EX-10.72.15

 

 

 

 
LOAN AGREEMENT
 
by and among
 
EMERITUS CORPORATION, a Washington corporation,
 
SUMMERVILLE SENIOR LIVING, INC., a Delaware corporation,
 
SW ASSISTED LIVING, LLC, a Delaware limited liability company,
 
SUMMERVILLE AT HERITAGE PLACE, LLC, a Delaware limited liability company,
 
SUMMERVILLE AT BARRINGTON COURT LLC, a Delaware limited liability company,
 
SUMMERVILLE AT ROSEVILLE GARDENS LLC, a Delaware limited liability company,
 
SUMMERVILLE 5 LLC, a Delaware limited liability company,
 
SUMMERVILLE 14 LLC, a Delaware limited liability company,
 
SUMMERVILLE 15 LLC, a Delaware limited liability company,
 
SUMMERVILLE 16 LLC, a Delaware limited liability company, and
 
SUMMERVILLE 17 LLC, a Delaware limited liability company,
 
and
 
VENTAS REALTY, LIMITED PARTNERSHIP, a Delaware limited partnership
 

 
Executed as of December 19, 2008
 

 
 

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TABLE OF CONTENTS

 
Section
   
Page
1
DEFINITIONS.
3
 
1.1.
Defined Terms
3
 
1.2.
Exhibits and Schedules Incorporated
12
2
LOAN.
 
12
 
2.1.
The Loan
12
 
2.2.
Intentionally Omitted.
12
 
2.3.
Loan Documents
12
 
2.4.
Agreement Date
13
 
2.5.
Maturity Date
13
 
2.6.
Note Rate.
13
 
2.7.
Prepayments; Amortization; Payments.
14
 
2.8.
Expenses
15
3
DISBURSEMENT.
15
 
3.1.
Loan Opening and Disbursements of Loan Proceeds
15
 
3.2.
Conditions Precedent to Opening Disbursement
15
 
3.3.
Disbursements Evidenced by the Note
17
4
INSURANCE.
17
 
4.1.
Types of Policies
17
 
4.2.
Policy Requirements
18
 
4.3.
Notice; Evidence of Renewal
18
 
4.4.
Separate Insurance
19
 
4.5.
Leasehold Properties
19
 
4.6.
Fee Properties
19
5
GENERAL REPRESENTATIONS AND WARRANTIES
19
 
5.1.
Authority
19
 
5.2.
Formation
20
 
5.3.
No Default
20
 
5.4.
No Litigation
20
 
5.5.
True and Complete Information
20
 
5.6.
Usury
20
 
5.7.
Non Foreign Status
21
 
5.8.
ERISA
21
 
5.9.
RICO
21

 
 

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5.10.
Financial Statements; No Material Adverse Change
21
 
5.11.
Property Specific
21
 
5.12.
Brokerage Commissions
22
 
5.13.
Loan Purposes
22
 
5.14.
Single Purpose Entity
22
 
5.15.
Master Lease
23
 
5.16.
Representations and Warranties Generally
23
 
5.17.
Benefits of the Loan; Additional Agreements of Emeritus
23
6
HAZARDOUS MATERIALS.
25
 
6.1.
Special Representations and Warranties
25
 
6.2.
Covenants
26
 
6.3.
Inspection By Lender
27
 
6.4.
Lender's Right to Rely
27
 
6.5.
Hazardous Materials Indemnity
27
 
6.6.
California Deed of Trust
28
7
GENERAL COVENANTS, CONDITIONS AND AGREEMENTS
28
 
7.1.
Compliance with Loan Documents
28
 
7.2.
Use of the Property
28
 
7.3.
Property Leases and Other Transfers
28
 
7.4.
Covenants, Conditions and Restrictions
29
 
7.5.
Other Agreements Affecting the Property
29
 
7.6.
Management Agreement
29
 
7.7.
Inspection of Books and Records
29
 
7.8.
Litigation
30
 
7.9.
No Lien Rights
30
 
7.10.
No Transfers or Other Financing
30
 
7.11.
No Related Party Payments
30
 
7.12.
Mechanics Liens
30
 
7.13.
Inspections
31
 
7.14.
Construction
31
 
7.15.
Massachusetts Mortgage
31
8
FINANCIAL STATEMENTS.
31
 
8.1.
Annual Reports
31
 
8.2.
Quarterly Reports
32
 
8.3.
Certifications of Compliance
32
 
8.4.
Annual Budgets
32
 
8.5.
Monthly Financial Information
33
 
8.6.
Authorizations
33
 
8.7.
Actuarial Reports
33
 
8.8.
Notices/Inspection Reports from Governmental Authorities
33
 
8.9.
Other Information
34

 
 

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9
BORROWER'S DEFAULT.
34
 
9.1.
Borrower's Defaults and Lender's Remedies.
34
 
9.2.
Protective Advances
37
 
9.3.
Other Remedies
37
 
9.4.
RICO Related Law Concerns
37
 
9.5.
No Lender Liability
37
 
9.6.
Lender's Fees and Expenses
38
10
MISCELLANEOUS.
38
 
10.1.
Indemnification
38
 
10.2.
Assignment and Participation.
38
 
10.3.
Prohibition on Assignment
39
 
10.4.
Time of the Essence
39
 
10.5.
No Waiver
40
 
10.6.
Severability
40
 
10.7.
Use of Proceeds
40
 
10.8.
Notices
40
 
10.9.
Successors and Assigns
41
 
10.10.
No Joint Venture
42
 
10.11.
Brokerage Commissions
42
 
10.12.
Publicity
42
 
10.13.
Documentation
42
 
10.14.
Additional Assurances
42
 
10.15.
Entire Agreement
42
 
10.16.
Choice of Law
42
 
10.17.
No Third Party Beneficiary
43
 
10.18.
Legal Tender of United States
43
 
10.19.
Definitions; Captions
43
 
10.20.
Interpretation
43
 
10.21.
WAIVER OF RIGHT TO JURY TRIAL
44
 
10.22.
Credit Reporting
44
 
10.23.
Duplication of Deliveries
44
 
10.24.
Conflicts with Master Lease
44
 
10.25.
Liability Limitation
45

 
 

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Exhibits:
 
EXHIBIT A                                      LIST OF FEE PROPERTIES/LEASEHOLD
PROPERTIES A-1
EXHIBITS A -1                                      BRIGHTON LEGAL
DESCRIPTION A-3
EXHIBITS A -2                                      LAKE MARY LEGAL
DESCRIPTION A-4
EXHIBITS A -3                                      GOLDEN POND LEGAL
DESCRIPTION A-5
EXHIBITS A -4                                      MENTOR LEGAL DESCRIPTION A-6
EXHIBITS A -5                                      ATHERTON LEGAL
DESCRIPTION A-7
EXHIBITS A -6                                      WINDSOR LEGAL DESCRIPTION A-8
EXHIBITS A -7                                      HERITAGE LEGAL
DESCRIPTION A-9
EXHIBITS A -8                                      BARRINGTON LEGAL
DESCRIPTION A-10
EXHIBITS A -9                                      SOMER PARK LEGAL
DESCRIPTION A-11
EXHIBITS A -10                                      FARM POND LEGAL
DESCRIPTION A-12
EXHIBITS A -11                                      BONITA SPRINGS LEGAL
DESCRIPTIONA-13
EXHIBITS A -12                                      BOYNTON BEACH LEGAL
DESCRIPTIONA-14
EXHIBITS A -13                                      DEER CREEK LEGAL
DESCRIPTION A-15
EXHIBITS A -14                                      JENSEN BEACH LEGAL
DESCRIPTION A-16
EXHIBITS A -15                                      JENSEN BEACH (LAND) LEGAL
DESCRIPTION A-17
EXHIBIT B                                      LOAN DOCUMENTS B-1
EXHIBIT C                                      WIRE INSTRUCTIONS C-1
EXHIBIT D                                      FORM OF OFFICER’S CERTIFICATE D-1

 
 

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LOAN AGREEMENT
 

 
THIS LOAN AGREEMENT (as amended, supplemented, replaced and/or restated from
time to time, this “Agreement”) is dated as of December 19, 2008, and is made by
and among EMERITUS CORPORATION, a Washington corporation (“Emeritus”);
SUMMERVILLE SENIOR LIVING, INC., a Delaware corporation (“SSL”); SW ASSISTED
LIVING, LLC, a Delaware limited liability company (“Windsor Borrower”);
SUMMERVILLE AT HERITAGE PLACE, LLC, a Delaware limited liability company
(“Heritage Borrower”); SUMMERVILLE AT BARRINGTON COURT LLC, a Delaware limited
liability company (“Barrington Borrower”); SUMMERVILLE AT ROSEVILLE GARDENS LLC,
a Delaware limited liability company (“Somer Park Borrower”); SUMMERVILLE 5 LLC,
a Delaware limited liability company (“Farm Pond Borrower”); SUMMERVILLE 14 LLC,
a Delaware limited liability company (“Bonita Borrower”); SUMMERVILLE 15 LLC, a
Delaware limited liability company (“Boynton Borrower”); SUMMERVILLE 16 LLC, a
Delaware limited liability company (“Deer Creek Borrower”); and SUMMERVILLE 17
LLC, a Delaware limited liability company (“Jensen Beach Borrower”, and
collectively with Emeritus, SSL, Windsor Borrower, Heritage Borrower, Barrington
Borrower, Somer Park Borrower, Farm Pond Borrower, Bonita Borrower, Boynton
Borrower and Deer Creek Borrower, on a joint and several basis, “Borrower” or
individually each a “Borrower” as the context may require, as determined by
Lender), and VENTAS REALTY, LIMITED PARTNERSHIP, a Delaware limited partnership
(“Lender”).
 
RECITALS
 
WHEREAS, EMERIVENT BRIGHTON LLC, a Delaware limited liability company (“Brighton
Owner”); EMERIVENT LAKE MARY LLC, a Delaware limited liability company (“Lake
Mary Owner”); EMERIVENT BRADENTON LLC, a Delaware limited liability company
(“Golden Pond Owner”); EMERIVENT MENTOR LLC, a Delaware limited liability
company (“Mentor Owner”); and EMERIVENT ATHERTON COURT INC, a Delaware
corporation (“Atherton Owner”, and together with Brighton Owner, Lake Mary
Owner, Golden Pond Owner and Mentor Owner, individually, each an “Emeritus
Purchaser”, and collectively, the “Emeritus Purchasers”) hold fee simple title
to five (5) parcels of property, along with all improvements thereon and
easements and appurtenances thereto, which parcels are listed as Facility Nos. 1
through 5 on Exhibit A attached hereto, and legally described in Exhibits A-1
through Exhibit A-5 attached hereto (individually, each a “Sold Property”, and
collectively, the “Sold Properties”).
 
WHEREAS, the Emeritus Purchasers have acquired title to the respective Sold
Properties pursuant to (i) that certain Agreement for Sale of Real Estate dated
as of July 25, 2008, by and between Lender, as Seller, and Emeritus, as
Purchaser, relating to the property commonly known as Summerville at Brighton,
(ii) that certain Agreement for Sale of Real Estate dated as of July 25, 2008,
by and between Lender, as Seller, and Emeritus, as Purchaser, relating to the
property commonly known as Summerville at Lake Mary, (iii) that certain
Agreement for Sale of Real Estate dated as of July 25, 2008, by and between
Lender, as Seller, and Emeritus, as Purchaser, relating to the property commonly
known as Golden Pond Assisted Living, (iv) that certain
 

 
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Agreement for Sale of Real Estate dated as of July 25, 2008, by and between
Lender, as Seller, and Emeritus, as Purchaser, relating to the property commonly
known as Summerville at Mentor, and (v) that certain Agreement for Sale of Real
Estate dated as of July 25, 2008, by and between Lender, as Seller, and
Emeritus, as Purchaser, relating to the property commonly known as Atherton
Court Alzheimer’s Residence (as amended, supplemented, replaced and/or restated
from time to time, individually, each a “Purchase Contract”, and collectively,
the “Purchase Contracts”).
 
WHEREAS, Windsor Borrower, Heritage Borrower, Barrington Borrower, Somer Park
Borrower, Farm Pond Borrower, Bonita Borrower, Boynton Borrower, Deer Creek
Borrower and Jensen Beach Borrower (individually, each a “Leasehold Borrower”,
and collectively, the “Leasehold Borrowers”) hold leasehold interests in ten
(10) parcels of property, along with all improvements thereon and easements and
appurtenances thereto, which parcels are listed as Facility Nos. 6 through 15 on
Exhibit A attached hereto, and legally described in Exhibits A-6 through Exhibit
A-15 attached hereto (individually, each a “Leasehold Property”, and
collectively, the “Leasehold Properties”) pursuant to that certain Third Amended
and Restated Master Lease Agreement dated as of July 25, 2008, by and among
Lender and Ventas Framingham, LLC, a Delaware limited liability company, as
landlord (together, and collectively with any replacement thereof under the
Master Lease, the “Master Landlord”), and Leasehold Borrowers and certain
affiliates thereof, as tenants (as amended, supplemented, replaced and/or
restated from time to time, the “Master Lease”).
 
WHEREAS, certain Affiliates of Borrower have also entered into (i) that certain
Master Lease Agreement dated as of January 31, 2005, by and between Ventas
Fairwood, LLC, as landlord, and Summerville at Fairwood Manor, LLC, a Delaware
limited liability company, as tenant (as the same may be amended, supplemented,
replaced and/or restated from time to time, the “Fairwood Lease”) and (ii) that
certain Master Lease Agreement dated as of April 14, 2005, by and between Ventas
Whitehall Estates, LLC, a Delaware limited liability company, as landlord, and
Summerville 4 LLC, a Delaware limited liability company, as tenant (as the same
may be amended, supplemented, replaced and/or restated from time to time, the
“Whitehall Lease”).
 
WHEREAS, SSL owns, directly or indirectly, one hundred percent (100%) of the
membership interests of each Fee Owner (as hereinafter defined) and each
Leasehold Borrower.
 
WHEREAS, Emeritus owns one hundred percent (100%) of the capital stock in SSL.
 
WHEREAS, as a condition of making the Loan (as hereinafter defined) described in
this Agreement, Lender requires that Borrower execute and deliver this
Agreement, the Collateral Documents (as hereinafter defined), the other Loan
Documents (as hereinafter defined) and the Other Related Documents (as
hereinafter defined), as applicable.
 
THEREFORE, in consideration of the mutual covenants, conditions and agreements
herein contained, the parties hereto hereby agree as follows:
 

 
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AGREEMENT
 
1. ­DEFINITIONS.
 
1.1. ­Defined Terms.  The following capitalized terms generally used in this
Agreement shall have the meanings defined or referenced below.  Certain other
capitalized terms used only in specific sections of this Agreement are defined
in such sections.
 
“Actuarial Reports” shall mean any and all written reports, studies, analyses or
reviews prepared by or behalf of any Borrower Party or their respective
insurance providers or carriers, whether quarterly or otherwise, concerning any
Borrower Party’s malpractice or professional liability insurance or any Borrower
Party’s reserves for expenses relating to malpractice or professional liability
claims.
 
“ADA” shall mean the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et.
seq., as hereinafter amended or modified.
 
“Affiliate” or “Affiliates” shall mean an entity’s partners, members or parent
and subsidiary corporations, and any other entity or person, directly or
indirectly, controlling, controlled by or under common control with said entity,
and their respective affiliates, shareholders, directors, officers, employees
and agents.
 
“Annual Budget” shall mean each Borrower Party’s projection of such Borrower
Party’s revenues and expenses for a particular Fiscal Year in a format and
containing such information as is reasonably acceptable to Lender.
 
“Assignee Lender” shall have the meaning ascribed to such term in Section 10.2.
 
“Assignment of Contracts, Permits and Licenses” shall mean a collateral
assignment duly executed by each Leasehold Borrower and consented to by such
Material Vendors as Lender may request, as amended, supplemented, replaced
and/or restated from time to time, pursuant to which each Leasehold Borrower
assigns to Lender, to the extent assignable:  (i) all of Borrower’s right, title
and interest in and to all contracts relating to or entered into in connection
with the Leasehold Properties, including, without limitation, subcontracts,
sub-subcontracts and material purchase orders, and property management
agreements, now or hereafter entered into in connection with the management
thereof, or any portion thereof, relating to such Leasehold Properties; and (ii)
all of Borrower’s right, title and interest in and to all applicable plans and
specifications, permits, authorizations, approvals and licenses issued from time
to time with respect to the Leasehold Properties.

 “Authorizations” shall mean any and all licenses, operating permits, Provider
Agreements, certificates of exemption, approvals, waivers, variances and other
governmental or “quasi-governmental” authorizations necessary or advisable for
the use of any Property for its primary intended use and receipt of
reimbursement or other payments under any Third Party Payor Programs.
 

 
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“Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978 (11 USC §
101-1330), as hereinafter amended or recodified.
 
“Borrower” shall have the meaning ascribed to such term in the Preamble.
 
“Borrower Annual Report” shall have the meaning ascribed to such term in
Section 8.1.
 
“Borrower Party(ies)” shall mean, collectively or individually as the context
may require, as determined by Lender, each Borrower and each Fee Owner;
provided, however, that Borrower Party(ies) shall not include any Fee Owner from
and after the date such Fee Owner is no longer controlled by Borrower or an
Affiliate of Borrower due to a default under the Loan and Lender’s pursuit of
its remedies hereunder or under any of the other Loan Documents.
 
“Brighton” shall mean that certain Fee Property commonly known as Summerville at
Brighton and listed as Facility No. 1 on Exhibit A and legally described on
Exhibit A-1.
 
“Business Day” shall mean a day of the week (but not a Saturday or Sunday or any
holiday on which banks in Chicago, Illinois are customarily required or
authorized to close).
 
“California Deed of Trust” shall mean a Leasehold Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture Filing, of even date herewith,
covering each Leasehold Property located in the State of California and executed
by the respective Leasehold Borrower(s) thereof in favor of Lender, as amended,
supplemented, replaced and/or restated from time to time.
 
“Capital Stock” shall mean, with respect to any Person, any capital stock
(including preferred stock), shares, interests and/or participation or other
ownership interests (however designated) of such Person and any rights, warrants
or options to purchase any thereof, but excluding the sale of all of the Capital
Stock in a Venture Entity (as defined below).

“Capmark” shall mean Capmark Bank, a Utah industrial bank, or any Affiliate
thereof.

“Capmark Loan” shall mean the Fee Owners’ first mortgage financing from Capmark
obtained in connection with Fee Owners’ initial acquisition of the Fee
Properties pursuant to the Purchase Contracts.

 “Cash Collateral Agreement” shall mean that certain Cash Collateral and
Security Agreement of even date herewith made by each Leasehold Borrower in
favor of Lender granting a first priority lien and security interest in, among
other things, one hundred percent (100%) of the Security Deposit, as amended,
supplemented, replaced and/or restated from time to time.
 
“Collateral” shall mean all the property (including all personal, real, tangible
and intangible property) in which the Collateral Documents grant (or purport to
grant) Lender a security interest or lien.
 

 

 
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“Collateral Documents” shall mean the Pledge Agreement, the Cash Collateral
Agreement, the Mortgages, the Assignment of Contracts, Permits and Licenses, and
all UCC Financing Statements relating to the foregoing.
 
“Commitment Date” shall have the meaning ascribed to such term in Section 5.10.
 
“Common Materials” shall have the meaning ascribed to such term in
Section 6.2.1.
 
“Connecticut Mortgage” shall mean a Leasehold Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, of even date herewith, covering
each Leasehold Property located in the State of Connecticut and executed by the
respective Leasehold Borrower(s) thereof in favor of Lender, as amended,
supplemented, replaced and/or restated from time to time.
 
           “Default Rate” shall mean the rate of fourteen percent (14%) per
annum, computed based on a 360-day year and charged on the basis of actual days
elapsed.
 
“Emeritus” shall have the meaning ascribed to such term in the Preamble.
 
“Emeritus Entities” shall mean, collectively, (i) each Borrower, (ii) each
Emeritus Purchaser and (iii) any of their respective Affiliates whose financial
activities are, pursuant to GAAP, included in Emeritus’s consolidated financial
statements.
 
“Emeritus Purchaser(s)” shall have the meaning ascribed to such term in the
Recitals.
 
           “Equity Transaction” shall mean, with respect to any Person, any
issuance or sale of shares of Capital Stock in such Person or any of its
consolidated subsidiaries or other Affiliates, other than an issuance (i) to
such Person or any of its consolidated subsidiaries or other Affiliates or (ii)
of restricted stock to any present or former employee, officer or director of
such Person or any of its consolidated subsidiaries or Affiliates, or in
connection with the exercise by a present or former employee, officer or
director of such Person or any of its consolidated subsidiaries or Affiliates
under a stock incentive plan, stock option plan or other equity-based
compensation plan or arrangement.
 
“Event of Default” shall have the meaning ascribed to such term in Section
9.1.1.
 
“Fairwood Lease” shall have the meaning ascribed to such term in the Recitals.
 
“Fairwood Guaranty” shall mean that certain Guaranty of Lease dated as of July
25, 2008, by and between Emeritus, as guarantor, and Ventas Fairwood, LLC, a
Delaware limited liability company, as landlord, as amended, supplemented,
replaced and/or restated from time to time.
 
“Fee Owner(s)” shall mean the Brighton Owner and the Golden Pond Owner.
 
“Fee Property(ies)” shall mean Brighton and Golden Pond.
 
“FEMA” shall mean the Federal Emergency Management Agency.
 

 

 
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“Fiscal Year” shall mean the twelve (12) month period from January 1 to
December 31.
 
“Florida Mortgage” shall mean a Leasehold Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, of even date herewith, covering
each Leasehold Property located in the State of Florida and executed by the
respective Leasehold Borrower(s) thereof in favor of Lender, as amended,
supplemented, replaced and/or restated from time to time.
 
“GAAP” shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession.
 
“Golden Pond” shall mean that certain Fee Property commonly known as Golden Pond
Assisted Living and listed as Facility No. 3 on Exhibit A and legally described
on Exhibit A-3.
 
“Governmental Authority” shall mean any court, board, agency, licensing agency,
commission, office or authority or any governmental unit (federal, state,
county, district, municipal, city or otherwise) whether now or hereafter in
existence, including, without limitation, any state licensing agency and/or any
state Medicaid agency and any quasi-governmental authorities.

“Hazardous Materials” shall have the meaning ascribed to such term in Section
6.1.1.
 
“Hazardous Materials Claims” shall have the meaning ascribed to such term in
Section 6.1.3.
 
“Hazardous Materials Laws” shall have the meaning ascribed to such term in
Section 6.1.2.
 
“Improvements” shall mean the buildings and other structures now or hereafter
located on any Property, together with all necessary or required site
improvements and all appurtenances and fixtures and all tenant improvements.
 
“Indemnified Matters” shall have the meaning ascribed to such term in
Section 6.5.
 
“Intercreditor Agreement” shall mean that certain Indemnity Agreement of even
date herewith by and between Lender and Capmark.
 
“Leasehold Borrower(s)” shall have the meaning ascribed to such term in the
Recitals.
 
“Leasehold Property(ies)” shall have the meaning ascribed to such term in the
Recitals.
 
“Lender” shall have the meaning ascribed to such term in the Preamble.
 
“Loan” shall mean the loan described in Section 2.1.
 

 

 
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“Loan Amount” shall mean Ten Million and No/100 Dollars ($10,000,000.00).
 
“Loan Documents” shall mean those documents, as hereafter amended, supplemented,
replaced, modified and/or restated from time to time, properly executed and in
recordable form, if necessary, listed as Loan Documents in Exhibit B, and shall
also include any other agreement executed by Borrower or any Affiliate of
Borrower in favor of or with Lender in connection with the transactions
contemplated by this Agreement (other than the Other Related Documents).
 
“Massachusetts Mortgage” shall mean an Open-End Leasehold Mortgage Deed,
Assignment of Leases and Rents, Security Agreement and Fixture Filing, of even
date herewith, covering each Leasehold Property located in the State of
Massachusetts and executed by the respective Leasehold Borrower(s) thereof in
favor of Lender, as amended, supplemented, replaced and/or restated from time to
time.
 
“Master Landlord” shall have the meaning ascribed to such term in the Recitals.
 
“Master Lease” shall have the meaning ascribed to such term in the Recitals.
 
 “Master Lease Guaranty” shall mean, individually or collectively as the context
may require (as determined by Lender), (i) that certain Guaranty of Lease dated
as of July 25, 2008, by and between Emeritus, as guarantor, and Master Landlord,
as landlord, as amended, supplemented, replaced and/or restated from time to
time, and (ii) that certain Guaranty of Lease of even date herewith, by and
between SSL, as guarantor, and Master Landlord, as landlord, as amended,
supplemented, replaced and/or restated from time to time.
 
“Material Indebtedness” shall mean any borrowing, loan or indebtedness (other
than the Loan) for which any Borrower Party is liable (other than non-material
vendor agreements, which, in the case of any vendor agreement for which Emeritus
is liable, shall mean and refer to any vendor agreement for which the annual
aggregate consideration is less than $2,000,000.00, and other than loans for
which Emeritus is liable, so long as the principal amount of each such loan is
less than $2,000,000.00 and the aggregate principal amount of such loans is less
than $20,000,000.00).
 
“Material Vendors” shall mean those vendors providing services to any Property
pursuant to a written contract for which the annual payments to such vendors
exceed $20,000.
 
“Maturity Date” shall mean December 18, 2011.
 
“Mortgages” shall mean, collectively, the California Deed of Trust, the
Connecticut Mortgage, the Florida Mortgage and the Massachusetts Mortgage.
 
“Municipality” shall mean, on a collective and individual basis, each city or
municipality in which any Property is located.
 
“Net Cash Proceeds” shall mean, with respect to any Person, the aggregate gross
cash proceeds received, directly or indirectly, by such Person or any of its
consolidated subsidiaries or Affiliates (including, without limitation, as
applicable, all cash proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only
 

 
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as and when received), minus the following, without any duplication: (i)
reasonable and customary brokerage commissions and other reasonable and
customary fees and expenses related to the transaction generating such cash
proceeds (including reasonable and customary fees and expenses of counsel and
investment bankers actually paid by the applicable Person or consolidated
subsidiary or Affiliate), and (ii) in each case, to the extent applicable and
not already deducted from the aforesaid aggregate gross cash proceeds, the
amount of any payments made to retire indebtedness secured by any land,
buildings or other tangible assets being sold or otherwise disposed of where
payment of such indebtedness is required in connection with such transaction
generating such cash proceeds; provided, however, that, if (a) the recipient of
Net Cash Proceeds is an Emeritus Entity that is not, directly or indirectly,
100% owned by Emeritus (a “Venture Entity”), and (b) such Venture Entity
received such Net Cash Proceeds in return for Capital Stock in such Venture
Entity, then, in such event, the Net Cash Proceeds received by such Venture
Entity shall, for purposes hereof, be reduced by the amount of the Net Cash
Proceeds (x) received by such Venture Entity from an Equity Transaction that,
immediately upon receipt thereof, are paid to a Person that is not a Emeritus
Entity, or (y) that, pursuant to the terms of any partnership or operating or
shareholder agreement, or similar document, which governs the use of such Net
Cash Proceeds, may not be, and in fact are not, distributed or otherwise paid to
Emeritus or another entity that Emeritus wholly owns.
 
“Net Operating Income” shall mean, for any period, the amount by which Operating
Revenue for such period exceeds Operating Expenses for such period.
 
“Note” shall mean that certain Secured Promissory Note of even date herewith
duly executed by Borrower to the order of Lender in the stated principal amount
of the Loan Amount, as amended, supplemented, replaced and/or restated from time
to time.
 
“Note Rate” shall mean, during the following periods, the following interest
rates per annum:
 
Period
Interest Rate
December 19, 2008 through December 18, 2009
8%
December 19, 2009 through December 18, 2010
8.25%
December 19, 2010 through December 18, 2011
8.5%

 
“Officer’s Certificate” shall mean a certificate of Borrower (or Borrower
Parties, as applicable) collectively, or each Borrower (or Borrower Party)
individually, as applicable, signed by the chairman of the board of directors,
the president, the chief operating officer, the chief financial officer, the
general counsel or the general partner or managing member, as applicable, of
each Borrower (or Borrower Party) in the case of a certificate of Borrower (or
Borrower Party) collectively, or of such particular Borrower (or Borrower
Party), as applicable, in the case of a certificate of an individual Borrower
(or Borrower Party), as applicable.
 

 
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“Opening Disbursement” shall have the meaning ascribed to such term in Section
3.1.
 
“Operating Expenses” shall mean, with respect to any or all of the Properties,
and without duplication, all costs and expenses incurred by the respective
Borrower Party(ies), determined on an accrual basis, relating to the operation,
maintenance, repair, use and management of such Property(ies), including,
without limitation, utilities, repairs and maintenance, insurance, taxes,
assessments, levies, fees, advertising expenses, payroll and related taxes,
equipment lease payments and actual management fees, but excluding (i) debt
service, (ii) depreciation, amortization and other non-cash expenses of the
Property(ies); provided, however, that such costs and expenses shall be subject
to reasonable adjustment by Lender to normalize such costs and expenses, and
(iii) capital expenditures.
 
“Operating Revenue” shall mean all revenue derived from the operation of any or
all of the Properties or a Property, as the case may be, and received by the
respective Borrower Party(ies) from whatever source, determined on an accrual
basis, but excluding (i) sales, use and occupancy or other taxes on receipts
required to be accounted for by such Borrower Party(ies) to any Governmental
Authority, (ii) non-recurring revenues as reasonably determined by Lender (e.g.
proceeds from a sale of assets or refinancing), (iii) casualty insurance
proceeds and awards (other than business interruption or other loss of income
insurance related to business interruption or loss of income for the
Property(ies) in question), and (iv) any proceeds from the permitted sale or
refinancing of any Property or recapitalization of the applicable Borrower
Party(ies).  In addition, if required by Lender, revenue accrued but not paid in
cash during an accounting period shall be adjusted for an allowance for doubtful
accounts in a manner consistent with historical net realizable value.
 
“Organizational Documents” shall mean, with respect to a (i) corporation, the
articles or charter and bylaws; (ii) with respect to a partnership, the
partnership agreement and certificate of limited partnership; (iii) with respect
to a limited liability company, the operating agreement and certification of
formation; (iv) with respect to a trust, the trust agreement; and (v) with
respect to an individual, none.
 
“Other Related Documents” shall mean those documents, as hereafter amended,
supplemented, replaced, modified and/or restated from time to time, properly
executed and in recordable form, if necessary, listed as Other Related Documents
in Exhibit B.
 
“Permitted Exceptions” shall mean those title exceptions acceptable to Lender in
its sole discretion, which shall include any matter which would constitute a
Permitted Encumbrance (as such term is defined under the Master Lease) under the
Master Lease.
 
“Permitted Transfers” shall mean (i) any Transfer related to a Leasehold
Property, or involving a transfer or issuance of stock in Emeritus, or any
change in control of Emeritus or any Person(s) controlling Emeritus, that, if
made pursuant to the terms of the Master Lease, would not be a prohibited
Transfer thereunder (except that (a) in the event any Successor Entity and/or
Seniormost Parent Entity (as such terms are defined in the Master Lease) is
required pursuant to the terms of the Master Lease to execute and deliver to the
landlord under the Master Lease a new Lease Guaranty in the form of the Emeritus
Guaranty (as such terms are defined in the Master Lease) in connection with such
Transfer, then such Transfer shall not be a Permitted
 

 
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Transfer hereunder unless such Successor Entity and/or Seniormost Parent Entity,
as applicable, assumes, joins in and agrees to perform any and all duties,
liabilities and other obligations of Emeritus under this Agreement, the other
Loan Documents and the Other Related Documents, on a joint and several basis
with each other (if both a Successor Entity and a Seniormost Parent Entity are
required to deliver a new Lease Guaranty relative to the Master Lease, as
described above) and with all other Borrowers (including, without limitation,
Emeritus, if Emeritus remains in existence), pursuant to documentation
reasonably satisfactory to Lender, and (b) if such Transfer results in any
mandatory prepayment obligation as provided in Section 2.7.2 hereof, such
mandatory prepayment is made to Lender), (ii) any sale or disposition of any
item of tangible personal property used in the operation of any of the
Properties, provided, however, that, unless such item is functionally obsolete,
Borrower shall be obligated to replace, or to cause the Fee Owners to replace,
such item with an item of similar quality, use and functionality, and (iii) the
mortgage lien granted to secure the Capmark Loan.
 
“Person” shall mean any individual, sole proprietorship, corporation, general
partnership, limited partnership, limited liability company, joint venture,
association, joint stock company, bank, trust, estate, unincorporated
organization, Governmental Authority, endowment fund or other form of entity.
 
“Pledge Agreement” shall mean that certain Membership Interest Pledge and
Security Agreement of even date herewith made by SSL in favor of Lender granting
a first priority lien and security interest in one hundred percent (100%) of the
membership interests in the Fee Owners, as amended, supplemented, replaced
and/or restated from time to time.
 
“Project” shall mean all of the Improvements located on any one or more of the
Properties, as the context may require as determined by Lender, together with
any fixtures, fittings, apparatus, machinery, equipment and other personal
property, and any replacements thereof or substitutes therefor, now or at any
time hereafter owned by the Borrower Parties and located on any such
Property(ies) or not located on such Property(ies) but used in any way in
connection with such Property(ies) or the Improvements located thereon (other
than tangible personal property located at Borrower’s main office).
 
“Property Leases” shall mean all commercial leases, licenses or other agreements
providing for the use or occupancy of any portion of the Properties, including
all amendments, extensions, renewals, supplements, modifications, sublets and
assignments thereof and all separate letters or separate agreements relating
thereto, provided, however, that Property Leases shall not include the Master
Lease nor any Residency Agreement.
 
“Property(ies)” shall mean, collectively or individually as the context may
require, as determined by Lender, each of the Fee Properties and each of the
Leasehold Properties.
 
“Provider Agreements” shall mean any agreements under which healthcare
facilities are eligible to receive payment under any Third Party Payor Program
from Governmental Authorities or non-public entities.
 
“Purchase Contract(s)” shall have the meaning ascribed to such term in the
Recitals.
 

 

 
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“REA” shall mean any reciprocal easement agreement or like agreement (together
with any amendments or modifications thereto) concerning any of the Fee
Properties executed by and between the respective Fee Owner and owners of
adjacent property.
 
“Residency Agreement” shall mean an agreement with a resident of a
Property:  (i) that does not provide for lifecare services; (ii) that does not
contain any type of rate lock provision or rate guaranty for more than one (1)
calendar year; (iii) that does not provide for any rent reduction or waiver
other than for an introductory period not to exceed six (6) months; (iv) under
which Borrower Party at no time collects rent for more than one (1) month in
advance, other than an amount equal to not more than two (2) months’ rent
collected and held by Borrower Party as security for the performance of the
resident’s obligations to Borrower Party; (v) that is accurately shown in the
accounting records for such Property; and (vi) that is otherwise on Borrower
Party’s usual and customary form, without any material amendments to such form.
 
“RICO Related Law” shall mean the Racketeer Influenced and Corrupt Organizations
Act of 1970 or any other federal, state or local law for which forfeiture of
assets is a potential penalty.
 
“Security Deposit” shall mean any security deposit, whether now or hereafter
existing, and whether in the form of cash or a letter of credit (or the proceeds
thereof), deposited by Leasehold Borrowers pursuant to the Master Lease and held
by Master Landlord (and/or its Affiliates) pursuant to the Master Lease or by
Lender pursuant to the Cash Collateral Agreement.
 
“Sold Property(ies)” shall have the meaning ascribed to such term in the
Recitals.
 
“SSL” shall have the meaning ascribed to such term in the Preamble.
 
“Subordination Agreement (Management Agreement)” shall mean Lender’s standard
form of Assignment and Subordination of Management Agreement to be executed by
the respective Borrower Party and any property manager for the benefit of
Lender.
 
“Third Party Payor Programs” shall mean any third party payor programs pursuant
to which healthcare facilities qualify for payment or reimbursement for medical
or therapeutic cure or other goods or services rendered, supplied or
administered to any admittee, occupant, resident or patient by or from any
Governmental Authority, bureau, corporation, agency, commercial insurer,
non-public entity, “HMO,” “PPO” or other comparable party.
 
“Title Company” shall mean First American Title Insurance Company.
 
“Title Insurance Policies (Leasehold)” shall mean an ALTA Lender’s (Leasehold)
Policy or Policies of Title Insurance as issued by the Title Company covering
Lender’s security interest and lien under the Mortgages and corresponding UCC
Financing Statements filed as fixture filings, with extended coverage and
containing such endorsements as Lender may reasonably require, to the extent
available in the State where a Leasehold Property is located, including, without
limitation, a creditor’s rights endorsement, a usury endorsement, a separate tax
parcel endorsement, a PUD endorsement, a variable rate endorsement, an access
endorsement relating to the public street, a survey endorsement, a comprehensive
endorsement no. 1, a 3.1
 

 
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zoning endorsement for any improved property, a first loss endorsement, a
subdivision endorsement (if applicable), a contiguity endorsement (if
applicable), a waiver of arbitration endorsement, a tie-in endorsement and a
last dollar endorsement.
 
“Title Insurance Policies (Eagle 9)” shall mean (i) an Eagle 9 UCC Insurance
Policy, or the equivalent thereto, issued by the Title Company covering Lender’s
security interest and lien under the Pledge Agreement and corresponding UCC
Financing Statements filed as fixture filings, and containing such endorsements
as Lender may require, together with (ii) an ALTA Owner’s Policy of Title
Insurance issued in favor of the Fee Owners covering their fee title in the Fee
Properties, containing such endorsements as Lender may require, including,
without limitation, a Mezzanine Endorsement in favor of Lender.
 
“Transfer” shall mean any conveyance, transfer, sale, assignment, pledge,
hypothecation, mortgage, encumbrance or other disposition of all or any portion
of the Properties or of any interest in any Borrower Party, as applicable, or
the entering into of any agreement to do any of the foregoing, whether the same
occurs directly, indirectly, by operation of law or otherwise.
 
“UCC” shall mean the Uniform Commercial Code as enacted in the states where the
Collateral is located or the applicable party is organized.
 
“Venture Entity” shall have that meaning ascribed to it in the definition of
“Net Cash Proceeds”.
 
“Whitehall Lease” shall have the meaning ascribed to such term in the Recitals.
 
“Whitehall Guaranty” shall mean that certain Guaranty of Lease dated as of July
25, 2008, by and between Emeritus, as guarantor, and Ventas Whitehall Estates,
LLC, a Delaware limited liability company, as landlord, as amended,
supplemented, replaced and/or restated from time to time.
 
1.2. Exhibits and Schedules Incorporated.  All exhibits and schedules attached
hereto or referenced herein are hereby incorporated into this Agreement.
 
2. LOAN.
 
2.1. The Loan.  Borrower desires to obtain from Lender a loan (the “Loan”) in an
amount equal to the Loan Amount.  Borrower acknowledges and agrees that Lender
has not made any commitments, either express or implied, to extend the term of
the Loan past the Maturity Date, unless Borrower and Lender hereafter
specifically otherwise agree in writing.
 
2.2. Intentionally Omitted.
 
2.3. Loan Documents.  Borrower shall deliver to Lender con­currently with this
Agreement each of the Loan Documents and the Other Related Documents, properly
executed and in recordable form, as applicable.
 

 
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2.4. Agreement Date.  The Loan Documents and the Other Related Documents shall
become effective as of the date of this Agreement.
 
2.5. Maturity Date.  On the Maturity Date, all sums due and owing under this
Agreement and the other Loan Documents and the Other Related Documents shall be
repaid in full.  All payments due under this Agreement, whether at the Maturity
Date or otherwise, shall be paid in immediately available funds.
 
2.6. Note Rate.
 
2.6.1. Interest Rate.  All disbursements of Loan proceeds shall bear interest at
the applicable Note Rate, subject to the default interest provisions contained
herein.
 
2.6.2. Interest Payments.  Subject to Section 2.6.3, interest accrued on the
outstanding amount of the Loan shall be payable by Borrower in arrears on the
first Business Day of the first calendar month following the date of this
Agreement, and the first Business Day of each succeeding calendar month
thereafter, and on the Maturity Date.  
 
2.6.3. Default Interest.
 
2.6.3.1. If any payment of interest required hereunder or under any other Loan
Document or Other Related Document is not received by Lender on or before the
fifth (5th) day following the date such payment becomes due, Borrower shall pay
to Lender a late charge equal to five percent (5%) of the amount of such unpaid
payment to defray part of the increased cost of collecting late payments and the
opportunity costs incurred by Lender because of the unavailability of the
funds.  If such interest payment is not received by Lender on or before the
fifth (5th) day following the date when it becomes due, Borrower shall pay
interest on the entire outstanding principal balance of the Note at the Default
Rate from and after the date when the payment was due.
 
2.6.3.2. If any payment of principal required hereunder or under any other Loan
Document or Other Related Document, other than the repayment of the Loan Amount
due on the Maturity Date, is not received by Lender on or before the date such
payment becomes due, Borrower shall pay to Lender a late charge equal to five
percent (5%) of the amount of such unpaid payment to defray part of the
increased cost of collecting late payments and the opportunity costs incurred by
Lender because of the unavailability of the funds.  In addition to the late
charge, Borrower shall pay interest on the entire outstanding principal balance
of the Note at the Default Rate from and after the date when the payment was
due.
 
2.6.3.3. Effective immediately upon the occurrence of any Event of Default other
than default in the payment of interest or principal as described in the
preceding two paragraphs, the balance of this Note then outstanding shall bear
interest at the Default Rate (based on a 360-day year and charged on the basis
of actual days elapsed).  In addition, all other amounts due Lender (whether
directly or for reimbursement) under the Note, the Loan Agreement or any of the
other Loan Documents or the Other Related Documents, if not paid when due or, in
the event no time period is expressed, if not paid within five (5) days after
 

 
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written notice from Lender that the same has become due, shall also bear
interest thereafter at the Default Rate.
 
2.6.4. Computation of Interest.  Interest shall be computed on the basis of the
actual number of days elapsed in the period during which interest accrued and a
year of 360 days.  In computing interest, the date of funding, but not the date
of payment so long as received by 2:00 P.M. (Central Standard Time), shall be
included; provided, however, that if any funding is repaid on the same day on
which it is made, one day’s interest shall be paid thereon.  Notwithstanding any
of the terms and conditions contained in this Section, interest in respect of
any amount of the Loan shall not exceed the maximum rate permitted by applicable
law.
 
2.7. Prepayments; Amortization; Payments.
 
2.7.1. Voluntary Prepayments.  Borrower may prepay the Loan in whole or in part
at any time without penalty upon thirty (30) days prior written notice to
Lender.
 
2.7.2. Mandatory Prepayments.
 
2.7.2.1. In the event any of the Emeritus Entities engage, directly or
indirectly, in an Equity Transaction, Borrower shall pay, or cause to be paid,
to Lender on account of the Loan the lesser of either (i) the amount of the Net
Cash Proceeds received by any of the Emeritus Entities from such Equity
Transaction or (ii) all amounts owing with respect to the Loan.
 
2.7.2.2. In the event of any sale or refinancing, directly or indirectly, of any
of the Sold Properties (not including the Capmark Loan) and/or any interest of
any Emeritus Entity in the Sold Properties, Borrower shall pay, or cause to be
paid, to Lender on account of the Loan the lesser of either (i) the amount of
the Net Cash Proceeds from such sale or refinancing or (ii) all amounts owing
with respect to the Loan.
 
2.7.3. Amortization.  In addition to the interest payments provided in
Section 2.6.2 above, on January 2, 2009, and on the first Business Day of each
succeeding calendar month thereafter that precedes the month which includes the
Maturity Date, Borrower shall pay to Lender, in partial repayment of the
outstanding principal amount under the Loan Documents and the Other Related
Documents, the amount of Forty Thousand and No/100 Dollars ($40,000.00).
 
2.7.4. Manner and Time of Payment.  All payments of principal, interest and fees
hereunder, or under the other Loan Documents or the Other Related
Documents,  payable to Lender shall be made, without condition or reservation of
right and free of set-off or counterclaim, in U.S. dollars and by wire transfer
(pursuant to Lender’s written wire transfer instructions from time to time
delivered pursuant to the notice provisions hereof (Lender’s current wire
transfer instructions are attached hereto as Exhibit C)) of immediately
available funds delivered to Lender not later than 2:00 P.M. (Central Standard
Time) on the date due.  Funds received by Lender after that time and date shall
be deemed to have been paid on the next succeeding Business Day.
 

 
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2.7.5. Payments on Non-Business Days.  Whenever any payment to be made by
Borrower hereunder shall be stated to be due on a day which is not a Business
Day, payments shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder.
 
2.8. Expenses.  Borrower shall, immediately upon demand, pay or reimburse Lender
for all attorneys’ fees and expenses incurred by Lender in any proceedings
involving the estate of a decedent, an insolvent or a bankrupt, or in any
action, proceeding or dispute of any kind in which Lender, in its capacity as
lender hereunder (and not as a landlord under the Master Lease), is made a
party, or appears as an intervenor or party plaintiff or defendant, affecting or
relating to this Agreement or any of the other Loan Documents and the Other
Related Documents, any Emeritus Entity, or any of the Properties, including,
without limitation, the foreclosure of any of the Collateral Documents, any
condemnation action involving any of the Properties, or any action to protect
Lender’s interest in any of the Properties, and any such amounts paid by Lender
and not paid or reimbursed by Borrower as determined by Lender in its sole
discretion, within ten (10) days after Lender’s demand therefor shall be added
to the indebtedness evidenced by the Note, secured by the lien of the Collateral
Documents, and shall be due and payable upon demand.  Borrower shall pay
promptly to or as directed by Lender, after a request therefor by Lender, all
out-of-pocket expenses, charges, costs and fees relating to the cost of reviews
and inspections of the Fee Properties and reviews of environmental or title
reports or materials related thereto, and all out-of-pocket expenses, charges,
costs and fees of or relating to the Loan, including, without limitation, all
escrow and recording fees and charges, title insurance premiums, transfer,
documentary stamp and/or other forms of mortgage taxes, legal fees and expenses
of outside counsel for Lender and any third-party engaged by Lender’s outside
counsel on behalf of Lender, and third-party insurance consultant fees, and any
such amounts paid by Lender and not paid or reimbursed by Borrower within ten
(10) days after Lender’s demand therefor shall be added to the indebtedness
evidenced by the Note, as determined by Lender in its sole and absolute
discretion, secured by the Collateral Documents, and shall be due and payable
upon demand.  The foregoing shall not require Borrower to pay any charges or
expenses which Master Landlord is otherwise obligated to pay under the Master
Lease or Lender is otherwise obligated to pay under the Purchase Contracts.
 
3. DISBURSEMENT.
 
3.1. Loan Opening and Disbursements of Loan Proceeds.  At such time as all of
the terms and conditions set forth in Section 3.2 have been satisfied by
Borrower and Borrower has executed and delivered or caused to be executed and
delivered to Lender each of the Loan Documents and the Other Related Documents
in form and substance satisfactory to Lender, in its sole and absolute
discretion, Lender shall disburse to Borrower an amount equal to the Loan Amount
(the “Opening Disbursement”).  In the event Borrower fails to satisfy such
disbursement conditions, Borrower nevertheless shall pay all costs and expenses
incurred by Lender in connection with the transactions contemplated herein
promptly upon receipt of an invoice therefor from Lender (and, if appropriate,
any Affiliate of Lender).
 
3.2. Conditions Precedent to Opening Disbursement.  In addition to the Loan
Documents and the Other Related Documents, and in conjunction with and as
additional (but independent) supporting evidence for certain of the covenants,
representations and warranties
 

 
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made by Borrower herein, prior to and as a condition of the Opening
Disbursement, Borrower shall deliver or cause to be delivered to Lender each of
the following, each of which shall be in form and substance satisfactory to
Lender, in its sole and absolute discretion:
 
3.2.1. Title Insurance.
 
3.2.1.1. Title Insurance Policies (Leasehold).  Concurrently with the recording
of each of the Mortgages (other than the Florida Mortgage), the Title Insurance
Policies (Leasehold) issued by the Title Company with respect to each of the
Leasehold Properties (other than the Leasehold Properties located in Florida),
with a tie-in endorsement acceptable to Lender in its sole and absolute
discretion, insuring, in an amount equal to the Loan Amount, as of the date of
the Opening Disbursement, each such Mortgage to be a valid first and prior lien
on the leasehold interest of each Leasehold Borrower under the Master Lease,
subject only to the Permitted Exceptions, and, concurrently with the recording
of the Florida Mortgage, the Title Insurance Policies (Leasehold) issued by the
Title Company with respect to each of the Leasehold Properties located in
Florida, with a tie-in endorsement acceptable to Lender in its sole and absolute
discretion, insuring, in an amount equal to the Loan Amount, as of the date of
the Opening Disbursement, the Florida Mortgage to be a valid first and prior
lien on the leasehold interest of each Leasehold Borrower under the Master
Lease, subject only to the Permitted Exceptions.

3.2.1.2. Title Insurance Policies (Eagle 9).  Concurrently with the execution
and delivery of the Pledge Agreement, and the recording of the corresponding UCC
Financing Statements, the Title Insurance Policies (Eagle 9) issued by the Title
Company with respect to each Fee Owner (and Fee Property), insuring, in an
amount equal to the Loan Amount, as of the date of the Opening Disbursement, the
Pledge Agreement and corresponding UCC Financing Statements to be a valid first
and prior lien on the membership interests of each Fee Owner, subject only to
the Permitted Exceptions.
 
3.2.2. Intentionally Omitted.  
 
3.2.3. Insurance.  Evidence of the insurance described in Section 4.
 
3.2.4. Searches.  Such UCC searches on each Borrower Party, and any other owner
of the Collateral (including the Fee Owners directly) pertaining to the
jurisdictions (i) in which the owner of the Collateral is organized, and (ii) in
which the Collateral is located as determined pursuant to Article 9 of the UCC.
 
3.2.5. Opinions.  An opinion of counsel of Borrower reasonably satisfactory to
Lender, dated on or about the date of the Opening Disbursement and relating to
such customary matters with respect to the Loan Documents and the Other Related
Documents, the Loan, the Properties and otherwise with respect to the
transaction contemplated hereby as Lender may reasonably request.
 
3.2.6. Organization, Authorization and Good Standing.  Such evidence of the due
authorization, good standing and qualification to do business, of the Borrower
Parties as
 

 
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Lender may reasonably request and certified copies of the Organizational
Documents of each Borrower Party.
 
3.2.7. Master Lease Guaranty from SSL.  An executed original of the Master Lease
Guaranty of even date herewith from SSL.
 
3.2.8. Intentionally Omitted.
 
3.2.9. Lender Consents.  Delivery of written consents from any mortgage lender
with a lien on Brighton and/or Golden Pond (including, without limitation,
Capmark), and from any other lenders having consent rights as to any of the
Collateral Documents, consenting to Lender’s security and collateral interests
and Lender’s other rights under the Collateral Documents, in form and substance
satisfactory to Lender, as determined in its reasonable discretion.
 
3.2.10. USA Patriot Act. Such information on the principals of the Borrower
Parties as Lender reasonably believes is prudent to ensure compliance with the
USA Patriot Act (Title III of Pub. L. 107-56) (signed into law October 26,
2001).  Lender hereby notifies Borrower that, pursuant to the requirements of
the Act, it is required to obtain, verify and record the name and address of
Borrower and other information that will allow Lender to identify Borrower in
accordance with the Act.
 
3.3. Disbursements Evidenced by the Note.  All amounts disbursed by Lender
hereunder, together with interest thereon, shall be evidenced by the Note and
secured by the Collateral Documents.
 
4. INSURANCE.
 
4.1. Types of Policies.  Subject to Section 4.6 below, Borrower, at its sole
cost and expense, shall insure or cause to be insured and keep insured each Fee
Property against such perils and hazards, and in such amounts and with such
limits, as Lender may from time to time deem (i) commercially reasonable (in
light of such factors, including, without limitation, the availability and cost
of particular types and amounts of coverages, as Lender, in its sole discretion,
deems appropriate) and/or (ii) consistent with the insurance coverages that are
maintained by owners of properties similar to the Fee Properties, and, in any
event, including, without limitation, the following coverages with respect to
each of the Fee Properties (where references are made to “the Property” in this
Section 4 they are intended to refer to each and every Fee Property):
 
4.1.1. All Risk.  Insurance against loss to the Property which, during any
construction, shall be on an “All Risk” perils “Builders’ Risk,” monthly
reporting or non-reporting “Completed Value” form and, after completion of
construction, shall be on an “All Risk” policy form covering, in each case,
insurance risks of all physical loss “Causes of Loss - Special Form,” including
theft, terrorism, and insurance against such other risks as Lender may
reasonably require.  Such policies shall be in amounts equal to the full
replacement cost of the Property (including the related Improvements and,
specifically, Fee Owner’s interest in any leasehold improvements).
 

 
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4.1.2. Flood.  If any Property is now, or at any time while any obligation of
Borrower hereunder remains outstanding shall be, situated in any area which an
appropriate governmental authority designates as a Special Flood Hazard Area,
insurance against loss or damage by flood or mud slide in compliance with the
Flood Disaster Protection Act of 1973, as amended from time to time, in amounts
reasonably acceptable to Lender.
 
4.1.3. Public Liability.  Commercial general public liability insurance against
death, bodily injury and property damage arising in connection with the Property
with limits of not less than One Million and No/100 Dollars ($1,000,000.00) per
occurrence with not less than a Three Million and No/100 Dollars ($3,000,000.00)
general aggregate limit and with the applicable limits applying on a “per
location” basis.  Such policy shall be written on a claims made form and shall
list the respective Borrower Parties as the named insured, shall designate
thereon the location of the Property and shall have such limits and deductibles
as Lender may reasonably require.
 
4.1.4. Contractor’s Insurance.  During the entire period of material renovation
and construction of any of the Improvements on the Property, Borrower shall
cause to be furnished to Lender certificates from the insurance carrier for the
respective Project contractor evidencing worker’s compensation, employers’
liability, commercial auto liability, excess umbrella liability coverage and
commercial general liability insurance (including contractual liability and
completed operations coverage) written on an occurrence form, with such general
liability insurance limits as Lender may reasonably require.
 
4.2. Policy Requirements.  All insurance shall be carried in companies
acceptable to Lender and all policies shall name Lender as an additional insured
on a primary and non-contributory basis, mortgagee and loss payee.  Furthermore,
all insurance shall be in form and content reasonably acceptable to Lender,
provide thirty (30) days’ advance written notice to Lender before any
cancellation, adverse material modification or notice of non-payment and, to the
extent limits are not otherwise specified herein, contain deductibles which are
in amounts acceptable to Lender.  All physical damage policies and renewals
shall contain a standard mortgage clause naming Lender as mortgagee, which
clause shall expressly state that any breach of any condition or warranty by any
applicable Borrower shall not prejudice the rights of Lender under such
insurance, as well as a loss payable clause in favor of Lender for personal
property, contents, inventory and equipment.  Except for Master Landlord, no
additional parties shall appear in the mortgage or loss payable clause with
respect to any Property without Lender’s prior written consent.  All evidence of
insurance shall reference the specific projects being covered by name and
address and shall otherwise be in form and substance reasonably acceptable to
Lender.  All deductibles shall be in amounts reasonably acceptable to Lender.
 
4.3. Notice; Evidence of Renewal.  Any notice pertaining to insurance and
required pursuant to this Section shall be given in the manner provided in
Section 10.8 and at any additional address of which Lender gives Borrower prior
written notice.  Borrower shall use commercially reasonable efforts to deliver
to Lender evidence of renewal satisfactory to Lender at least ten (10) days
before the expiration date of existing policies or any prior renewal
thereof.  If Lender has not received satisfactory evidence of such renewal or
substitute insurance as of ten (10) days before such expiration date, Lender
shall have the right, but not the obligation, to purchase such insurance upon
three (3) days’ prior notice to Borrower (if such notice is given by
 

 
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Lender more than five (5) days in advance of such expiration date), unless
Borrower has provided such satisfactory evidence to Lender prior to the
expiration of such three (3) day period, or with no notice to Borrower at any
time three (3) days or less prior to such expiration date, unless Borrower has
provided such satisfactory evidence to Lender prior to Lender’s aforesaid
purchase of insurance.  Any amounts so disbursed by Lender pursuant to this
Section shall be a part of the Loan and shall bear interest at the Default
Rate.  Nothing contained in this Section shall require Lender to incur any
expense or take any action hereunder, and inaction by Lender shall never be
considered a waiver of any right accruing to Lender on account of this Section
4.
 
4.4. Separate Insurance.  Borrower shall not carry any separate insurance on the
Property concurrent in kind or form with any insurance required hereunder or
contributing in the event of loss without Lender’s prior written consent and, in
the event Lender grants its consent, any such policy shall nevertheless have
attached thereto a standard non-contributing mortgagee clause, with loss payable
to Lender, and shall otherwise meet all other requirements set forth in this
Section.
 
4.5. Leasehold Properties.  Notwithstanding anything contained herein which may
be construed to the contrary, the Leasehold Properties shall be insured pursuant
to the requirements set forth in the Master Lease so long as all or any portion
of the Loan remains outstanding, except that, in addition to complying with such
requirements, Borrower shall cause Lender, in its capacity as lender under the
Loan, to be named as an additional insured on a primary, non-contributory basis
on any commercial liability insurance that is required under the Master Lease
and shall cause Lender, in its capacity as lender under the Loan, to be named as
loss payee and mortgagee under a so-called New York standard non-contributory
mortgagee clause on any “all risk” or “special causes of loss” or similar policy
that is required under the Master Lease.
 

4.6. Fee Properties.  Notwithstanding anything contained herein which may be
construed to the contrary, in the event of any conflict between the requirements
of this Section 4 and the insurance requirements set forth in the Capmark Loan
documents, the Fee Properties shall be insured pursuant to the requirements set
forth in the Capmark Loan documents, so long as the Capmark Loan shall be
outstanding, except that, notwithstanding the foregoing, Borrower shall cause
Lender, in its capacity as lender under the Loan, to be named as an additional
insured on a primary, non-contributory basis on any commercial liability
insurance that is required under the Capmark Loan documents.
 
5. GENERAL REPRESENTATIONS AND WARRANTIES.  Borrower hereby covenants,
represents and warrants to Lender as follows:
 
5.1. Authority.  Each Borrower has full right, power and authority to execute,
deliver and carry out the terms and provisions of the Loan Documents and the
Other Related Documents to which it is a party and any other documents and
instruments to be executed and delivered by such Borrower pursuant to this
Agreement.  The Loan Documents and the Other Related Documents and any other
documents and instruments to be executed and delivered by the Borrower pursuant
to this Agreement, when executed and delivered pursuant hereto, will constitute
the duly authorized, valid and legally binding obligations of such parties and
will be
 

 
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enforceable strictly in accordance with their respective terms, subject to the
effect of bankruptcy and other laws affecting the rights of creditors generally.
 
5.2. Formation.  Each Borrower that is not an individual or general partnership
is a corporation, limited liability company or limited partnership, is duly
formed, validly existing and in good standing under the laws of the state under
the laws of which it was formed.  Each Borrower that is an entity has qualified
to do business in every state where such qualification is required. Borrower has
furnished Lender with a certified true, complete and correct copy of the
Organizational Documents of each Borrower Party.  No Borrower shall modify,
amend, terminate or otherwise change any of the Organizational Documents of any
Borrower Party without Lender’s consent.
 
5.3. No Default.  None of the Borrower Parties is in default under any contract,
agreement or commitment to which it is a party, the effect of which would
adversely affect any Borrower’s performance of its respective obligations
pursuant to and as contemplated by the terms and provisions of this Agreement or
any of the other Loan Documents and the Other Related Documents.  The execution
and delivery of the Loan Documents and the Other Related Documents and any other
documents or instruments to be executed and delivered by Borrower pursuant
hereto, the consummation of the transactions herein or therein contemplated, and
compliance with the terms and provisions hereof or thereof, will not (i) to the
best of Borrower’s knowledge, violate any presently existing provisions of law
or any presently existing applicable regulation, order, writ, injunction or
decree of any court or governmental department, commission, board, bureau,
agency or instrumentality, or (ii) conflict or be inconsistent with, or result
in any breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in any acceleration of any obligations
under, any indenture, mortgage, deed of trust, instrument, documents, agreement
or contract of any kind to which any Borrower is a party or by which any
Collateral of any Borrower may be bound.
 
5.4. No Litigation.  There are no petitions, actions, suits or proceedings
pending or, to the best of Borrower’s knowledge, threatened in writing against
or affecting any Collateral before any court or governmental, administrative,
regulatory, adjudicatory or arbitrational body or agency of any kind, which will
materially adversely affect the performance by any Borrower of its obligations
pursuant to and as contemplated by the terms and conditions of this Agreement or
the other Loan Documents and the Other Related Documents.
 
5.5. True and Complete Information.  To Borrower’s knowledge, neither this
Agreement, nor any other Loan Document or Other Related Document, nor any
document, financial statement, credit information, certificate or other
statement required herein furnished to Lender by any Borrower Party contains any
untrue statement of a material fact or omits to state a material fact relating
to the Collateral or any matter covered by this Agreement.
 
5.6. Usury.  The Loan constitutes a business loan within the meaning of 815
Illinois Compiled Statutes, 205 Section 4(1)(c), and the amounts to be received
by Lender as interest under the Note are not usurious or illegal under Illinois
law.
 

 
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5.7. Non Foreign Status.  No Borrower Party is a nonresident alien for purposes
of U.S. income taxation or is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as said terms are defined in the Internal
Revenue Code and Income Tax Regulations).
 
5.8. ERISA.  No Borrower Party is and, for so long as any obligation of Borrower
hereunder remains outstanding, shall be an “employee benefit plan” within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, no Borrower Party’s assets constitute assets of any such plan.
 
5.9. RICO.  There are no suits, actions or proceedings pending or threatened
against any Borrower Party or Daniel R. Baty under a RICO Related Law.
 
5.10. Financial Statements; No Material Adverse Change.  Borrower has heretofore
furnished Lender a copy of each Borrower Party’s compiled financial statements
each dated as of September 30, 2008.  Such financial statements were prepared on
a GAAP basis in a manner consistent with the applicable Borrower Party’s
preparation method for the prior fiscal year and present fairly the financial
condition of such Borrower Party as of the date thereof and the results of
operations for the period then ended and otherwise comply with Section
8.1.  Since the date of such financial statements, there has been no material
adverse change in such Borrower Party’s business or financial condition not
disclosed in writing to Lender.  Such Borrower Party has no contingent
liabilities not provided for or disclosed in said financial statements, except
as disclosed in writing to Lender.  Each Borrower Party has the financial
capacity to perform and discharge each and every one of its respective
obligations and liabilities under this Agreement and any of the other Loan
Documents and the Other Related Documents as it becomes due.  Since July 25,
2008 (the “Commitment Date”), no material adverse change has occurred in the
financial condition of any Borrower Party, and (ii) no Event of Default exists
and is continuing under the Master Lease, the Brighton Lease (as defined in the
Master Lease), the Fairwood Lease, the Whitehall Lease, or any guaranty relating
to any of the foregoing, and no event or condition has arisen that, with notice
or passage of time or both, could reasonably be expected to become an Event of
Default under any one or more of the foregoing.
 
5.11. Property Specific.  With respect to each Property (where references are
made to “the Property” in this Section 5.11 they are intended to refer to each
and every Property):  
 
5.11.1. Compliance With Laws.  To Borrower’s knowledge, the use of the Property
does not violate any presently existing applicable statute, law, regulation,
rule, ordinance or order of any kind whatsoever (including, without limitation,
any presently existing zoning or building laws or ordinances, any presently
existing environmental protection laws or regulations, or any presently existing
rules, regulations or orders of any governmental agency), or any building permit
issued with respect to the Property or any condition, easement, right-of-way,
covenant or restriction of record affecting the Property, which violation could,
in Lender’s reasonable opinion, impair any Borrower’s ability to keep or perform
any of its agreements, undertakings, obligations, covenants or conditions under
this Agreement.
 
5.11.2. ADA Compliance.  The Improvements on the Property are, to Borrower’s
knowledge, and shall be maintained, in strict accordance and full compliance
with all of the requirements of the ADA and any similar state or local law, to
the extent same are applicable
 

 
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thereto.  Borrower shall pay or cause to be paid all ADA related compliance
costs relating to each Property.
 
5.11.3. Flood Plain and Wetlands.  No portion of Improvements on any Property is
located (i) in an area designated by FEMA as a Special Flood Hazard Area, (ii)
in an area classified as “wetlands” or (iii) in an area designated by any
federal, state or local governmental or quasi-governmental agency as a
“floodway,” special flood hazard area or flood plain.
 
5.11.4. No Defaults Under Agreements Affecting the Property.  There exist no
monetary defaults or other material defaults, of which the Borrower Parties have
given or received notice, beyond any applicable cure period under any (i)
agreement (written or oral) relating to the Property (including, without
limitation, any REA), or (ii) under any material Property Lease.
 
5.11.5. Associations.  Each Borrower will comply, in all material respects, with
all obligations arising from membership in any association imposed on the owner
of its Property pursuant to any recorded instrument to which title to the
Property is subject, or otherwise imposed on any Borrower under any such
instrument.  Borrower shall promptly deliver to Lender copies of any notice of
default relating to any payment or other obligation under any such instrument
which any Borrower may receive.  In the event Lender receives notice of any such
payment default from whatever source, Lender, upon prior notice to Borrower, may
elect (but shall have no obligation) to make such payment on behalf of any
Borrower, in which event the amount so paid, as determined by Lender in its sole
discretion, shall be deemed a disbursement of Loan proceeds and become
additional indebtedness under the Note.
 
5.11.6. Agreements Affecting the Properties.  No Borrower shall enter into any
contract or agreement relating to the management of the Properties without the
prior written consent of Lender (not to be unreasonably withheld or delayed)
and, if required by Lender, the applicable Borrower shall execute a collateral
assignment to Lender of such Borrower’s right, title and interest in and to any
such property management agreement.
 
5.12. Brokerage Commissions.  No brokerage fees or commissions are payable by
any Borrower in connection with the Loan.
 
5.13. Loan Purposes.  The Loan is not being made for the purpose of purchasing
or carrying margin stocks, and Borrower agrees to execute, or cause to be
executed, upon reasonable request from Lender, all instruments necessary to
comply with all of the requirements of Regulation U of the Federal Reserve
System.  The Loan is an exempt transaction under the Truth-in-Lending Act.
 
5.14. Single Purpose Entity.  Each Leasehold Borrower and each Fee Owner is and
shall remain a single purpose entity which (i) was formed or organized solely
for the purpose of acquiring and directly holding an ownership or leasehold
interest in a Property and activities incidental thereto, (ii) does not and will
not engage in any business unrelated to such Property, (iii) does not and will
not have any assets other than those related to its interest in such Property or
any indebtedness other than as permitted by the Loan Documents and the Other
Related Documents, (iv) has its own separate books and records and keeps its own
accounts, in each case
 

 
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which are separate and apart from the books and records and accounts of any
other entity, (v) is subject to all of the limitations on powers set forth in
its organizational documentation, (vi) holds and will hold itself out as being
an entity separate and apart from any other entity, (vii) has not at any time
since its formation assumed or guaranteed and will not assume or guaranty the
liabilities of any other entity, (viii) has not at any time since its formation
acquired and will not acquire obligations or securities of any other entity,
(ix) has not at any time since its formation made and will not make loans to any
other entity, and (x) does not and will not have any subsidiaries.  No Leasehold
Borrower or Fee Owner shall allow, suffer or permit, at any time, any security
interest in personal or real property to exist with respect to any of its
property (including the Property), except for security interests in favor of
Lender (and other than the Capmark Loan).
 
5.15. Master Lease.  Each Leasehold Borrower shall at all times comply with the
requirements, obligations, terms and conditions set forth in the Master Lease.
 
5.16. Representations and Warranties Generally.  The representations and
warranties set forth in this Agreement and/or in any other Loan Document or
Other Related Document will be true and correct on the date of this Agreement
and at the dates of all disbursements of the Loan.  All representations,
warranties, covenants and agreements made in this Agreement or in any
certificate or other document delivered to Lender by or on behalf of Borrower
pursuant to or in connection with this Agreement shall be deemed to have been
relied upon by Lender notwithstanding Lender’s review of any documents or
materials delivered by Borrower to Lender pursuant to the terms hereof and
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf (and Borrower hereby acknowledges such reliance by Lender in making
the Loan and all disbursements thereunder).
 
5.17. Benefits of the Loan; Additional Agreements of Emeritus.  Each Borrower
acknowledges and agrees that:
 
(i) the consummation of the Purchase Contracts, and, among other results
thereof, the partial terminations of the Master Lease and termination of the
Brighton Lease that will result from such consummation, are beneficial to
Borrower;
 
(ii) without the Loan, Emeritus, as Purchaser under the Purchase Contracts,
would not have entered into the Purchase Contracts;
 
(iii) pursuant to Section 3.4.4 and the other provisions of the Master Lease,
upon the consummation of the Purchase Contracts, the Security Amount (as defined
in the Master Lease) will immediately be reduced by in excess of $4,000,000.00
(exclusive of the additional amount of the Security Deposit that is being
returned on account of the termination of the Master Lease as it relates to the
Sold Properties pursuant to the Purchase Contracts) and the manner in which such
Security Amount is calculated under the Master Lease in the future will be made
substantially more favorable to Borrower, both of which results are major
benefits to Borrower;
 
(iv) the Master Lease, as it was entered into as of July 25, 2008 and which
combined, amended and restated two previous master leases, included material,
bargained-for and advantageous provisions in favor of Leasehold Borrowers,
including, without limitation,
 

 
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provisions not included in the aforesaid previous master leases eliminating
certain individual Property financial tests, expanding Leasehold Borrowers’
rights relative to assignments and changes in control, and extending certain
rights of first offer to additional Persons, that, in the business judgment of
Leasehold Borrowers, provided and provide fair consideration and value and
business justification for the agreements of Leasehold Borrowers in the Master
Lease, and in this Agreement, the other Loan Documents and the Other Related
Documents, relative to the Loan, including, without limitation, the agreements
of Leasehold Borrowers, at Section 17.11 of the Master Lease (which Section
17.11 was not included in the aforesaid previous master leases), among other
things, (x) to be a borrower under the Loan, (y) that an Event of Default under
the Loan will constitute an event of default under the Master Lease and (z)
granting the right to apply the Security Deposit to amounts owing under the
Loan; and
 
(v) for the preceding reasons and many others, each Borrower has, after careful
consideration and with the advice of counsel, concluded that entry into this
Agreement and the other Loan Documents and the Other Related Documents is in the
best interest of each Borrower, and, without limitation of the foregoing, that
granting a lien and security interest in the Security Deposit to Lender to
secure the Loan, and agreeing that an Event of Default under the Loan will
constitute an Event of Default under the Master Lease, is in each Borrower's
best interest, notwithstanding that the proceeds of the Loan will initially be
wholly used by Emeritus to finance the consummation of the Purchase Contracts.
 
Moreover, without limitation of the substantial and material benefits that each
Leasehold Borrower and SSL will realize from the Loan as referenced above, as an
additional material inducement to Leasehold Borrowers and SSL to enter into this
Agreement, the other Loan Documents and the Other Related Documents, Emeritus
agrees (1) with and in favor of Lender and each Leasehold Borrower and SSL,
that, in the event of any application of the Security Deposit to amounts due
under the Loan or other enforcement of Lender's rights with respect to the
Security Deposit, Emeritus shall immediately take all necessary actions (whether
by depositing additional Security Deposit funds or otherwise) to restore the
amount of the Security Deposit to the Secured Amount required under the Master
Lease, in order to avoid an Event of Default under the Master Lease, and (2) for
the benefit of each Leasehold Borrower and SSL and as between Emeritus, on the
one hand, and each other Borrower, on the other hand, to indemnify and hold
harmless each Leasehold Borrower and SSL from and against any loss, damage, cost
or expense actually incurred, including, without limitation, attorneys' fees and
expenses, that any Leasehold Borrower or SSL may suffer or incur as a result of
any application of the Security Deposit to amounts due under the Loan or other
enforcement of Lender's rights with respect to the Security Deposit or otherwise
as a result of collection by Lender of any amounts due under the Loan from any
Leasehold Borrower or SSL (which collection rights, and all other rights of
Lender under this Agreement, the other Loan Documents and the Other Related
Documents, are unaffected and unimpaired by this subsection (2)).

 
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6. HAZARDOUS MATERIALS.
 
6.1. Special Representations and Warranties.  Without in any way limiting the
other representations and warran­ties set forth in this Agreement, and after
reasonable investigation and inquiry, Borrower hereby specially represents and
warrants to the best of Borrower’s knowledge as of the date of this Agreement as
follows, with respect to each Property, except as otherwise disclosed to Lender
pursuant to the making of the Loan or in connection with the Master Lease:
 
6.1.1. Hazardous Materials.  The Property is not and has not been a site for the
use, generation, manufacture, storage, treatment, release, threatened release,
discharge, disposal, transportation or presence of any oil, flammable
explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls,
radioactive materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances which are
“hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic
substances” under the Hazardous Materials Laws, as described below, and/or other
applicable environmental laws, ordinances or regulations (collectively, the
“Hazardous Materials”).
 
6.1.2. Hazardous Materials Laws.  The Property is in compliance with all laws,
ordinances and regulations relating to Hazardous Materials and with any permit,
license or requirement pertaining to the protection, preservation, conservation
or regulation of the environment which relates to the Property (“Hazardous
Materials Laws”), including, without limitation:  the Clean Air Act, as amended,
42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery
Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive
Environment Response, Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C.
Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29
U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977,
as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of
other jurisdictions or orders and regulations.
 
6.1.3. Hazardous Materials Claims.  There are no claims or actions (“Haz­ardous
Materials Claims”) pending or threatened in writing, nor have there been any
such claims or actions in the past, against Borrower, any Borrower Party or the
Property by any governmental entity or agency or by any other person or entity
relating to Hazardous Materials or pursuant to the Hazardous Materials Laws.
 
6.1.4. Storage Tanks.  No storage tanks (including, without limitation,
petroleum or heating oil storage tanks), underground or above-ground, are
present on or under the Property.
 
6.1.5. Waters of the United States.  No part of the Fee Properties contains
“waters of the United States”, as defined in 33 CFR 328.  Borrower shall not,
and shall not cause
 

 
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or permit the Fee Owners to, discharge dredged or fill material into waters of
the United States as such activity is described and regulated by Section 404 of
the Clean Water Act, 33 U.S.C. 1344.
 
6.2. Covenants.  Borrower agrees as follows (where references are made to “the
Property” in this Section 6.2 they are intended to refer to each and every
Property):
 
6.2.1. No Hazardous Activities.  Borrower shall not cause or permit the Property
or any Improvements to be used as a site for the use, generation, manufacture,
storage, treatment, release, discharge, disposal, transportation or presence of
any Hazardous Materials, other than products and materials of a type commonly
used or otherwise present in assisted living facilities, in quantities and in a
manner which complies with Hazardous Materials Laws (“Common Materials”).
 
6.2.2. Compliance.  Borrower shall comply and cause the Fee Owners, the Property
and the Improvements to comply with all Hazardous Materials Laws.
 
6.2.3. Notices.  Borrower shall immediately notify Lender in writing of:  (i)
the discovery of any Hazardous Materials on, under or about the Property or
Improvements, other than Common Materials; (ii) any knowledge by any Borrower
Party that the Property or Improvements do not comply with any Hazardous
Materials Laws; and (iii) any Hazardous Materials Claims.  Borrower shall
promptly cure and have dismissed with prejudice, or caused to be promptly cured
and dismissed with prejudice, all Hazardous Materials Claims pursuant to
applicable law, and Borrower shall keep or cause to be kept the Property free of
any encumbrance arising from any judgment, liability or lien imposed pursuant to
any Hazardous Materials Claims.  Notwithstanding the foregoing sentence,
Borrower may, diligently, in good faith and by appropriate legal proceedings,
contest, or Borrower may permit another Borrower Party to contest, any such
Hazardous Materials Claims provided (i) Borrower first furnishes or causes to be
furnished to Lender such deposits or other collateral as Lender, in its sole
discretion, deems sufficient to fully protect Lender’s interests, (ii) such
contest shall have the effect of preventing any threatened or pending sale or
forfeiture of all or any portion of the Property or the loss or impairment of
Lender’s lien and security interests in and to the Property, and (iii) such
contest will not cause Lender to incur any liability, in Lender’s sole
judgment.  Borrower shall permit (or cause each Borrower Party to permit)
Lender, at Lender’s option (but with respect to the Fee Properties, subject to
any restrictions contained in the Capmark Loan documents of which Borrower has
provided Lender with written notice and evidence), to appear in and to be
represented in any such contest and shall pay or cause to be paid upon demand
all expenses incurred by Lender in so doing, including, without limitation,
attorneys’ fees and expenses.
 
6.2.4. Remedial Action.  In response to the presence of any Hazard­ous Materials
on, under or about the Property or Improvements (but with respect to the Fee
Properties, subject to any restrictions contained in the Capmark Loan documents
of which Borrower has provided Lender with written notice and evidence),
Borrower shall immediately take or cause to be taken, at Borrower’s sole
expense, all remedial action required by any Hazardous Mate­rials Laws or any
judgment, consent decree, settlement or compromise in respect to any Hazardous
Materials Claims.
 

 
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6.2.5. Exceptions.  The obligations of Borrower set forth in this Section 6.2
shall not be applicable to any noncompliance with the terms and conditions
hereof to the extent relating to a particular Property and resulting directly
from actions taken by Lender, Lender’s nominee or a successful purchaser of
Collateral after the respective Borrower Party and its Affiliates have been
dispossessed from such Property.
 
6.3. Inspection By Lender.  Borrower shall provide such information and
certifications which Lender may reasonably request from time to time (whether
before or after the commencement of a nonjudicial or judicial foreclosure
proceeding) to monitor Borrower’s compliance with this Section for the sole
purpose of protecting Lender’s interest in the Properties and the Improvements
thereon.  To protect its interest in the Properties and Improvements (but with
respect to the Fee Properties, subject to any restrictions contained in the
Capmark Loan documents of which Borrower has provided Lender with written notice
and evidence), Lender shall have the right, but not the obligation, at any time
upon not less than five (5) days’ written notice to Borrower, except in the case
of emergency, in which event no notice shall be required  to enter upon the
Properties, if Lender has reason to believe that Hazardous Materials exist on
the Property in violation of Hazardous Materials Laws, take reasonably necessary
samples, review any Borrower Party’s books and records related thereto,
interview any Borrower Party’s employees and officers in relation thereto, and
conduct such other related activities as Lender, in its reasonable discretion,
deems appropriate.  Each Borrower Party shall cooperate fully in the conduct of
such an audit.  If Lender decides to conduct such an audit because of (i) a
Hazardous Material Claim, (ii) the possibility that Lender may, directly or
indirectly, take possession of or title to the Properties (or any part thereof)
after an Event of Default, (iii) a material change in the use of the Properties
which, in Lender’s sole and absolute judgment, increases the risk to its
interest in such Property and the Improvements thereon, or (iv) the introduction
of Hazardous Material to any Property, then Borrower shall pay or cause to be
paid upon demand all out-of-pocket costs and expenses actually incurred by
Lender and connected with such audit, as determined by Lender, which, until
paid, shall become additional indebtedness under the Note secured by the Loan
Documents and the Other Related Documents.  Nothing in this Section shall give
or be construed as giving Lender the right to direct or control any Borrower
Party’s actions in complying with Hazardous Materials Laws.
 
6.4. Lender’s Right to Rely.  Lender is entitled to rely upon Borrower’s
representations, covenants, agreements and warranties contained in this Section
despite any independent investigations by Lender or its consultants or other
representatives.  Borrower shall take all necessary actions to determine for
itself, and to remain aware of, the environmental condition of the
Properties.  Borrower shall have no right to rely upon any independent
environmental investigations or findings made by Lender or its consultants or
other representatives unless otherwise stated in writing therein and agreed to
in writing by Lender.
 
6.5. Hazardous Materials Indemnity.  Subject to Section 10.24, Borrower hereby
agrees to defend, indemnify and hold harmless Lender, its directors, officers,
employees, agents, successors and assigns (including, without limitation, any
participants in the Loan) from and against any and all losses, damages,
liabilities, claims, actions, judgments, court costs and legal or other expenses
(including, without limitation, attorney’s fees and expenses) which Lender may
incur as a direct or indirect consequence of (a) any Hazardous Material Claim,
(b) any
 

 
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misrepresentation, inaccuracy or breach of any representation, warranty or
covenant contained or referred to in this Section 6, or (c) the use, generation,
manufacture, storage, disposal, threatened disposal, transportation or presence
of Hazardous Materials in, on, under or about the Properties or Improvements
(collectively, the “Indemnified Matters”).  The Indemnified Matters shall
include, without limita­tion:  (i) the reasonable costs, whether foreseeable or
unforeseeable, of any repair, cleanup or detoxification of the Properties which
is required by any governmental entity or is otherwise necessary to render the
Properties in compliance with all laws and regulations pertaining to Hazardous
Ma­terials; (ii) all other direct or indirect consequen­tial damages (including,
without limita­tion, any third party tort claims or governmental claims, fines
or penalties against Lender, any corporation con­trolled by Lender, or any of
their re­spective directors, officers, employ­ees, agents, successors or
assigns); and (iii) all court costs and reasonable attorneys’ fees and expenses
paid or incurred by Lender, any entity con­trolled by Lender, or any of their
respec­tive directors, officers, employ­ees, agents, successors or assigns
relating to the subject matter hereof.  Borrower shall immediately pay to Lender
upon demand any amounts owing under this indemnity, together with interest from
the date the indebtedness arises until paid at the rate of interest applicable
to the principal balance of the Note.  Borrower’s duty and obligations to
defend, indemnify and hold harmless Lender shall survive the cancellation of the
Note and the release, reconveyance or partial reconveyance of any of the
Mortgages or other Collateral.  Notwithstanding anything contained herein to the
contrary, the above indemnities shall not apply to the extent that a matter
relates to a particular Property and results solely and directly from the
actions of Lender and first arises after the date the respective Borrower Party
and its Affiliates are dispossessed from such Property, or with respect to the
Fee Properties, first arises after the date the applicable Fee Owner is no
longer controlled by Borrower or an Affiliate of Borrower due to a default under
the Loan and Lender’s pursuit of its remedies hereunder or under any of the
other Loan Documents.
 
6.6. California Deed of Trust.  Notwithstanding anything which might be
construed herein or in the California Deed of Trust or in any of the other Loan
Documents or the Other Related Documents to the contrary, in no event shall
Borrower’s obligations and liabilities under the foregoing Section 6 be secured
by the lien of the California Deed of Trust.
 
7. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.  Borrower hereby further
covenants and agrees with Lender as follows:
 
7.1. Compliance with Loan Documents.  Borrower shall, and shall cause the Fee
Owners to, comply with, observe and timely perform each and every one of the
covenants, agreements and obligations under each and every one of the Loan
Documents and the Other Related Documents.
 
7.2. Use of the Property.  Borrower shall, and shall cause the Fee Owners to,
not make, suffer or permit any use of the Property for any purpose other
than assisted living facilities (along with ancillary independent living
facilities) and/or Alzheimer’s facilities and related or appurtenant uses.
 
7.3. Property Leases and Other Transfers.  Borrower shall not, and shall cause
the Fee Owners not to, without the prior written consent of Lender (to be
granted or withheld in Lender’s sole discretion), enter into any new Property
Lease, modify, surrender, terminate,
 

 
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extend or renew, either orally or in writing, any Property Lease now existing or
hereafter created upon the Property or any part thereof, or permit an assignment
or sublease thereof without the prior written consent of Lender (to be granted
or withheld in Lender’s sole discretion).  Borrower shall not, and shall cause
the Fee Owners not to, without the prior written consent of Lender, assign or
further encumber or convey or dispose (or permit or consent or agree to the
conveyance, encumbrance or disposal) of any interest in the Property (it being
understood that Lender has consented to the Capmark Loan), and any assignment or
encumbrance, or purported assignment or encumbrance, conveyance or disposal of
any of the foregoing shall be void and of no effect for any purpose whatsoever.
 
7.4. Covenants, Conditions and Restrictions.  Borrower shall not record (or
cause or allow to be recorded) any covenants, conditions, restrictions or
declarations or any other agreement or instrument with respect to any portion of
the Property, without the prior written consent of Lender, which consent shall
not be unreasonably withheld.  Subject to the terms of the Capmark Loan, Lender
may, in the exercise of its discretion, require that Borrower execute and
deliver, or cause to be executed and delivered, to Lender a collateral
assignment of the declarant’s rights thereunder, to the extent Borrower is the
declarant, together with such other security agreements, financing statements
and instruments as Lender may require which have the effect of creating a
collateral assignment of any Borrower Party’s interest as declarant, all in a
form acceptable to Lender.
 
7.5. Other Agreements Affecting the Property.  Subject to the provisions of the
Capmark Loan, Borrower shall not, and shall not permit the Fee Owners to, enter
into any written agreement nor amend or modify, in any material respect, any REA
or any other easements, covenants or conditions affecting all or any portion of
the Property, without the prior written consent of Lender (to be granted or
withheld in Lender’s sole discretion).
 
7.6. Management Agreement. Borrower shall not, and shall not permit the Fee
Owners to,  enter into any contract or agreement relating to the management of
the Property (nor shall it permit any Borrower Party to enter into any such
agreement) unless such contract or agreement (i) has been approved in writing by
Lender, which approval shall not be unreasonably withheld or delayed, (ii) can
be terminated (for any reason) by Borrower or its successors or assigns or any
subsequent owner or operator of the subject Property (at no cost or expense)
upon thirty (30) days’ written notice, and (iii) if required by Lender in its
discretion, is the subject of a fully executed and delivered Lender’s form of
Assignment and Subordination of Management Agreement.  Notwithstanding the
foregoing, Lender agrees that, for so long as a particular Fee Property is
encumbered by the Capmark Loan, such Fee Property may be managed by Emeritus or
SSL pursuant to a management agreement acceptable to Capmark and that complies
with subsection (ii) above.
 
7.7. Inspection of Books and Records.  Borrower shall keep and maintain, and
shall cause the Fee Owner’s to keep and maintain, at the Property or at
Borrower’s main office, proper and accurate books, records and accounts
reflecting all items of income and expense incurred by any Borrower Party in
connection with the operation of the Property or in connection with any
services, equipment or furnishings provided in the operation of the
Property.  Borrower shall allow, and shall cause the Fee Owners to allow, Lender
and any of Lender’s representatives, at any time during normal business hours,
access to the records and books of account, including,
 

 
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without limitation, any supporting or related vouchers or papers kept at the
Property or at any Borrower Party’s main office, by or on behalf of any Borrower
Party or any of its representatives in connection with the Property, such access
to include the right to make abstracts or copies thereof.
 
7.8. Litigation.  During the term of the Loan, Borrower shall, upon receiving
notice of same, promptly furnish Lender a written notice of any material
litigation in which any Borrower Party is named as defendant or affecting or
relating to the Property or any portion thereof, other than personal injury or
workers compensation claims which are covered by insurance and minor
construction contract disputes.
 
7.9. ­No Lien Rights.  If any Borrower or any person or entity controlled by or
affiliated with Borrower acts as a general contractor, architect, engineer,
subcontractor, property manager, supplier of materials, or otherwise performs
lienable work or services with respect to any part of the Property, Borrower
hereby irrevocably waives and relinquishes, or shall cause its Affiliate to
waive and relinquish, as appropriate, any and all lien rights it may obtain as a
result of such work or services.
 
7.10. No Transfers or Other Financing.  Other than with respect to a Permitted
Transfer, Borrower shall not permit a Transfer of all or any portion of any
direct or indirect ownership interest in any Borrower Party.  In addition to the
foregoing, other than with respect to a Permitted Transfer, Borrower shall not
permit a Transfer of the Property or any other Collateral (or any portion
thereof or any direct or indirect interest therein), other than the encumbrance
of such Property with the liens of the Loan Documents and the Other Related
Documents (and other than the liens granted pursuant to the Capmark
Loan).  Other than any assignments or encumbrances evidenced by the Loan
Documents and the Other Related Documents (and other than the liens granted
pursuant to the Capmark Loan), no Borrower Party shall, without the prior
written consent of Lender, assign or further encumber or convey or dispose, or
consent or agree, to the conveyance, encumbrance or disposal (except for sales
contracts entered into in compliance with the provisions of this Agreement) of
any other interest in the Property or the Collateral, and any assignment or
encumbrance, or purported assignment or encumbrance, conveyance or disposal of
any of the foregoing shall be void and of no effect for any purpose
whatsoever.  Furthermore, no Borrower Party shall, without the prior written
consent of Lender, enter into any financing arrangement or loan transaction or
consent to or agree to any such financing arrangement or loan transaction
(except with respect to a time when this Loan has been repaid in full) other
than the Loan, and any such financing arrangement or loan transaction shall be
void and of no effect for any purpose whatsoever (and other than the liens
granted pursuant to the Capmark Loan).
 
7.11. No Related Party Payments.  At any time after, and during the continuance
of, an Event of Default, no distributions or other payments shall be made
directly or indirectly by any Borrower Party or its partners, members or
managers to any person or entity or affiliate thereof owning a direct or
indirect interest in any Borrower Party or its partners, members or managers.
 
7.12. Mechanics Liens.  If a claim of a mechanics or materialman’s lien is
recorded which affects any Property, Borrower shall, within twenty (20) days
after any Borrower Party
 

 
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becomes aware of such recording or service or within five (5) days of Lender’s
demand, which­ever occurs first: (i) pay and discharge the claim of lien; (ii)
effect the release thereof by recording or delivering to Lender a surety bond in
sufficient form and amount; (ii) cause the Title Company to insure over such
claim of lien by endorsement to the Title Insurance Policies; or (iv) provide
Lender with other assur­ance which Lender deems, in its sole discretion, to be
satisfactory for the payment of such claim of lien and for the full and
continuous protection of Lender from the effect of such lien.
 
7.13. Inspections.  Borrower shall permit (and shall cause each Fee Owner to
permit), and shall cooperate (and shall cause each Fee Owner to cooperate) with
Lender in arranging for, inspections of the Property from time to time by any
representatives of Lender.  In the event that such representative furnishes
Lender with reports covering such inspections, Lender may, but is not under any
obligation whatsoever to, furnish Borrower with copies of any of said
reports.  Borrower acknowledges and agrees that (i) all of such inspections and
reports shall be made for the sole benefit of Lender and not for the benefit of
any Borrower Party or any third party, and none of Lender, nor any of Lender’s
representatives assume any responsibility or liability (except to Lender) by
reason of such inspections, reports or the furnishing of any of such reports to
Borrower, (ii) no Borrower Party shall rely upon any of such inspections or
reports for any purpose whatsoever, and (iii) such inspections and the
furnishing of any of such reports to Borrower shall not constitute a waiver of
any of the provisions of this Agreement or any of the obligations of Borrower
hereunder.
 
7.14. Construction.  Borrower shall not, and shall not permit the Fee Owners to
(except as required pursuant to the Capmark Loan), perform any construction or
other improvement or repair to any Property which is expected to cost in excess
of $100,000, except with the prior written consent of Lender, to be granted or
withheld by Lender in its sole discretion.
 
7.15. Massachusetts Mortgage.  As an accommodation, Lender has agreed that, if
necessary, Borrower may cause the Massachusetts Mortgage to be executed by Farm
Pond Borrower alone, as mortgagor, and recorded without a “Consent” attached
thereto evidencing the consent and agreement of each other
Borrower.  Notwithstanding anything which may be construed to the contrary in
the Massachusetts Mortgage, and whether or not the aforesaid "Consent" is a part
of the recorded Massachusetts Mortgage, each Borrower does hereby consent and
agree to the terms and conditions of the Massachusetts Mortgage, and covenants
and agrees to be bound by its terms and liable for the payment and performance
of all of the obligations of Farm Pond Borrower thereunder.
 
8. FINANCIAL STATEMENTS.
 
8.1. Annual Reports.  As soon as available, and in any event within one hundred
eighty (180) days after the close of each Fiscal Year, Borrower shall deliver to
Lender, presented on a consolidated and consolidating, but not on a
Property-by-Property, basis, financial statements prepared for such Fiscal Year
with respect to the Borrower Parties (the “Borrower Annual Report”), including a
balance sheet and operating statement as of the end of such Fiscal Year and
further including related statements of income and members’, partners’ or
owners’ capital for such Fiscal Year, audited by a “Big Four” accounting firm or
a nationally recognized,
 

 
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independent certified public accounting firm reasonably satisfactory to Lender,
whose opinion shall be to the effect that such financial statements have been
prepared in accordance with GAAP, applied on a consistent basis, and shall not
be qualified as to the scope of the audit or as to the status of any Borrower
Party as a going concern.  Together with each Borrower Party’s annual financial
statements, Borrower shall deliver to Lender:  (i) a statement of cash flows for
each Property; and (ii) such other information as Lender shall reasonably
request and that is prepared by any Borrower Party in the ordinary course of its
business.  Relative to the annual financial statements described above, Lender
agrees that, so long as Emeritus owns, directly or indirectly, one hundred
percent (100%) of the membership interests in each of the Leasehold Borrowers
and Fee Owners, in lieu of the above referenced audited financial statements of
the Borrower Parties, Borrower shall deliver audited financial statements of
Emeritus, rather than the Borrower Parties, satisfying the above referenced
requirements and unaudited financial statements of each Borrower Party
satisfying the above referenced requirements.
 
8.2. Quarterly Reports.  As soon as available, and in any event within
forty-five (45) days after the end of each fiscal quarter, Borrower shall
deliver to Lender, presented on a consolidated and consolidating as well as a
Property-by-Property basis, quarterly and year-to-date unaudited financial
statements prepared for such fiscal quarter with respect to the Leasehold
Borrowers and the Fee Owners, including a balance sheet and operating statement
as of the end of such fiscal quarter and further including related statements of
income, members’, partners’ or owners’ capital and cash flows for such fiscal
quarter and for the portion of the Fiscal Year ending with such fiscal
quarter.  Each such quarterly statement shall show the separate operations of
each Property.  Each such quarterly report shall be accompanied by the
following:  (i) a statement in reasonable detail showing the calculation of Net
Operating Income for each Fee Property for the trailing four fiscal quarters, in
each case, ending at the end of the fiscal quarter as to which such statement is
being delivered; (ii) a then current occupancy report for each Property; and
(iii) such other information as Lender shall reasonably request and that is
prepared by any Borrower Party in the ordinary course of its business.  In the
event that Emeritus ceases to be a public company that publishes its quarterly
financial results, as soon as available, and in any event within forty-five (45)
days after the end of each fiscal quarter, Borrower shall deliver to Lender,
presented on a consolidated and consolidating, but not on a
Property-by-Property, basis, unaudited financial statements prepared for such
fiscal quarter with respect to the Borrower Parties, including a balance sheet
and operating statement as of the end of such fiscal quarter and further
including related statements of income and members’, partners’ or owners’
capital for such fiscal quarter.
 
8.3. Certifications of Compliance.  Simultaneously with the delivery of the
annual and quarterly financial statements contemplated by Sections 8.1 and 8.2,
Borrower shall deliver to Lender an Officer’s Certificate in the form of Exhibit
D attached hereto and dated as of the date of such delivery.  
 
8.4. Annual Budgets.  Borrower has previously delivered to Lender the Annual
Budget for each Property for the Fiscal Year ending December 31, 2007.  Not more
than thirty (30) days following the commencement of each subsequent Fiscal Year
for so long as all or any portion of the Loan remains outstanding, Borrower
shall deliver to Lender an Annual Budget for each Property presented on a
Property-by-Property basis for such Fiscal Year and, promptly after
 

 
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preparation thereof, any subsequent revisions to such Annual Budget.  On or
prior to fifteen (15) days prior to the commencement of each such subsequent
Fiscal Year, Borrower shall deliver to Lender a preliminary draft of the
aforesaid Annual Budget for such Fiscal Year.
 
8.5. Monthly Financial Information.  As soon as available, and in any event
within thirty (30) days after the end of each calendar month, Borrower shall
deliver to Lender, presented on a consolidated and consolidating as well as a
Property-by-Property basis, monthly and year-to-date unaudited financial
statements prepared for the applicable month with respect to the Leasehold
Borrowers and the Fee Owners, including a balance sheet and operating statement
as of the end of such month and further including related statements of income,
members’, partners’ or owners’ capital and cash flows for such month and for the
portion of the Fiscal Year ending with such month, which statements shall be
accompanied by (i) an Officer’s Certificate certifying that the same are true
and correct and were prepared in accordance with GAAP, applied on a consistent
basis, subject to changes resulting from audit and normal year-end audit
adjustments, and (ii) an Officer’s Certificate certifying as to any material
variances from the approved Annual Budget on a line-item basis.  Each monthly
report shall show the separate operations of each Property, including, without
limitation, the monthly cash flow for such Property.  Each such monthly report
shall be accompanied by the following:  (a) a statement setting forth in
reasonable detail the calculation of Net Operating Income for each Fee Property
for the trailing twelve (12) months, in each case, ending at the end of the
calendar month as to which such statement is being delivered; (b) a then current
occupancy report for each Property; (c) a report describing in reasonable detail
the occurrence during such month of any event that is reasonably likely to
result in a material adverse effect on the ability of the Borrower to perform
any material provision of the Loan Documents or Other Related Documents, or the
value, use or enjoyment of any of the Properties or the operation thereof; (d) a
monthly summary of accounts receivable with respect to each Property and all of
the Properties in form acceptable to Lender; and (e) such other information as
Lender shall reasonably request and that is prepared by any Borrower Party in
the ordinary course of its business.
 
8.6. Authorizations.  As soon as available, and in any event within ninety (90)
days after the end of each calendar year, Borrower shall deliver to Lender as to
each Property a report describing in reasonable detail the status of such
Property’s compliance with all Authorizations for such Property.  In addition,
not later than thirty (30) days after the commencement of each Fiscal Year for
so long as all or any portion of the Loan remains outstanding, Borrower shall
deliver to Lender copies of any and all Authorizations (together with any
renewals or extensions thereof) certified by Borrower as accurate and complete
in an Officer’s Certificate.
 
8.7. Actuarial Reports.  Promptly (and in any event no later than ten (10) days)
after any Borrower Party’s receipt thereof, Borrower shall deliver to Lender a
complete copy of any Actuarial Report(s) received by the Borrower Parties with
respect to the Properties.
 
8.8. Notices/Inspection Reports from Governmental Authorities.  As soon as
available, and in any event within ten (10) days of any Borrower Party’s
receipt, Borrower shall deliver to Lender (i) any and all notices (regardless of
form) from any Governmental Authority that (a) any Authorization for any
Property or the certification of any Property for reimbursement under any
applicable governmental reimbursement program is the subject of any enforcement
action, revocation or suspension or is subject to assessment for civil monetary
penalties or is the
 

 
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subject of any overpayment claim or recoupment claim or (b) action is pending or
being considered to revoke or suspend any Authorization or to institute
enforcement actions of any kind, and (ii) any and all inspection reports
(regardless of form) from any Governmental Authority relating to any of the
Properties.
 
8.9. Other Information.  Borrower shall furnish, within ten (10) days after
written request from Lender, a written statement, duly acknowledged, setting
forth the unpaid principal of, and interest on, the indebtedness secured by the
Loan Documents and Other Related Documents and whether or not any offsets or
defenses exist against such principal and interest.  In addition, Borrower shall
deliver to Lender whatever additional information concerning any Property, or
any Borrower Party which Lender may reasonably request, provided such
information is consistent with the types of reports and information generally
utilized by institutions within the healthcare or financing industry.
 
9. BORROWER’S DEFAULT.
 
9.1. Borrower’s Defaults and Lender’s Remedies.
 
9.1.1. Events of Default.  Each of the following shall constitute an “Event of
Default” under this Agreement:
 
9.1.1.1. Borrower fails to pay, when due, any principal of or installment of
interest on the Note; or
 
9.1.1.2. Borrower fails to pay, when due, any other amount payable under this
Agreement (other than principal or interest), and such failure continues for a
period of five (5) days after notice thereof from Lender to Borrower; or
 
9.1.1.3. Borrower fails to keep or perform any of its agreements, undertakings,
obligations, covenants or conditions under this Agreement not expressly referred
to in another clause of this Section and (i) such failure continues for a period
of thirty (30) days after notice thereof from Lender to Borrower, or (ii) if
such failure cannot, because of its nature, be cured within said thirty (30)-day
period, then, if Borrower commences curing such failure within said thirty
(30)-day period and diligently continues such cure, such failure continues for
an additional sixty (60)-day period after an additional notice; or
 
9.1.1.4. Any “Event of Default” occurs, as defined under any of the other Loan
Documents or the Other Related Documents, including, without limitation, any
Collateral Document; or
 
9.1.1.5. Any Borrower fails to keep or perform any of its agreements,
undertakings, obligations, covenants or conditions under the other Loan
Documents or the Other Related Documents to which it (or its parent entity) is a
party, and such failure continues beyond any applicable cure period, or if no
cure period is specified, (i) such failure continues for a period of thirty (30)
days after notice thereof from Lender to Borrower, or (ii) if such failure
cannot, because of its nature, be cured within said thirty (30)-day period,
then, if Borrower commences
 

 
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curing such failure within said thirty (30)-day period and diligently continues
such cure, such failure continues for an additional sixty (60)-day period after
an additional notice; or
 
9.1.1.6. Any representation, warranty or certification made in this Agreement by
Borrower or otherwise made in writing in connection with or as contemplated by
this Agreement or any of the other Loan Documents or the Other Related Documents
by Borrower shall be or, to the extent intended to be continuing, become
materially incorrect or false, or any material representation to Lender by
Borrower as to the financial condition or credit standing of any Borrower Party
is or proves to be false or misleading; or
 
9.1.1.7. Any “Event of Default”, as defined under any one or more of the Master
Lease, the Master Lease Guaranty, the Fairwood Lease, the Fairwood Guaranty, the
Whitehall Lease and/or the Whitehall Guaranty, occurs, or any default occurs
under any Material Indebtedness and the same is not cured within any applicable
notice and cure period; or
 
9.1.1.8. Except in connection with the Capmark Loan, the recording of any claim
of lien against any Fee Property or any Improvements thereon and the continuance
of such claim of lien for thirty (30) days without discharge, satisfac­tion or
pro­vi­­sion for payment being made by Borrower in a manner satisfactory to
Lender; or the sequestration or attach­ment of, or any levy or execution upon
any Fee Property or any Improvements, any other Collateral, or any substantial
por­tion of the other assets of any Bor­rower, which sequestration, attachment,
levy or execution is not released, ex­punged or dis­missed prior to the earlier
of thirty (30) days or the sale of the assets affected thereby; or
 
9.1.1.9. The filing of a petition by any Borrower Party for relief under the
Bankrupt­cy Code, or under any other present or future state or federal law
regarding bankruptcy, reorganiza­tion or other debtor relief law; the filing of
any pleading or an answer by any Borrower Party in any involuntary proceeding
under the Bankrupt­cy Code or other debtor relief law which admits the
jurisdiction of the court or the petition’s mate­rial allega­tions regarding any
Borrower Party’s insolvency; a general assignment by any Borrower Party for the
benefit of creditors; or any Borrower Party applying for, or the appointment of,
a receiver, trustee, custodian or liquida­tor of any Borrower Party or any of
its property; or
 
9.1.1.10. The failure of any Borrower Party to effect a full dismis­sal of any
involuntary petition under the Bankruptcy Code or any other debtor relief law
that is filed against any Borrower Party or in any way restrains or limits any
Borrower Party or Lender regarding the Loan, the Property or any Improvements,
prior to the earlier of the entry of any court order grant­ing relief sought in
such involun­tary petition, or sixty (60) days after the date of filing of such
involuntary petition; or
 
9.1.1.11. The dissolution of any Borrower Party which Lender determines, in its
sole and absolute discretion, shall have a material adverse effect on the Loan,
any Property or any Improvements, or on the ability of any Borrower Party to
perform its respective obligations under the Loan Documents or the Other Related
Documents; or
 
9.1.1.12. Any Transfer occurs without the prior written consent of Lender, in
its sole and absolute discretion, other than a Permitted Transfer; or
 

 
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9.1.1.13. Any Borrower Party enters into any secondary or additional financing
agreements or arrangements of any kind whatsoever secured, in whole or in part,
by all or any part of or interest in any Collateral (other than Fee Owners’
first mortgage financing from Capmark obtained in connection with Fee Owners’
initial acquisition of the Fee Properties pursuant to the Purchase Contracts);
or
 
9.1.1.14. Any order or decree is entered by any court of competent jurisdiction
directly or indirectly enjoining or prohibiting any Borrower from performing any
of their material obligations under this Agreement or any of the Loan Documents
or the Other Related Documents, and such order or decree is not vacated, and the
proceedings out of which such order or decree arose are not dismissed, within
sixty (60) days after the granting of such decree or order; or
 
9.1.1.15. The filing of formal charges by any governmental or quasi-governmental
entity, including, without limitation, the issuance of an indictment, under a
RICO Related Law against any Borrower Party or any property manager, which are
not dismissed within thirty (30) days; or
 
9.1.1.16. Any Property is rezoned (except for such rezoning as does not affect
the value, use or operation of the Property), either voluntarily or
involuntarily, or any agreement for the foregoing is entered into, without the
prior written consent of Lender; or
 
9.1.1.17. Any Borrower Party fails to commence compliance with or to cause
commencement of compliance with (or to bond or indemnify Lender to its
satisfaction with regard to) any requirement (including, without limitation,
compliance with all applicable zoning, building, health, fire and environmental
laws, rules, regulations and ordinances) of any Governmental Authority having
jurisdiction within fifteen (15) days after such Borrower Party has written
notice from such Governmental Authority of such requirement or any Borrower
Party fails to thereafter diligently prosecute such compliance; or
 
9.1.1.18. Any order or decree is entered by any court of competent jurisdiction
directly or indirectly enjoining the operation of any Property or prohibiting
any Borrower from performing any of their material obligations under any of the
Loan Documents or the Other Related Documents and such order or decree is not
vacated, and the proceedings out of which such order or decree arose are not
dismissed, within thirty (30) days after the granting of such decree or order.
 
9.1.2. Lender’s Remedies.  Upon the happening of any Event of Default, Lender
shall have the right, if such Event of Default shall then be continuing, in
addition to all the remedies conferred upon Lender by law or equity or the terms
of any Loan Document or Other Related Document, to do any or all of the
following, concurrently or successively, without notice to any Borrower Party:
 
9.1.2.1. Declare the Note to be, and it shall thereupon become, immediately due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Note to
the contrary notwithstanding; or
 

 
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9.1.2.2. Terminate Lender’s obligations under this Agreement to extend credit of
any kind or to make any disbursement, whereupon the commitment and obligation of
Lender to extend credit or to make disbursements hereunder shall terminate; or
 
9.1.2.3. Appropriate and apply to any amounts due under the Loan Documents or
the Other Related Documents any and all balances, credits, deposits (general or
special, time or demand, provisional or final), accounts or monies of Borrower
with Lender including, without limitation, the Security Deposit (and in the
event the Security Deposit is in the form of a letter of credit, draw on the
same and apply the proceeds thereof to any such amounts due or hold the same in
cash form pursuant to the terms of the Cash Collateral Agreement); or
 
9.1.2.4. Exercise all of its rights and remedies at law, in equity and/or
pursuant to any or all Collateral Documents, including foreclosing on the
Collateral.
 
Borrower shall pay to Lender, upon demand, all out-of-pocket expenses actually
incurred (including, without limitation, attorneys’ fees and expenses) of
obtaining such judgment or decree or of otherwise seeking to enforce its rights
under this Agreement or any of the other Loan Documents or the Other Related
Documents; and all such expenses, as determined by Lender in its sole and
absolute discretion, shall, until paid, be secured by the Loan Documents or the
Other Related Documents and shall bear interest at the Default Rate described in
the Note.
 
9.2. Protective Advances.  If an Event of Default occurs, Lender may (but shall
in no event be required to) cure any such Event of Default and any amounts
expended by Lender in so doing, as determined by Lender in its sole and absolute
discretion, shall (i) be deemed advanced by Lender under an obligation to do so
regardless of the identity of the person or persons to whom such funds are
furnished, (ii) constitute additional advances hereunder, the payment of which
is additional indebtedness evidenced by the Note, and (iii) become due and
owing, at Lender’s demand, with interest accruing from the date of disbursement
thereof until fully paid at the Default Rate.
 
9.3. Other Remedies.  If any Event of Default shall occur and be continuing,
Lender may, in addition to any other rights and remedies hereunder, exercise any
and all remedies provided in any of the other Loan Documents or the Other
Related Documents.
 
9.4. RICO Related Law Concerns.  Notwithstanding anything to the contrary
contained in this Agreement, if Lender has reasonable cause to believe that any
material portion of any Property or of any collateral securing the Loan or of
any other funds, property or other assets of any Borrower Party might be subject
to forfeiture under any RICO Related Law, Lender may, in its sole and absolute
discretion, refuse to make any further disbursements, hereunder or under any of
the other Loan Documents or the Other Related Documents, of any kind whatsoever
until Lender has no reasonable belief that any portion of any Property or any of
such assets are subject to forfeiture under any RICO Related Law.
 
9.5. No Lender Liability.  To the extent permitted by law, Lender shall have no
liability for any loss, damage, injury, cost or expense resulting from any
action or omission by it, or any of its representatives, which was taken,
omitted or made in good faith, except to the extent caused by Lender’s gross
negligence or willful misconduct.
 

 
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9.6. Lender’s Fees and Expenses.  In relation to any Event of Default hereunder,
Borrower shall pay Lender’s out-of-pocket fees and expenses actually incurred,
including, without limitation, attorneys’ fees and expenses, in connection with
the enforcement of this Agreement or any of the other Loan Documents or the
Other Related Documents.
 
10. MISCELLANEOUS.
 
10.1. Indemnification.  Borrower shall indemnify, defend and hold Lender and its
Affiliates harmless from and against any and all actual (but not consequential)
losses, liabilities, obligations, penalties, claims, fines, demands, litigation,
defenses, costs, judgments, suits, proceedings, actual damages, disbursements or
expenses of any kind or nature whatsoever (including, without limitation,
attorneys’ fees and expenses) which may at any time be either directly or
indirectly imposed upon, incurred by or asserted or awarded against Lender or
any of Lender’s Affiliates, in their capacity as lender, in connection with,
arising from or relating to Lender’s entering into or carrying out the terms of
this Agreement or being the holder of the Note, or the use, operation or
maintenance of any of the Properties prior to Lender’s foreclosing upon or
taking possession thereof, including, without limitation, any injury or damage
to person or property, or both, occurring on or about any of the  Properties,
other than any loss, liability, damage, suit, claim, expense, fees or costs
arising solely by reason of Lender’s or any of Lender’s Affiliates’ willful
misconduct or gross negligence, or any liability of Lender to the extent that it
arises due to its being the landlord under the Master Lease.
 
10.2. Assignment and Participation.  
 
10.2.1. Lender may pledge or otherwise hypothecate all or any portion of this
Agreement or grant participations herein (provided Lender acts as agent for any
participants, except as provided below), or in any of its rights and security
hereunder, including, without limitation, the Note.  Lender may also assign all
or any part (provided Lender acts as agent in connection with any partial
assignment, except as provided below) of the Loan and the Lender’s obligations
in connection therewith to one or more commercial banks or other financial
institutions or investors (each an “Assignee Lender”).  Upon delivery to
Borrower of an executed copy of the Assignee Lender’s assignment and acceptance
(i) each such Assignee Lender shall be deemed to be a party hereto and, to the
extent that rights and obligations hereunder have been assigned and delegated to
such Assignee Lender, and assumed in writing by such Assignee Lender, such
Assignee Lender shall have the rights and obligations of Lender hereunder and
under the other Loan Documents or the Other Related Documents, and (ii) Lender,
to the extent that rights and obligations hereunder have been assigned, assumed
in writing, and delegated by it, shall be released from its obligations
hereunder and under the other Loan Documents or the Other Related Documents
(including, without limitation, the obligation to fund the Assignee Lender’s
share of the Loan).  Within five (5) Business Days after receipt of a copy of
the executed assignment and acceptance document, along with a form new Note or
Notes (in the same form as the existing Note except for changes to specifically
address the assignment of all or a portion of the Note), at Lender’s request,
Borrower shall execute and deliver to Lender a new Note or Notes in the form
provided by Lender, as applicable (for delivery to the relevant Assignee
Lender), evidencing such Assignee Lender’s assigned portion of the Loan and a
replacement Note or Notes, as applicable, in the principal amount of the Loan
retained by Lender (such Note(s) to be in exchange for, but not in payment of,
the Note then held
 

 
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by Lender).  Such Note(s) shall be dated the date of the predecessor
Note.  Lender shall hold such new Note or Notes in escrow until Lender has
marked the predecessor Note(s) “exchanged” and delivered it to
Borrower.  Accrued interest on that part of the predecessor Note(s) evidenced by
the new Note(s), and accrued fees, shall be paid as provided in the assignment
agreement between Lender and to the Assignee Lender, provided that in no event
shall Borrower pay any duplicate interest or fees.  Accrued interest on that
part of the predecessor Note(s) evidenced by the replacement Note(s) shall be
paid to Lender, provided that in no event shall Borrower pay any duplicate
interest or fees.  Accrued interest and accrued fees shall be so apportioned
between the Note(s) and paid at the same time or times provided in the
predecessor Note(s) and in this Agreement, provided that in no event shall
Borrower pay any duplicate interest or fees.  Borrower authorizes Lender to
disclose to any prospective Assignee Lender any financial or other information
pertaining to Borrower, the Loan, the Properties or Improvements, provided that
such prospective Assignee Lender agrees to keep such information confidential in
accordance with customary lending practice.  In addition, Borrower agrees that,
in connection with any complete assignment of the Loan, if so requested by
Lender and at Lender’s expense, Borrower will cause all insurance policies,
binders and commitments (including, without limitation, casualty insurance and
title insurance) required by the Loan Documents or the Other Related Documents
to be delivered to Lender to name the Assignee Lender as an additional insured
or obligee, as Lender may request.  In the event of a granting of a
participation or an assignment of less than all of its interest in the Loan,
Ventas Realty, Limited Partnership, a Delaware limited partnership, shall
continue to act as agent for Lender and any notice, report or other document
delivered to agent shall be deemed to have been delivered to any party then
constituting Lender.  Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including this Section 10.2, Lender
may at any time and from time to time pledge and assign all or any portion of
its rights under all or any of the Loan Documents or the Other Related Documents
to a Federal Reserve Bank; provided that no such pledge or assignment shall
release Lender from its obligations thereunder.
 
10.2.2. In the event that (i) an Assignee Lender (or, if such Assignee Lender is
a disregarded entity for United States federal income tax purposes, the entity
or person treated, for United States federal income tax purposes, as the owner
of the assets of such Assignee Lender) is not organized under the laws of the
United States or a state thereof and (ii) such Assignee Lender fails to
establish to the reasonable satisfaction of Borrower that payments under the
Loan Documents are exempt from United States withholding taxes, Borrower shall
not be required to “gross-up” payments made to such Assignee Lender for United
States withholding taxes required to be withheld by Borrower.  Any amounts
payable to an Assignee Lender that are subject to United States withholding
taxes shall be withheld by Borrower and remitted to the applicable taxing
authority and treated, for purposes of this Agreement and all other Loan
Documents, as if they were paid to such Assignee Lender.
 
10.3. Prohibition on Assignment.  Borrower shall not assign or attempt to assign
its rights under this Agreement, either voluntarily or by operation of law.
 
10.4. Time of the Essence.  Time is of the essence of this Agreement.
 

 
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10.5. No Waiver.  No waiver of any term, provision, condition, covenant or
agreement herein contained shall be effective unless set forth in a writing
signed by Lender, and any such waiver shall be effective only to the extent set
forth in such writing.  No failure to exercise or delay in exercising, by Lender
or any holder of the Note, of any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof, or the
exercise of any other right or remedy provided by law.  The rights and remedies
provided in this Agreement are cumulative and not exclusive of any right or
remedy provided by law or equity.  No notice or demand on Borrower in any case
shall, in itself, entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Lender to
any other or further action in any circumstances without notice or demand.  No
consent or waiver, expressed or implied, by Lender to or of any breach or
default by Borrower in the performance of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance of the same or any other obligations of Borrower
hereunder.  Failure on the part of Lender to complain of any acts or failure to
act or to declare an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Lender of its rights hereunder or
impair any rights, powers or remedies on account of any breach or default by
Borrower.
 
10.6. Severability.  Any provision of this Agreement which is unenforceable or
invalid or contrary to law, or the inclusion of which would adversely affect the
validity, legality or enforcement of this Agreement, shall be of no effect and,
in such case, all the remaining terms and provisions of this Agreement shall
subsist and be fully effective according to the tenor of this Agreement the same
as though any such invalid portion had never been included
herein.  Notwithstanding any of the foregoing to the contrary, if any provisions
of this Agreement or the application thereof are held invalid or unenforceable
only as to particular persons or situations, the remainder of this Agreement,
and the application of such provision to persons or situations other than those
to which it shall have been held invalid or unenforceable, shall not be affected
thereby, but shall continue valid and enforceable to the fullest extent
permitted by law.
 
10.7. Use of Proceeds.  All agreements between Borrower and Lender (including,
without limitation, this Agreement and any other Loan Documents or the Other
Related Documents) are expressly limited so that in no event whatsoever shall
the amount paid or agreed to be paid to Lender exceed the highest lawful rate of
interest permissible under the laws of the State of Illinois.  If, from any
circumstances whatsoever, fulfillment of any provision hereof or of any other
Loan Documents or the Other Related Documents, at the time performance of such
provision shall be due, shall involve exceeding the limit of validity prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then
ipso facto, the obligation to be fulfilled shall be reduced to the highest
lawful rate of interest permissible under the laws of the State of Illinois, and
if for any reason whatsoever, Lender shall ever receive as interest an amount
which would be deemed unlawful, such interest shall be applied to the payment of
the last maturing installment or installments of the indebtedness secured by the
Collateral (whether or not then due and payable) and not to the payment of
interest.
 
10.8. Notices.  All notices, demands, requests, consents, approvals and other
communications hereunder shall be in writing and delivered (i) by mail
(registered or certified
 

 
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mail, return receipt requested), in which case such notice shall be deemed
received three (3) Business Days after its deposit, (ii) by confirmed facsimile,
in which case such notice shall be deemed received on the date sent provided a
copy is sent pursuant to clause (iii) on the next Business Day, or (iii) by
reputable nationally recognized overnight courier service, in which case such
notice shall be deemed received the next Business Day, addressed to the
respective parties, as follows:
 
if to Borrower:                                           c/o Emeritus
Corporation
3131 Elliott Avenue, #500
Seattle, Washington  98121
Attention:  Eric Mendelsohn
Facsimile:  (206) 357-7388
 
with a copy to:                                           Pircher, Nichols &
Meeks
900 North Michigan Avenue, Suite 1050
Chicago, Illinois  60611
Attention:  Real Estate Notices (JDL/MJK)
Facsimile:  (312) 915-3348

in the case of Lender
to:                                                      c/o Ventas, Inc.
10350 Ormsby Park Place, Suite 300
Louisville, Kentucky  40223
Attention:  General Counsel
Telephone:  (502) 357-9000
Facsimile:  (502) 357-9001

with a copy to:                                           c/o Ventas, Inc.
10350 Ormsby Park Place, Suite 300
Louisville, Kentucky  40223
Attention:  Loan Administration
Telephone:  (502) 357-9000
Facsimile:  (502) 357-9001

with a copy to:                                           Barack Ferrazzano
Kirschbaum & Nagelberg LLP
200 West Madison Street, Suite 3900
Chicago, Illinois 60606
Attention:  Douglas W. Anderson, Esq.
Facsimile:  (312) 984-3150

or to such other address or addresses as the party to be given notice may have
furnished in writing to the party seeking or desiring to give notice, as a place
for the giving of notice.
 
10.9. Successors and Assigns.  This Agreement shall inure to the benefit of the
parties and their respective heirs, legal representatives, successors and
assigns except that, unless Lender consents in writing, no assignment made by
Borrower in violation of this Agreement shall confer any rights on any assignee
of Borrower.
 

 
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10.10. No Joint Venture.  Nothing contained herein or in any document executed
pursuant hereto and no action or inaction whatsoever on the part of Lender,
shall be deemed to make Lender a partner or joint venturer with Borrower.
 
10.11. Brokerage Commissions.  Borrower and Lender each represent that they have
not engaged any broker in connection with the transaction contemplated by this
Agreement.  Borrower and Lender shall each indemnify, defend and hold the other
party and their respective Affiliates harmless from and against any and all
losses, liabilities, obligations, penalties, claims, fines, lost profits,
demands, litigation, defenses, costs, judgments, suits, proceedings, damages,
disbursements or expenses of any kind or nature whatsoever (including, without
limitation, attorneys’ fees and expenses), consequential or otherwise, which may
at any time be either directly or indirectly imposed upon, incurred by or
asserted or awarded against such party or any of its Affiliates in connection
with, arising out of or relating to any claim of a broker’s or finder’s fee
against such party or any person or entity in connection with the Loan herein
contemplated arising out of or relating to Borrower’s or Lender’s action or
inaction.
 
10.12. Publicity.  Borrower shall not publicize this Loan without the prior
written consent of Lender, which shall not be unreasonably withheld, or as
required by applicable securities laws.
 
10.13. Documentation.  Subject to the express terms of this Agreement, all
documents and other matters required by any of the provisions of this Agreement
to be submitted or furnished to Lender shall be in form and substance reasonably
satisfactory to Lender.
 
10.14. Additional Assurances.  Borrower agrees that, at any time or from time to
time, upon the written request of Lender, it will execute all such further
documents and do all such other acts and things as Lender may reasonably request
to effectuate the transaction herein contemplated.
 
10.15. Entire Agreement.  This Agreement and the Exhibits hereto constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and may not be modified or amended in any manner other than by
supplemental written agreement executed by the parties hereto.
 
10.16. Choice of Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois.  Nothing herein
shall be deemed to limit any rights, powers or privileges which Lender may have
pursuant to any law of the United States of America or any rule, regulation or
order of any department or agency thereof and nothing herein shall be deemed to
make unlawful any transaction or conduct by Lender which is lawful pursuant to,
or which is permitted by, any of the foregoing.  Borrower acknowledges that
Lender’s principal office is located in Chicago, Illinois and that Lender may be
irreparably harmed if required to institute or defend any action in any
jurisdiction other than the Northern District of Illinois or Cook County,
Illinois or, with respect to enforcement of the Mortgages, the States where the
respective Leasehold Properties are located.  Therefore, Borrower irrevocably
(i) agrees that any suit, action or other legal proceeding relating to this Loan
Agreement or any of the other Loan Documents or the Other Related Documents may
be brought, at Lender’s sole option, only in the Circuit Court of Cook County or
in the Northern District of Illinois or, with
 

 
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respect to enforcement of the Mortgages, any state or Federal court sitting in
the counties where the respective Leasehold Properties are located,
(ii) consents to the jurisdiction of each such court in any such suit, action or
proceeding, (iii) waives any objection which Borrower may have to the laying of
venue in any such suit, action or proceeding in any such court, and (iv) waives
personal service of any and all process (in any court or jurisdiction
whatsoever) and consents that all such services of process may be made by
certified mail return receipt requested directed to Borrower at the address
indicated in Section 10.8 herein, and services so made shall be complete five
(5) days after the same has been deposited in the U.S. Mail as aforesaid.
 
10.17. No Third Party Beneficiary.  This Agreement is made for the sole benefit
of Borrower and Lender, and no other person shall be deemed to have any privity
of contract hereunder nor any right to rely hereon to any extent or for any
purpose whatsoever, nor shall any other person have any right of action of any
kind hereon or be deemed to be a third party beneficiary hereunder.
 
10.18. Legal Tender of United States.  All payments hereunder shall be made in
coin or currency which at the time of payment is legal tender in the United
States of America for public and private debts.
 
10.19. Definitions; Captions.  With respect to any reference in this Agreement
to any defined term, (i) if such defined term refers to a person, or a trust,
corporation, partnership or other entity, then it shall also mean all heirs,
legal representatives, successors and assigns of such person or entity, and (ii)
if such defined term refers to a document, instrument or agreement, then it
shall also include any replacement, extension or other modification
thereof.  Captions contained in this Agreement in no way define, limit or extend
the scope or intent of their respective provisions.
 
10.20. Interpretation.  All references herein to a party’s best knowledge shall
be deemed to mean the best knowledge of such party based on commercially
reasonable inquiry.  All references herein to Borrower’s knowledge shall be
deemed to refer to the actual knowledge of each Borrower Party.  Unless
specified to the contrary herein, all references herein to an exercise of
discretion or judgment by Lender, to the making of a determination or
designation by Lender, to the application of Lender’s discretion or opinion, to
the granting or withholding of Lender’s consent or approval, to the
consideration of whether a matter or thing is satisfactory or acceptable to
Lender, or otherwise involving the decision making of Lender, shall be deemed to
mean that Lender shall decide unilaterally using its sole and absolute
discretion or judgment.  The terms “herein,” “hereof,” “hereunder” and any other
similar terms used herein shall be deemed to refer to this Agreement in its
entirety.  Any reference contained herein, or in any of the other Loan Documents
or Other Related Documents, to attorneys’ fees and expenses shall be deemed to
be reasonable fees and expenses of Lender’s outside counsel and of any other
third-party experts or consultants engaged by Lender’s outside counsel on
Lender’s behalf and, in the case of attorneys’ fees and expenses, shall include,
without limitation, attorneys’ fees and expenses at trial, on appeal, in a
bankruptcy proceeding or otherwise.  All references to any Loan Document or
Other Related Document shall be deemed to be to such document as amended,
modified or restated from time to time.
 

 
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10.21. WAIVER OF RIGHT TO JURY TRIAL.  BORROWER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS AGREEMENT, THE
NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS, OR ANY OTHER
STATEMENTS OR ACTIONS OF BORROWER OR LENDER.  EACH OF BORROWER AND LENDER
ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS DISCUSSED THIS WAIVER WITH SUCH LEGAL COUNSEL.
BORROWER FURTHER ACKNOWLEDGES THAT (I) IT HAS READ AND UNDERSTANDS THE MEANING
AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY BORROWER
AND BORROWER’S COUNSEL AND IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THE
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND OTHER RELATED DOCUMENTS, AND (III)
THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH OTHER LOAN DOCUMENTS OR OTHER
RELATED DOCUMENTS AS IF FULLY INCORPORATED THEREIN.
 
10.22. Credit Reporting.  Borrower acknowledges that the following notice is
provided as required by the Fair Credit Reporting Act:  Lender may report
information about the Loan/Borrower’s account to credit bureaus and late
payments, missed payments or other defaults on such Loan/Borrower’s account may
be reflected in Borrower’s credit report.
 
10.23. Duplication of Deliveries.   To the extent that Borrower or any Borrower
Party is required to make a delivery to Lender of any notice, report, agreement
or other document hereunder that such Borrower, Borrower Party, or any Affiliate
thereof, is also required to deliver to the landlord under the Master Lease, so
long as Lender or its Affiliates, either directly or indirectly, continues to be
the landlord under the Master Lease, the delivery of such notices, reports,
agreements or other documents the Master Lease shall constitute delivery by such
Borrower, Borrower Party, or any Affiliate thereof, to Lender hereunder, and
neither Borrower, Borrower Party nor or any Affiliate thereof shall be obligated
to make a duplicate delivery hereunder.
 
10.24.   Conflicts with Master Lease.  Notwithstanding anything which may be
construed to the contrary in this Agreement, and except as expressly set forth
herein, Borrower acknowledges and agrees that (i) except as provided in the Cash
Collateral Agreement and the Consent and Agreement of Master Landlord relating
to such agreement, (a) in no event will the terms, conditions, restrictions or
obligations of Lender under this Agreement or any of the other Loan Documents or
Other Related Documents impair or abrogate the rights or remedies of Master
Landlord under the Master Lease or any guaranty made in conjunction therewith,
and (b) nothing herein shall be construed so as to prevent Master Landlord from
exercising or enforcing any or all of its rights and remedies under the Master
Lease in accordance with the terms thereof, and (ii) in no event will the terms,
conditions, restrictions or obligations of Master Landlord under the Master
Lease impair or abrogate the rights or remedies of Lender under this Agreement
or any of the other Loan Documents or Other Related Documents, and nothing
herein shall be construed so as to prevent Lender from exercising or enforcing
any or all of its rights
 

 
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and remedies under this Agreement or any of the other Loan Documents or Other
Related Documents in accordance with the terms thereof.  Without limitation of
the Cash Collateral Agreement and the Consent and Agreement of Master Landlord
relating to such agreement, in the event of a clear and unavoidable conflict
between the terms of this Agreement or any of the other Loan Documents or Other
Related Documents and the terms of the Master Lease, for so long as Ventas
Realty, Limited Partnership and/or any of its affiliates are both Lender under
this Agreement and Master Landlord under the Master Lease, such conflict shall
be resolved by Ventas Realty, Limited Partnership, in its sole and absolute
discretion.
 
10.25. Liability Limitation.  This Agreement, the Notes and the other Loan
Documents and the Other Related Documents are being entered into between
Borrower and Lender to create a borrower/lender relationship with respect to the
Loan, and Borrower and Lender agree that, notwithstanding anything to the
contrary contained in this Agreement, the Notes and the other Loan Documents and
the Other Related Documents, (i) in the case of any indemnity of Lender by
Borrower that is contained in this Agreement, the Notes and the other Loan
Documents and/or the Other Related Documents, Borrower shall not be liable to
indemnify Lender with respect to any loss, damage, cost or expense, including,
without limitation, attorneys' fees, that is incurred by Lender if and to the
extent that the same arises as a result of Lender being the Master Landlord
under the Master Lease and (ii) in the case of any covenant or agreement by
Borrower that is contained in this Agreement, the Notes and the other Loan
Documents and/or the Other Related Documents and breached by Borrower, Borrower
shall not be liable for any damages suffered by Lender as a result of such
breach if and to the extent that such damages are suffered by Lender as a result
of Lender being the Master Landlord under the Master Lease.  For example, if
Borrower indemnifies Lender from certain environmental claims in a Loan
Document, Lender suffers a loss from a claim of the nature described in the
indemnity provision of such Loan Document and Lender suffers the loss, not
because it is the Lender (e.g. because it does not have or exercise under the
Loan Documents liability-creating dominion over the property in its capacity as
Lender) but instead as a result of the fact that, e.g., in its capacity as
Master Landlord it exercised rights of control or consent under the Master Lease
that resulted in the attachment of liability for the particular claim, then
subsection (i) above would exculpate Borrower from liability under the aforesaid
Loan Document indemnity provision.
 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
 
BORROWER:
 
EMERITUS CORPORATION,
a Washington corporation

By: /s/                      Eric Mendelsohn
Name:                      Eric Mendelsohn
Its:           Senior Vice President Corporate
Development

SUMMERVILLE SENIOR LIVING, INC.,
a Delaware corporation

By: /s/ Eric Mendelsohn
Name:                      Eric Mendelsohn
Its:           Senior Vice President Corporate
Development

SW ASSISTED LIVING, LLC
SUMMERVILLE AT BARRINGTON COURT LLC
SUMMERVILLE AT ROSEVILLE GARDENS LLC

Each of which entities is a Delaware limited liabilitycompany

By:           Summerville Senior Living, Inc., a Delaware
corporation, its Sole Member

By: /s/ Eric
Mendelsohn                                                                           
Name:                      Eric Mendelsohn
Its:           Senior Vice President Corporate
Development

 
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SUMMERVILLE 5 LLC
SUMMERVILLE 14 LLC
SUMMERVILLE 15 LLC
SUMMERVILLE 16 LLC
SUMMERVILLE 17 LLC

Each of which entities is a Delaware limited liabilitycompany

By:           Summerville Investors, LLC, a Delaware limited
liability company, each of their Sole Member

By:           Summerville Senior Living, Inc.,
a Delaware corporation,
its Sole Member

By: /s/                      Eric Mendelsohn
Name:                      Eric Mendelsohn
Its:           Senior Vice President Corporate
Development

SUMMERVILLE AT HERITAGE PLACE, LLC,
a Delaware limited liability company

By:           Summerville at Cobbco, Inc.,
a California corporation,
its Sole Member

By: /s/ Eric Mendelsohn _____________________
Name: Eric Mendelsohn
 
Title:
Senior Vice President Corporate Development

 
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LENDER:
 
VENTAS REALTY, LIMITED PARTNERSHIP,
a Delaware limited partnership
 
 
By:
Ventas, Inc., a Delaware corporation, its general partner

 

By:           /s/ T. Richard
Riney                                                                           
Name:                      T. Richard Riney
 
Title:
Executive Vice President, Chief Administrative Officer, General Counsel and
Secretary

 

 

 

 
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LANDLORD CONSENT
 
The undersigned, being the landlord under the Master Lease, hereby consent to
the Leasehold Borrowers’ encumbering of (i) their interest in the Leasehold
Properties pursuant to the Mortgages, (ii) the Security Deposit pursuant to the
Cash Collateral Agreement, and (iii) any Net Insurance Proceeds (as such term is
defined in the Mortgages) pursuant to Sections 1.9, 1.10, 1.11 and 1.12 of the
Mortgages, and otherwise consent to the terms of this Agreement, the other Loan
Documents and the Other Related Documents, and further acknowledge that the
execution of this Agreement, the other Loan Documents and the Other Related
Documents, along with any other documents executed by Leasehold Borrowers in
connection therewith, shall not be deemed a default under the Master
Lease.   All capitalized terms used in the foregoing paragraph shall have the
meaning ascribed to same in the Loan Agreement to which this consent is
attached.
 
MASTER LANDLORD:

VENTAS REALTY, LIMITED PARTNERSHIP,
a Delaware limited partnership
 
 
By:
Ventas, Inc., a Delaware corporation, its general partner

 

 
By:           /s/ T. Richard Riney
Name:                      T. Richard Riney
 
Title:
Executive Vice President, Chief Administrative
Officer, General Counsel

and Secretary
 

 
VENTAS FRAMINGHAM, LLC,
a Delaware limited liability company
 

 
By: /s/ T. Richard
Riney                                                                           
Name:                      T. Richard Riney
 
Title:
Executive Vice President, General Counsel and Corporate Secretary

 
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