or
performed, after the expiration of any applicable notice and grace periods
contained therein, if any, (B) if any one or more of the events referred to in
any Operating Lease shall occur which would cause such Operating Lease to
terminate without notice or action by the Operator Tenant under any Operating
Lease or which would entitle the Operator Tenant to terminate any Operating
Lease and the term thereof by giving notice to Owner, as landlord thereunder,
other than a termination arising from a casualty or condemnation with respect to
which Lender elects to apply any Insurance Proceeds or Award to the principal
balance of the Loan instead of making the same available for Restoration, (C) if
any Operating Lease shall be surrendered or any Operating Lease shall be
terminated or canceled for any reason or under any circumstances whatsoever in
violation of the terms of this Agreement, except with the consent of Lender or

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(D) if any of the terms, covenants or conditions of any Operating Lease shall in
any manner be modified, changed, supplemented, altered, restated or amended in
violation of the provisions of this Agreement without the consent of Lender (and
Borrower or Owner shall not have cured such Default within the applicable grace
period set forth in subsection (xvi);
     (xiv) if Borrower fails to comply with the covenants as to Prescribed Laws
set forth in Section 5.1.1 hereof;
     (xv) intentionally omitted;
     (xvi) if Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement not specified in subsections
(i) to (xv) above, for ten (10) days after written notice to Borrower from
Lender, in the case of any Default which can be cured by the payment of a sum of
money, or for thirty (30) days after written notice from Lender to Borrower in
the case of any other Default; provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such
thirty (30) day period and provided further that Borrower shall have commenced
to cure such Default within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for such time as is reasonably necessary for Borrower
in the exercise of due diligence to cure such Default, such additional period
not to exceed sixty (60) days;
     (xvii) if there shall be default under any of the other Loan Documents
beyond any expressly stated applicable cure periods contained in such documents,
whether as to Borrower or any Individual Property, or if any other such event
shall occur or condition shall exist, if the effect of such event or condition
is to accelerate the maturity of any portion of the Debt or to permit Lender to
accelerate the maturity of all or any portion of the Debt;
     (xviii) with respect to each Individual Property (other than an LC Covered
Property) Owner ceases to continuously operate by itself or through an operator
(including an Operator Tenant) any Individual Property or any material portion
thereof as a Facility for any reason whatsoever (other than temporary cessation
as a result of a total casualty or in connection with any repair or renovation
thereof undertaken with the consent of Lender);
     (xix) if there shall be a breach of the provisions of Section 5.1.23 or a
default under this Agreement constituting a violation of Health Care
Requirements (and with respect to a Default hereunder with respect to an
Operator Tenant which is not an Affiliate of Owner or Borrower and/or an
Operating Lease, Borrower or Owner shall not have cured such Default within the
applicable grace period set forth in subsection (xvi));

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     (xx) if Borrower, Owner, any Manager, any Operator Tenant or any Facility
violates in any material respect any applicable law or regulation and shall fail
to correct, within the time deadlines set by any Health Care Authority, managed
care company, insurance company or other third-party payor any deficiency, if
such violation or deficiency would reasonably be expected to result in any of
the following actions with respect to such Facility: (x) a termination of the
applicable Owner’s or Facility’s Medicare contract or Medicaid contract or any
of the Health Care Licenses; (y) a ban on payment for new admissions generally
or on payment for residents otherwise qualifying for Medicaid or Medicare
coverage without opportunity to correct or to contest (provided that such
contest would stay enforcement action or the exercise of remedies by Health Care
Authorities) prior to termination; or (z) a suspension, discontinuance,
elimination or material reduction or recoupment of reimbursement for services
without opportunity to correct or to contest (provided that such contest would
stay enforcement action or the exercise of remedies by Health Care Authorities)
(and with respect to a Default hereunder with respect to an Operator Tenant
which is not an Affiliate of Borrower and/or an Operating Lease, Borrower shall
not have cured such Default within the applicable grace period set forth in
subsection (xvi));
     (xxi) any Owner Entity shall revoke or modify any instruction or agreement
governing the direction of payments by any Operator Tenant, without in each
instance the prior written consent of Lender;
     (xxii) any of the events described in clause (vi) or (vii) occur to an
Operator Tenant and within 90 days after the occurrence of such event either
(1) Owner has not entered into a Replacement Operating Lease with an Operator
Tenant approved by Lender with respect to the Individual Property or Properties
operated by such Operator Tenant, or (2) such Operator Tenant has not properly
assumed all of the obligations of the tenant under the Operating Lease in
question; or
     (xxiii) an Event of Default as defined or described in the Senior Loan
Documents occurs (and such Event of Default is not waived or revoked in writing
by Senior Lender or cured to Senior Lender’s satisfaction).
          (b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi) or (vii)  above) and at any time thereafter,
in addition to any other rights or remedies available to it pursuant to this
Agreement and the other Loan Documents or at law or in equity, Lender may take
such action, without notice or demand, that Lender deems advisable to protect
and enforce its rights against Borrower and in and to all or any part of the
Collateral, including, without limitation, declaring the Debt to be immediately
due and payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower and any or all of the
Collateral, including, without limitation, all rights or remedies available at
law or in equity; and upon any Event of Default described in clauses (vi) or
(vii) above, the Debt and all other obligations of Borrower hereunder and under
the other Loan Documents shall immediately and automatically become

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due and payable, without notice or demand, and Borrower hereby expressly waives
any such notice or demand, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
          (c) Notwithstanding anything to the contrary contained in this
Agreement, a default under clause (a)(xiii), clause (a)(xiv) (due to a violation
of any Health Care Requirement) or (iii) clause (a)(xviii), clause (a)(xix),
clause (a)(xx), clause (a)(xxii) above (each, a “Limited Cure Default”) shall
not, in each instance, constitute an Event of Default hereunder in the event
that Borrower, in accordance with Section 2.5.1 hereof (except for purposes of
this Section 8.1(c) only, Borrower shall not be required to satisfy clauses
2.5.1(b) and 2.5.1(c)), obtains the release of the Individual Collateral
relating to the Individual Property in question, subject to the Operating Lease
with such affected Operator Tenant, from the Lien of the Pledge thereon within
ten (10) Business Days of such Limited Cure Default or if a Letter of Credit is
timely delivered pursuant to clause (e) below, prior to the expiration of the
nine (9) month period referenced therein (each such release, a “Limited Cure
Release”), except that (x)  the amount of principal required to be prepaid for
each such Individual Collateral shall be equal to one hundred percent (100%) of
the Adjusted Release Amount for such Individual Collateral (such amount, the
“Limited Cure Release Amount”), and (y) in the event that the Lockout Release
Date shall not have occurred, Borrower shall deposit the Limited Cure Release
Amount, or a Letter of Credit therefor, with Lender to be held by Lender as
additional collateral for the Loan until the release is completed pursuant to
this clause (y), and Borrower shall effect such Limited Cure Release within
twenty (20) Business Days after the occurrence of the Lockout Release Date (in
which event Lender shall apply such Limited Cure Release Amount as provided
herein). If Borrower delivers a Letter of Credit in accordance with clause (y),
then such Letter of Credit may be drawn upon by Lender (A)  twenty (20) Business
Days after the occurrence of the Lockout Release Date if Borrower has not
obtained the Limited Cure Release as provided herein, or (B) at any time less
than thirty (30) days prior to the expiration date of such Letter of Credit, in
which event Lender shall hold the proceeds of such Letter of Credit as Reserve
Funds until the earlier of the occurrence of an Event of Default (in which event
the provisions of Section 7.7 shall be applicable). In no event shall Borrower
be entitled to Limited Cure Releases under this Section 8.1(c) during the term
of the Loan once the aggregate amount of principal prepaid pursuant to this
Section 8.1(c) first equals or exceeds in the aggregate 10% of the original
principal amount of the Loan.
          (d) Notwithstanding anything to the contrary contained in this
Agreement, a default under clause (a) (iii) shall not constitute an Event of
Default if, prior to the occurrence of the Event of Default, Borrower delivers
to Senior Lender a Letter of Credit in an amount equal to 100% of the
replacement cost of such Individual Property, pursuant to Section 8.1(d) of the
Senior Loan Agreement.
          (e) Notwithstanding anything to the contrary contained in this
Agreement, a default with respect to any Individual Property under clauses
(a)(xiii), (a)(xiv) (due to a violation of any Heath Care Requirement),
(a)(xviii), (a)(xix), (a)(xx) or (a)(xxii) shall not in each instance constitute
an Event of Default hereunder if Borrower, within 25 days after the occurrence
of such Default, delivers to Lender a Letter of Credit in an amount equal to the
Release Amount of the Individual Collateral relating to such Individual
Property, in which

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event (1) such Letter of Credit shall be additional security for repayment of
the Debt, (2) such Letter of Credit may be drawn upon by Lender (A) upon the
occurrence and during the continuance of an Event of Default or (B) at any time
less than thirty (30) days prior to the expiration of such Letter of Credit if
such Letter of Credit is not renewed prior thereto, or if a substitute Letter of
Credit is not delivered to Lender prior thereto, in which event Lender shall
hold the proceeds of such Letter of Credit as Reserve Funds until the earlier of
the occurrence of an Event of Default (in which event the provisions of
Section 7.7 shall be applicable) or Borrower becomes entitled to the
disbursement thereof as provided below, (3) in no event may the face amount of
the Letters of Credit held by Lender under this clause (e) exceed $3,867,500.00
in the aggregate, (4) within nine (9) months after the delivery of such Letter
of Credit the provisions of this clause (e) will cease to suspend such Default
and (5) such Letter of Credit will be returned to Borrower after the cure of
such Default provided that there is then no uncured Event of Default and
Borrower gives a notice to Lender requesting the return of such Letter of
Credit.
          Section 8.2. Remedies. (a) Upon the occurrence during the continuance
of an Event of Default, all or any one or more of the rights, powers, privileges
and other remedies available to Lender against Borrower under this Agreement or
any of the other Loan Documents executed and delivered by, or applicable to,
Borrower or at law or in equity may be exercised by Lender at any time and from
time to time, whether or not all or any of the Debt shall be declared due and
payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to all or any part of the Collateral. Any
such actions taken by Lender shall be cumulative and concurrent and may be
pursued independently, singularly, successively, together or otherwise, at such
time and in such order as Lender determines in its sole discretion, to the
fullest extent permitted by law, without impairing or otherwise affecting the
other rights and remedies of Lender permitted by law, equity or contract or as
set forth herein or in the other Loan Documents. Without limiting the generality
of the foregoing, Borrower agrees that if an Event of Default is continuing
(i) Lender is not subject to any “one action” or “election of remedies” law or
rule, and (ii) all liens and other rights, remedies or privileges provided to
Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against the Collateral and the Pledge has been foreclosed, sold
and/or otherwise realized upon in satisfaction of the Debt or the Debt has been
paid in full.
          (b) With respect to Borrower and the Collateral, nothing contained
herein or in any other Loan Document shall be construed as requiring Lender to
resort to any portion of the Collateral for the satisfaction of any of the Debt
in preference or priority to any other portion of the Collateral, and Lender may
seek satisfaction out of all of the Collateral or any part thereof, in its
absolute discretion in respect of the Debt. In addition, Lender shall have the
right from time to time to partially foreclose the Pledge in any manner and for
any amounts secured by the Pledge then due and payable as determined by Lender
in its sole discretion including, without limitation, the following
circumstances: (i) in the event Borrower defaults beyond any applicable grace
period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose on the Pledge to recover such delinquent
payments, or (ii) in the event Lender elects to accelerate less than the entire
outstanding principal balance of the Loan, Lender may foreclose the Pledge to
recover so such of the principal balance of the Loan as Lender may accelerate
and such other sums secured by the

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Pledge as Lender may elect. Notwithstanding one or more partial foreclosures,
the Pledge shall remain subject to the Mortgages to secure payment of sums
secured by the Pledge and not previously recovered.
          (c) At any time during the continuance of an Event of Default, Lender
shall have the right from time to time to sever the Note and the other Loan
Documents into one or more separate notes, pledge and security agreements and
other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time during the continuance of an Event of
Default, promptly after the request of Lender, a severance agreement and such
other documents as Lender shall reasonably request in order to effect the
severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably
appoints Lender as its true and lawful attorney during the continuance of an
Event of Default, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect the aforesaid severance,
Borrower ratifying all that its said attorney shall do by virtue thereof;
provided, however, Lender shall not make or execute any such documents under
such power until three (3) Business Days after notice has been given to Borrower
by Lender of Lender’s intent to exercise its rights under such power. Except as
required in connection with a Securitization pursuant to Section 9.1 hereof,
(i) Borrower shall not be obligated to pay any costs or expenses incurred in
connection with the preparation, execution, recording or filing of the Severed
Loan Documents, (ii) the Severed Loan Documents shall not result in any economic
change in the Loan adverse to Borrower, Principal or Guarantor or materially
increase their obligations, or materially decrease their rights, under the Loan
Documents; and (iii) the Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the Loan Documents and
any such representations and warranties contained in the Severed Loan Documents
will be given by Borrower only as of March 29, 2007.
          (d) Remedies Cumulative; Waivers. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender determines
in Lender’s sole discretion. No delay or omission to exercise any remedy, right
or power accruing upon an Event of Default shall impair any such remedy, right
or power or shall be construed as a waiver thereof, but any such remedy, right
or power may be exercised from time to time and as often as may be deemed
expedient. A waiver of one Default or Event of Default with respect to Borrower
shall not be construed to be a waiver of any subsequent Default or Event of
Default by Borrower or to impair any remedy, right or power consequent thereon.
          IX. SPECIAL PROVISIONS
          Section 9.1. Sale of Notes and Securitization. Borrower acknowledges
and agrees that the Lender may sell all or any portion of the Loan and the Loan
Documents, or issue

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one or more participations therein, or consummate one or more private or public
securitizations of rated single- or multi-class securities (the “Securities”)
secured by or evidencing ownership interests in all or any portion of the Loan
and the Loan Documents or a pool of assets that include the Loan and the Loan
Documents (such sales, participations and/or securitizations, collectively, a
“Securitization”). At the request of Lender, and to the extent not already
required to be provided by Borrower under this Agreement, Borrower shall use
reasonable efforts to provide information not in the possession of Lender which
is reasonably required by Lender in order to satisfy the market standards to
which Lender customarily adheres or is reasonably required by prospective
investors and/or the Rating Agencies in connection with any such Securitization
(provided same is not protected by confidentiality and is otherwise reasonably
producible) including, without limitation, to:
          (a) provide additional and/or updated Provided Information, together
with appropriate verification and/or consents related to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys reasonably acceptable to Lender and the Rating Agencies;
          (b) if requested, supervise, third-party service providers engaged by
Borrower, the Principal and their respective affiliates to obtain, collect, and
deliver information reasonably requested or required by Lender or the Rating
Agencies;
          (c) deliver (i) updated opinions of counsel as to non-consolidation,
due execution and enforceability with respect to the Properties, Owner, the
Collateral, Borrower, the Principal and their respective Affiliates and the Loan
Documents, (including, without limitation, a so-called “10b-5” opinion with
respect to the Covered Disclosure Information) and (ii) revised organizational
documents for Borrower (provided such revised organizational documents do not
adversely affect Borrower, Principal or Guarantor (other than in an
insignificant manner) , which counsel opinions and organizational documents
shall be reasonably satisfactory to Lender and the Rating Agencies; and
          (d) execute such amendments to the Loan Documents as may be reasonably
requested by Lender or requested by the Rating Agencies to effect the
Securitization and/or deliver one or more new component notes to replace the
original note or modify the original note to reflect multiple components of the
Loan and modify the Cash Management Agreement with respect to the newly created
components provided that such amendments shall not result in any change in the
transaction adverse to Borrower, Principal or Guarantor(other than an adverse
change which is insignificant).
          Notwithstanding anything in any Loan Document to the contrary,
(a) Borrower shall not have any obligation to reimburse Lender or Rating
Agencies for any costs incurred by them with respect to a Securitization and
(b) Lender agrees to reimburse Borrower for all reasonable out of pocket costs
or expenses incurred by Borrower in order to comply with Borrower’s obligations
under this Section 9.1.
          Section 9.2. Intentionally Omitted.

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          Section 9.3. Achievements. If the Debt Service Coverage Ratio, for any
calendar quarter is not at least 1.4 to 1.0, or if the Lease Debt Service
Coverage Ratio, for any calendar quarter is not at least 1.1 to 1.00, then,
provided that either the Senior Loan has been paid in full or Senior Lender has
waived or not exercised its right pursuant to Section 9.3 of the Senior Loan
Agreement to retain such Excess Cash Flow in the Senior Loan Cash Management
Account, Lender may deliver written notice to the Senior Cash Management Bank
instructing the Senior Cash Management Bank to deposit Excess Cash Flow in the
Cash Management Account to be held by Lender (provided that if Senior Lender
subsequently revokes a previous waiver of its right to retain Excess Cash Flow
or subsequently exercises its right to retain Excess Cash Flow, then Lender’s
foregoing right will cease and such escrowed funds will be returned to
Borrower). Any such funds escrowed shall be returned to Borrower if the Debt
Service Coverage Ratio, as thereafter calculated in any two (2) consecutive
months equals or exceeds 1.4 to 1.0 and if the Lease Debt Service Coverage
Ratio, as calculated for such two (2) consecutive months equals or exceeds 1.1
to 1.00, and Lender shall not thereafter retain Excess Cash Flow unless and
until Lender may thereafter be entitled again to retain them pursuant to the
first sentence of this Section. Such period in which Lender is entitled to
retain Excess Cash Flow shall be referred to as a “Cash Trap Period.” All such
deposit amounts shall be treated as a “Reserve Fund” for purposes of Section 7.7
hereof. All additional amounts retained or deposited under this section shall be
additional security for the repayment of the Debt and may be withdrawn by Lender
upon the occurrence of an Event of Default and applied by Lender in such order
and priority as Lender may determine. All calculations of Debt Service Coverage
Ratio and Lease Debt Service Coverage Ratio shall be subject to verification by
Lender.
          Section 9.4. Exculpation. Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note, this Agreement, the Pledge or the
other Loan Documents by any action or proceeding wherein a money judgment shall
be sought against Borrower, except that Lender may bring a foreclosure action,
an action for specific performance or any other appropriate action or proceeding
to enable Lender to enforce and realize upon its interest under the Note, this
Agreement, the Pledge and the other Loan Documents, or in the Collateral or any
other collateral given to Lender pursuant to the Loan Documents; provided,
however, that, except as specifically provided herein, any judgment in any such
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower’s interest in the Collateral and Lender, by accepting the Note, this
Agreement, the Pledge and the other Loan Documents, agrees that it shall not sue
for, seek or demand any deficiency judgment against Borrower in any such action
or proceeding under, or by reason of, or in connection with, the Note, this
Agreement, the Pledge or the other Loan Documents. The provisions of this
Section shall not, however, (a) constitute a waiver, release or impairment of
any obligation evidenced or secured by any of the Loan Documents; (b) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Pledge; (c) affect the validity or enforceability
of or any Guaranty made in connection with the Loan or any of the rights and
remedies of Lender thereunder; (d) impair the right of Lender to obtain the
appointment of a receiver; (e)  constitute a prohibition against Lender to seek
a deficiency judgment against Borrower in order to fully realize the security
granted by the Pledge or to commence any other appropriate action or proceeding
in order for Lender to exercise its remedies against the Collateral; or
(f) constitute a waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the extent of any
loss, damage, cost, expense,

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liability, claim or other obligation incurred by Lender (including attorneys’
fees and costs reasonably incurred) arising out of or in connection with the
following:
     (i) fraud or intentional misrepresentation by Borrower, Owner, Guarantor or
any Affiliate thereof in connection with the Loan;
     (ii) waste by Borrower, Owner, Guarantor or any Affiliate thereof to one or
more of the Individual Properties;
     (iii) the gross negligence or willful misconduct of Borrower, Owner,
Guarantor or any Affiliate thereof;
     (iv) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Lender with respect thereto;
     (v) the removal or disposal by Borrower, Owner, Guarantor or any Affiliate
thereof of any portion of one or more of the Properties after the occurrence and
during the continuance of an Event of Default;
     (vi) the misappropriation or conversion by Borrower or Owner of (A) any
Insurance Proceeds paid by reason of any Casualty, (B) any Awards received in
connection with a Condemnation, (C) any Rents after the occurrence and during
the continuance of an Event of Default, or (D) any Rents paid more than one
(1) month in advance;
     (vii) failure to pay charges for labor or materials or other charges that
can create Liens on any portion of the Properties;
     (viii) any security deposits, advance deposits or any other deposits
collected or held by Borrower, Owner or any Affiliate thereof with respect to
the Properties which are not delivered to Senior Lender upon a foreclosure of
the Properties or acceptance of a deed in lieu thereof or a foreclosure of the
Collateral, except to the extent any such security deposits were applied in
accordance with the terms and conditions of any of the Leases prior to the
occurrence of the Event of Default that gave rise to such foreclosure or action
in lieu thereof;
     (ix) any amounts received by Borrower or any Affiliate thereof that are not
deposited into the Lockbox Account to the extent required to be so deposited
hereunder or under the Cash Management Agreement;
     (x) if (1) Borrower or Owner fails to permit on-site inspections of any of
the Properties, subject to terms of each respective Operating Lease, upon the
request of Lender or (2) Borrower fails to provide financial information
concerning Borrower, Owner, Principal or Guarantor in its possession (or
financial information which could be obtained by Borrower through commercially

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reasonable efforts) or (3) Borrower fails to provide financial information in
its possession or control (or financial information which could be obtained by
Borrower through commercially reasonable efforts) concerning any Operator Tenant
or collections under the Operating Leases, in each case, to the extent required
by and in accordance with the terms and provisions of this Agreement; or
     (xi) any breach of the representations and warranties set forth in Section
4.1.30(a) and (b) hereof (except for any representation or warrants that
Borrower or Principal will remain solvent, maintain adequate capital or pay its
debts or liabilities as the same may become due); and
          Notwithstanding anything to the contrary in this Agreement, the Note
or any of the Loan Documents, (A) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the full amount of
the Debt secured by the Pledge or to require that all collateral shall continue
to secure all of the Debt owing to Lender in accordance with the Loan Documents,
and (B) the Debt shall be fully recourse to Borrower, only (i) in the event of:
(a) Borrower or Owner filing a voluntary petition under the Bankruptcy Code or
any other Federal or state bankruptcy or insolvency law; (b) the filing of an
involuntary petition against Borrower or Owner under the Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law, which is assisted,
supported, aided or abetted by Borrower, Owner and/or Guarantor or with respect
to which Borrower, Owner and/or Guarantor fails to contest (where good grounds
exist for such contest); (c) Borrower or Owner filing an answer consenting to or
otherwise acquiescing in or joining in any involuntary petition filed against
it, by any other Person under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law, or soliciting or causing to be solicited
petitioning creditors for any involuntary petition from any Person; (d) Borrower
or Owner consenting to or acquiescing in or joining in an application for the
appointment of a custodian, receiver, trustee, or examiner for Borrower, Owner
or any material portion of any Property or the Collateral; or (e) Borrower or
Owner making a general assignment for the benefit of creditors, or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts
as they become due; (ii) if Borrower or Owner fails to maintain its status as a
Single Purpose Entity, as required by, and in accordance with, the terms and
provisions of the Loan Agreement or the other Loan Documents (except for any
covenant to remain solvent, maintain adequate capital or pay its debts or
liabilities as they become due or the additional covenant to comply with any
assumption in the Insolvency Opinion in any Additional Insolvency Opinion);
(iii) if Borrower fails to obtain Lender’s prior consent to any Indebtedness or
voluntary Lien encumbering one or more of the Individual Properties or any
material portion of one or more of the Individual Properties or all or any part
of the Collateral the extent required by the Loan Agreement; or (iv) if Borrower
fails to obtain Lender’s prior consent to any Transfer (other than a foreclosure
or acceptance of a deed in lieu of foreclosure with respect to one or more of
the Properties by Senior Lender or a foreclosure by Lender of or Lender’s
acceptance of an assignment in lieu of foreclosure with respect to all or part
of the Pledged Collateral) to the extent required by the Loan Agreement).
          Notwithstanding anything to the contrary in any of the Loan Documents,
including without limitation anything to the contrary in the immediately
preceding paragraphs or elsewhere in this Agreement, Borrower shall not have any
obligations or liabilities hereunder for

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any loss, damage, cost, expense, liability, claim or other obligation incurred
by Lender (including reasonable attorneys’ fees and costs reasonably incurred)
arising out of or in connection with (i) any action or inaction of any Pledged
Company or any Person owned or controlled by any Pledged Company but only to the
extent such action or inaction results from the exercise of control over any
Pledged Company or such entity owned or controlled by any Pledged Company by
Lender, (ii) any act or omission which occurs after the completion of a private
or public sale of the Pledged Collateral or after acceptance of an assignment in
lieu of foreclosure with respect to the Pledged Company Interests or (iii) any
act or omission relating to any Individual Property which occurs after Lender
completes a foreclosure with respect to such Individual Property or accepts a
deed in lieu of foreclosure with respect to such Individual Property.
          Section 9.5. Servicer. At the option of Lender, the Loan may be
serviced by a servicer/trustee (the “Servicer”) selected by Lender and Lender
may delegate all or any portion of its responsibilities under this Agreement and
the other Loan Documents to the Servicer pursuant to a servicing agreement (the
“Servicing Agreement”) between Lender and Servicer. Borrower shall be
responsible for any reasonable set-up fees or any other initial costs relating
to or arising under the Servicing Agreement, which set-up fees or initial costs
shall not exceed $500; provided, however, that Borrower shall not be responsible
for payment of the monthly servicing fee due to the Servicer under the Servicing
Agreement.
          Section 9.6. Guarantor Net Worth Threshold. (a) As used in this
Section 9.6, the term “Net Worth” shall mean, as of a given date, (x) the total
assets of Guarantor as of such date less (y) Guarantor’s total liabilities as of
such date, determined in accordance with GAAP.
          (b) Until all of the Guaranteed Obligations have been paid in full,
Guarantor shall maintain a Net Worth in excess of Five Hundred Million Dollars
($500,000,000).
          (c) Any default under this Section 9.6 which remains uncured for
fourteen (14) days after Borrower’s receipt of written notice thereof from
Lender shall constitute an Event of Default.
          Section 9.7. Intentionally Omitted.
          X. MISCELLANEOUS.
          Section 10.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All covenants,
promises and agreements in this Agreement, by or on behalf of Borrower, shall
inure to the benefit of the successors and assigns of Lender.
          Section 10.2. Lender’s Discretion. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to

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be satisfactory to Lender, the decision of Lender to approve or disapprove or to
decide whether arrangements or terms are satisfactory or not satisfactory shall
(except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive. Whenever this Agreement expressly
provides that Lender may not unreasonably withhold its consent, agreement to or
approval of an arrangement or term, or decide or determine whether an
arrangement or term is reasonably satisfactory, or words of similar effect, such
provisions shall also be deemed to prohibit Lender from unreasonably delaying or
conditioning such consent, agreement, approval, decision or determination.
          Section 10.3. Governing Law.
          (A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN
WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER
LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION,
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS
LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF
SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS
ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER
LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
          (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT
LENDER’S OPTION

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BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF
NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT EFFECTIVE 10
BUSINESS DAYS AFTER THE DATE HEREOF:
CT CORPORATION SYSTEM
111 Eighth Avenue
New York, NY 10011
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
          Section 10.4. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
          Section 10.5. Delay Not a Waiver. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude

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any other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
          Section 10.6. Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return receipt
requested or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, and by telecopier (with
answer back acknowledged), addressed as follows (or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a notice to the other parties hereto in the manner provided for in
this Section 10.6):

              If to Lender:   Column Financial, Inc.           11 Madison Avenue
          New York, New York 10010           Attention: Richard Lerner          
Facsimile No.: (212) 325-8105                   with a copy to:   Column
Financial, Inc.           One Madison Avenue           New York, New York 10019
          Legal and Compliance Department           Attention: Casey McCutcheon,
Esq.           Facsimile No.: (212) 325-8282                   with a copy to:  
Troutman Sanders LLP           405 Lexington Avenue           New York, New York
10174           Attention: Simon Cices, Esq.           Facsimile No.
(212) 704-8343                   If to Borrower:   CSE Casablanca Holdings II
LLC           4445 Willard Avenue           Chevy Chase, MD 20815          
Attention: Treasurer              Telecopier: (301) 841-2307                  
With a copy to:   CSE Casablanca Holdings II LLC           30699 Russell Ranch
Road, Suite 200           Westlake Village, CA  91362          
Attention: General Counsel – HRG           Telecopier: (818) 540-2157    

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A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day;
or in the case of telecopy, upon sender’s receipt of a machine-generated
confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.
          Section 10.7. Trial by Jury. BORROWER AND LENDER HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. LENDER AND BORROWER ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
          Section 10.8. Headings. The Article and/or Section headings and the
Table of Contents in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
          Section 10.9. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
          Section 10.10. Preferences. During the continuance of an Event of
Default, Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.
          Section 10.11. Waiver of Notice. Borrower hereby expressly waives, and
shall not be entitled to, any notices of any nature whatsoever from Lender
except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to Borrower and except with respect to matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice.

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          Section 10.12. Remedies of Borrower. In the event that a claim or
adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower’s sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
          Section 10.13. Expenses; Indemnity. (a)  Borrower covenants and agrees
to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of notice
from Lender for all reasonable costs and expenses (including reasonable
attorneys’ fees and disbursements) incurred by Lender in connection with
(i) [intentionally omitted]; (ii) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date, including, without limitation, confirming
compliance with environmental and insurance requirements; (iii) Lender’s ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date; (iv) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by Lender; (v) securing Borrower’s compliance
with any reasonable requests made pursuant to the provisions of this Agreement;
(vi) the filing and recording fees and expenses, title insurance and reasonable
fees and expenses of counsel for providing to Lender all required legal
opinions, and other similar expenses incurred in creating and perfecting the
Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents; (vii) enforcing or preserving any rights, either in response to third
party claims or in prosecuting or defending any action or proceeding or other
litigation, in each case against, under or affecting Borrower, this Agreement,
the other Loan Documents, the Collateral or the Properties, or any other
security given for the Loan; and (viii) enforcing any obligations of or
collecting any payments due from Borrower under this Agreement, the other Loan
Documents or with respect to the Collateral or the Properties or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a “work-out” or of any insolvency or bankruptcy
proceedings; provided, however, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same (1) arise by
reason of the gross negligence, illegal acts, fraud or willful misconduct of
Lender or its agents, (2) constitute Lender’s overhead or (3) except as
otherwise expressly set forth in Section 9.1 or Section 9.2, relate to a
Securitization. Any cost and expenses due and payable to Lender may be paid from
any amounts in the Lockbox Account.
          (b) Notwithstanding anything in this Agreement to the contrary, as
long as there is no uncured Event of Default, if Senior Lender selects or has
selected an independent, reputable, third party consultant or other professional
(other than attorneys) to perform a service for the Senior Lender, Mezzanine
Lender will not hire or continue the engagement of a separate consultant or
other professional to perform the same service for Mezzanine Lender, provided
that Mezzanine Lender (i) receives a reliance letter from the consultant or
other

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professional reasonably satisfactory to Mezzanine Borrower and (ii) does not
have a reasonable objection to using such consultant or other professional.
          (c) Borrower shall indemnify, defend and hold harmless Lender from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of
(i) any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement or the other Loan
Documents, (ii) the use or intended use of the proceeds of the Loan or (iii) all
paid and unpaid liability claims, including Medicare and Medicaid claims in
connection with the Properties and any other prior liability of Borrower, Owner,
or any prior owner of the Properties (collectively, the “Indemnified
Liabilities”); provided, however, that Borrower shall not have any obligation to
Lender hereunder to the extent that such Indemnified Liabilities arise from the
gross negligence, illegal acts, fraud or willful misconduct of Lender or as
agent. To the extent that the undertaking to indemnify, defend and hold harmless
set forth in the preceding sentence may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Lender.
          Section 10.14. Schedules Incorporated. The Schedules annexed hereto
are hereby incorporated herein as a part of this Agreement with the same effect
as if set forth in the body hereof.
          Section 10.15. Offsets, Counterclaims and Defenses. Any assignee of
Lender’s interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents which Borrower may otherwise have
against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower in any action or proceeding
brought by any such assignee upon such documents and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.
          Section 10.16. No Joint Venture or Partnership; No Third Party
Beneficiaries. (a)  Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Properties other than that of
mortgagee, beneficiary or lender.
          (b) This Agreement and the other Loan Documents are solely for the
benefit of Lender and Borrower and nothing contained in this Agreement or the
other Loan Documents shall be deemed to confer upon anyone other than Lender and
Borrower any right to insist upon or to enforce the performance or observance of
any of the obligations contained

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herein or therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable
to do so.
          Section 10.17. Publicity. All news releases, publicity or advertising
by Borrower or their Affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to Lender, CS, or any of their Affiliates shall be subject to the
prior approval of Lender (such approval not to be unreasonably withheld), except
to the extent any releases of information by Borrower or its Affiliates is
required in order for Borrower or such Affiliates to comply with legal
requirements applicable to them, including without limitation disclosure
required under the Exchange Act or the Securities Act, or regulations
promulgated thereunder. All news releases, publicity or advertising by Lender or
its Affiliates through any media intended to reach the general public which
refers to the Loan Documents or the financing evidenced by the Loan Documents,
to Borrower or any of their Affiliates shall be subject to the prior approval of
Borrower (such approval not to be unreasonably withheld), except to the extent
any releases of information by Lender, CS or their Affiliates is required in
order for Lender or such Affiliates to comply with legal requirements applicable
to them, including without limitation disclosure required under the Exchange Act
or the Securities Act, or regulations promulgated thereunder.
          Section 10.18. Waiver of Marshalling of Assets. To the fullest extent
permitted by law, Borrower, for itself and its successors and assigns, waives
all rights to a marshalling of the assets of Borrower, Borrower’s partners and
others with interests in Borrower, and of the Collateral, or to a sale in
inverse order of alienation in the event of foreclosure of the Pledge, and
agrees not to assert any right under any laws pertaining to the marshalling of
assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan Documents to a sale
of the Collateral for the collection of the Debt without any prior or different
resort for collection or of the right of Lender to the payment of the Debt out
of the net proceeds of the Collateral in preference to every other claimant
whatsoever. In addition, Borrower, for itself and its successors and assigns,
waives in the event of foreclosure of the Pledge, any equitable right otherwise
available to Borrower which would require the separate sale of the Collateral or
require Lender to exhaust its remedies against any portion of the Collateral
before proceeding against any other portion of the Collateral; and further in
the event of such foreclosure Borrower does hereby expressly consent to and
authorize, at the option of Lender, the foreclosure and sale either separately
or together of any combination of the Collateral.
          Section 10.19. Waiver of Counterclaim. Borrower hereby waives the
right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents.

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          Section 10.20. Conflict; Construction of Documents; Reliance. Except
as otherwise provided to the contrary in other Loan Documents, in the event of
any conflict between the provisions of this Loan Agreement and any of the other
Loan Documents, the provisions of this Loan Agreement shall control. The parties
hereto acknowledge that they were represented by competent counsel in connection
with the negotiation, drafting and execution of the Loan Documents and that such
Loan Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. Borrower acknowledges that, with respect
to the Loan, Borrower shall rely solely on its own judgment and advisors in
entering into the Loan without relying in any manner on any statements,
representations or recommendations of Lender or any parent, subsidiary or
Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in
the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue
of the ownership by it or any parent, subsidiary or Affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender’s exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.
          Section 10.21. Brokers and Financial Advisors. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and
hold Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind (including Lender’s attorneys’ fees and expenses) in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower or Lender in connection with the transactions contemplated
herein. The provisions of this Section 10.21 shall survive the expiration and
termination of this Agreement and the payment of the Debt.
          Section 10.22. Prior Agreements. This Agreement and the other Loan
Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties with respect to such transactions,
whether oral or written, including, without limitation, the term sheet dated
November 7, 2006 (as amended) between an Affiliate of Borrower and Lender are
superseded by the terms of this Agreement and the other Loan Documents.
[Signature page follows]

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          IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.

                  BORROWER:    
 
                CSE CASABLANCA HOLDINGS II LLC,
     a Delaware limited liability company    
 
           
 
  By:   /S/ JEFFREY A. LIPSON
 
Name: Jeffrey A. Lipson    
 
      Title: Vice President & Treasurer    

[Signatures continue on following page]

 

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            COLUMN FINANCIAL, INC.
      By:   /S/ SUSANA IANNICELLI         Name:   Susana Iannicelli       
Title:   Vice President     

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