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EXECUTION VERSION

 

 

 

 
HCP, INC.,
 
as Lender,
 

 
and
 

 
EMERITUS CORPORATION,
 
as Borrower
 

 

 

 
LOAN AGREEMENT
 

 

 

 
Dated as of: October 31, 2012
 

 

 

 
DOCUMENT PREPARED BY:
 
Paul, Weiss, Rifkind, Wharton & Garrison, LLP
 
1285 Avenue of the Americas
 
New York, NY 10019
 
Attention: Harris B. Freidus
 

 
 

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TABLE OF CONTENTS
 
Page
 
 
ARTICLE 1 DEFINITIONS
1
Section 1.1
Certain Definitions
1
Section 1.2
Definitions
10
Section 1.3
Phrases
10
Section 1.4
Incorporation by Reference
10
ARTICLE 2 LOAN TERMS
12
Section 2.1
The Loan
12
Section 2.2
Interest Rate; Late Charge
12
Section 2.3
Terms of Payment
12
Section 2.4
Prepayment
13
Section 2.5
Security; Establishment of Funds
13
Section 2.6
Application of Payments
13
Section 2.7
Sources and Uses
15
Section 2.8
Partial Releases
15
Section 2.9
Withholding Taxes
16
ARTICLE 3 INSURANCE AND CONDEMNATION
20
Section 3.1
Generally
20
Section 3.2
Adjustments
20
Section 3.3
WARNING REGARDING RIGHT OF LENDER TO PURCHASE INSURANCE
20
Section 3.4
Use and Application of Insurance Proceeds
21
Section 3.5
Condemnation Awards
22
ARTICLE 4 ENVIRONMENTAL MATTERS
22
Section 4.1
No Waiver
22
ARTICLE 5 LEASING MATTERS
23
Section 5.1
Representations, Warranties and Covenants on
23
Ground Lease
 
23
Section 5.2
Ground Lease Estoppels
23
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
23
Section 6.1
Organization, Power and Authority; Formation Documents
23
Section 6.2
Validity of Loan Documents
23
Section 6.3
Margin Stock
24
Section 6.4
Forfeiture
24
ARTICLE 7 COVENANTS
24
Section 7.1
Transfers
24
Section 7.2
Taxes
24
Section 7.3
Utility Service Charges
24

 
 
 
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Section 7.4
[Intentionally Deleted].
24
Section 7.5
Further Assurances
24
Section 7.6
Estoppel Certificates
25
Section 7.7
Payment For Labor and Materials
25
Section 7.8
Use and Proceeds; Revenues
25
Section 7.9
Cooperation Regarding Primary Licenses and Permits
26
Section 7.10
Transactions With Affiliates
26
Section 7.11
Representations and Warranties
26
Section 7.12
Business and Operations
26
Section 7.13
Limitations on Debt, Actions
27
Section 7.14
REIT Representations and Covenants
27
ARTICLE 8 EVENTS OF DEFAULT
28
Section 8.1
Events of Default
28
ARTICLE 9 REMEDIES
30
Section 9.1
Remedies - Insolvency Events
30
Section 9.2
Remedies - Other Events
31
Section 9.3
Lender’s Right to Perform the Obligations
31
ARTICLE 10 MISCELLANEOUS
31
Section 10.1
Notices
31
Section 10.2
Amendments and Waivers
33
Section 10.3
Binding Effect; Assignment
33
Section 10.4
Indemnities
33
Section 10.5
Lender-Creditor Relationship
34
Section 10.6
Right of Setoff
35
Section 10.7
Marshaling; Payments Set Aside
35
Section 10.8
Limitation on Interest
35
Section 10.9
Invalid Provisions
36
Section 10.10
Reimbursement of Expenses
36
Section 10.11
Approvals; Third Parties; Conditions
37
Section 10.12
Lender Not in Control; No Partnership
37
Section 10.13
[Intentionally Deleted]
38
Section 10.14
[Intentionally Deleted]
38
Section 10.15
Successors and Assigns
38
Section 10.16
Renewal, Extension or Rearrangement
38
Section 10.17
Waivers
38
Section 10.18
Cumulative Rights; Joint and Several Liability
38
Section 10.19
Singular and Plural
38
Section 10.20
Exhibits and Schedules
38
Section 10.21
Titles of Articles, Sections and Subsections
38
Section 10.22
Survival
38
Section 10.23
WAIVER OF JURY TRIAL
39
Section 10.24
Waiver of Punitive Damages
39
Section 10.25
Governing Law
39
Section 10.26
Entire Agreement
39

 
 
 
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Section 10.27
Counterparts
39
Section 10.28
Consents and Approvals
39
Section 10.29
Effectiveness of Facsimile Documents and Signatures
40
Section 10.30
Venue
40

 
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LOAN AGREEMENT
 
This Loan Agreement (as amended, restated, supplemented or otherwise modified
from time to time, this “Agreement”) is entered into as of October 31, 2012 by
and between HCP, INC., a Maryland corporation, as lender (together with its
successors and permitted assigns “Lender”) and Emeritus Corporation, a
Washington corporation , as borrower (“Borrower”).
 
RECITALS
 
A.  Borrower has requested, and Lender has agreed, that Lender shall make a loan
available to Borrower subject to all of the terms and conditions set forth in
this Agreement.
 
NOW, THEREFORE, in consideration of the foregoing and the mutual conditions and
agreements contained herein, the parties agree as follows:
 
ARTICLE 1
 
DEFINITIONS
 
Section 1.1 Certain Definitions
 
.  As used herein, the following terms have the meanings indicated:
 
“Affiliate” means, any Person which, directly or indirectly (including through
one or more intermediaries), Controls or is Controlled by or is under common
Control with any other Person, including any Subsidiary of a Person.   Without
limiting the generality of the foregoing, when used with respect to any
corporation, the term “Affiliate” shall also include (i) any Person which owns,
directly or indirectly (including through one or more intermediaries), fifty
percent (50%) or more of any class of voting security or equity interests of
such corporation, (ii) any Subsidiary of such corporation and (iii) any
Subsidiary of a Person described in clause (i).
 
“Agreement” has the meaning assigned in the preamble to this Agreement.
 
“Anti-Money Laundering Laws” means those laws, regulations and sanctions, state
and federal, criminal and civil, that (a) limit the use of and/or seek the
forfeiture of proceeds from illegal transactions; (b) limit commercial
transactions with designated countries or individuals believed to be terrorists,
narcotics dealers or otherwise engaged in activities contrary to the interests
of the United States; (c) require identification and documentation of the
parties with whom a Financial Institution conducts business; or (d) are designed
to disrupt the flow of funds to terrorist organizations.  Such laws, regulations
and sanctions shall be deemed to include the Patriot Act, the Bank Secrecy Act,
the Trading with the Enemy Act, 50 U.S.C. App. Section 1, et seq., the
International Emergency Economic Powers Act, 50 U.S.C. Section 1701, et seq.,
and the sanction regulations promulgated pursuant thereto by the OFAC, as well
as laws relating to prevention and detection of money laundering in 18 U.S.C.
Sections 1956 and 1957.
 
 
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 “Assignment of Leases and Rents” means the Assignments of Leases and Rents,
dated the date hereof, executed by Borrower for the benefit of Lender, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
 
“Award” has the meaning assigned in Section 3.5.
 
“Borrower” has the meaning assigned in the preamble to this Agreement.
 
“Borrower Controlling Person” means any (i) Person(s) which, directly or
indirectly (including through one or more intermediaries), controls Borrower,
including any partners, shareholders, principals, members, trustees and/or
beneficiaries of Borrower to the extent the same control Borrower, and (ii)
Person(s) which controls, directly or indirectly (including through one or more
intermediaries), any other Person that would constitute a Controlling Person
pursuant to the foregoing clause (i).
 
“Borrower’s Knowledge” means the actual knowledge of Borrower without inquiry or
investigation other than reasonable inquiry of the current operator of the
Projects.
 
“Business Day” means a day other than a Saturday, a Sunday, or a legal holiday
on which national banks located in the State of New York are not open for
general banking business.
 
“Casualty” has the meaning assigned in Section 3.4(a).
 
“Closing Date” means the date of this Agreement.
 
“Code” means the Internal Revenue Code of 1986, as amended, and as it may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
 
“Collateral” means all real and personal property with respect to which Liens in
favor of Lender are executed, identified or purported to be granted pursuant to
the Loan Documents and includes, without limitation, all of Borrower’s right,
title and interest in, to and under all personal property, real property, and
other assets that arise from, are used in connection with, are related to or are
located at the Projects, whether now owned by or owing to, or hereafter acquired
by or arising in favor of Borrower (including all personal property and other
assets owned or acquired under any trade names, styles or derivations thereof),
and whether owned or consigned by, or leased from, Borrower, and regardless of
where located.
 
“Commercial Lease” means a non-residential Lease.
 
“Condemnation” has the meaning assigned in Section 3.5.
 
 
 
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“Condemnation Threshold” means $500,000 with respect to any Condemnation
proceeding, not to exceed $1,000,000 in the aggregate in any calendar year. 
 
“Contract Rate” means a rate of interest equal to the lesser of (a) (i) with
respect to the first Loan Year, six and one-tenths percent (6.1%) per annum,
(ii) with respect to the second Loan Year, six and four-tenths percent (6.4%)
per annum, (iii) with respect to the third Loan Year, six and six-tenths percent
(6.6%) per annum, and (iv) with respect to the fourth Loan Year, six and
eight-tenths percent (6.8%) per annum, and (b) the maximum rate of interest
allowed by applicable Law.
 
“Control”, “controls”, “controlled by” and “under common control with”, as used
with respect to any Person, shall mean the possession, directly or indirectly
(including through one or more intermediaries), of the power to direct or cause
the direction of the management and policies of such Person, through the
ownership or control of voting securities, partnership interests or other equity
interests, by contract or otherwise.
 
“Debt” means, for any Person, without duplication: (a) all indebtedness of such
Person for borrowed money, for amounts drawn under a letter of credit, or for
the deferred purchase price of property for which such Person or any of its
assets is liable, (b) all unfunded amounts under a loan agreement, letter of
credit, or other credit facility for which such Person or any of its assets
would be liable or subject, if such amounts were advanced under the credit
facility, (c) all amounts required to be paid by such Person as a guaranteed
payment to partners, including any mandatory redemption of shares or interests,
(d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all
obligations under leases that constitute capital leases for which such Person or
any of its assets is liable or subject, and (f) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements (which shall be netted against any amount received by such Person
under such an agreement during the same period) and, provided further, that the
payment made on the Closing Date with respect to the first year of such a
contract shall not be included, in each case whether such Person or any of its
assets is liable or subject contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person otherwise assures a
creditor against loss.
 
“Default Rate” means the lesser of (a) the maximum rate of interest allowed by
applicable law, and (b) five percent (5%) per annum in excess of the
then-applicable Contract Rate.
 
“Dollars” and the sign “$” each mean the lawful money of the United States of
America.
 
“Environmental Laws” means any and all applicable federal, state, municipal and
local laws, statutes, ordinances, rules, regulations, binding and enforceable
guidance or policies, orders, decrees, judgments, whether statutory or common
law, as amended from time to time, now or hereafter in effect, or promulgated,
pertaining to the environment, public health and safety and industrial hygiene,
including the use,
 
 
 
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generation, manufacture, production, storage, release, discharge, disposal,
handling, treatment, removal, decontamination, clean-up, transportation or
regulation of  any Hazardous Substance, including the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Safe Drinking
Water Act and the Occupational Safety and Health Act.
 
“Event of Default” has the meaning assigned in Section 8.1.
 
“FATCA” means Sections 1471 through 1474 of the Code (or any amended or
successor version) and any current or future regulations or official
interpretations thereof.
 
“Financial Institution” means a United States Financial Institution as defined
in 31 U.S.C. 5312, as amended from time to time.
 
 “FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act
and the regulations promulgated pursuant to such act.
 
“GAAP” means U.S. generally accepted accounting principles.
 
“Governmental Approvals” means, collectively, all consents, licenses and permits
and all other authorizations or approvals required from any Governmental
Authority to operate the Projects.
 
“Governmental Authority” means any court, board, agency, administrative body,
commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence having jurisdiction and
enforcing regulatory control over the Projects or Borrower (including, without
limitation, any of the foregoing having jurisdiction over the ownership,
operation, use or occupancy of any Project).
 
“Ground Lease” means that certain Agreement of Lease, dated as of August 11,
1998, by and between Ground Lessor and Ground Lessee (successor-in-interest to
Baltimore NCH Assisted, L.L.C.), together with all amendments, modifications,
supplements, extensions and assignments thereto.
 
“Ground Lessee” means Borrower, in its capacity as the lessee under the Ground
Lease.
 
“Ground Lessor” means W.S. Baer Corporation (or its successor-in-interest) as
the ground lessor under the Ground Lease.
 
 “Hazardous Substances” means, collectively, any petroleum, petroleum product or
byproduct or any dangerous, toxic or hazardous substance, material or waste
regulated or listed pursuant to any Environmental Law, but excluding
pharmaceuticals and other health care products to the extent such
pharmaceuticals and products: (i) are
 
 
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related to the Primary Intended Use; (ii) would not be considered “waste” under
any Environmental Law other than “solid waste”; and (iii) are used in the
ordinary course of business consistent with the Primary Intended Use and in
compliance with Health Care Requirements.
 
“Health Care Requirements” means, with respect to each Project, all federal,
state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, standards, policies, judgments, decrees and injunctions
or agreements, in each case regulating the establishment, construction,
ownership, operation, use or occupancy of such Project or any part thereof for
its Primary Intended Use and all material permits, licenses and authorizations
and regulations relating thereto, including all material rules, orders,
regulations and decrees of and agreements with Governmental Authorities as
pertaining to such Project.
 
“Impositions” means, collectively, all taxes, including capital stock,
franchise, gross margins and other state, municipal and local taxes; ad valorem,
sales, use, single business, gross receipts, net worth, transaction privilege,
rent or similar taxes; assessments including assessments for public improvements
or benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term; water, sewer and other utility
levies and charges; excise tax levies; fees including license, permit,
inspection, authorization and similar fees; and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character, in the case of each of the foregoing, of
Borrower, in respect of the Projects (including with respect to any tax parcel
of which all or any portion of any Project comprises any portion thereof), and
all interest and penalties thereon attributable to any failure in payment by
Borrower, which at any time prior to, during or in respect of the Term hereof
may be assessed or imposed on or in respect of or be a lien upon (i) Borrower or
Borrower’s interest in the Projects, (ii) the Projects or any parts thereof, or
any rent therefrom or any estate, right, title or interest therein, or (iii) any
occupancy, operation, use or possession of, or sales from or activity conducted
on or in connection with the Projects or the leasing or use of the Projects or
any parts thereof.
 
“Incorporated Provisions” has the meaning assigned in Section 1.4.
 
“Indebtedness” means all payment obligations of Borrower to Lender or to Lender
under the Loan or any of the Loan Documents, including, without limitation, any
and all interest, whether or not accruing after the filing of any petition in
bankruptcy or the commencement of any insolvency, reorganization or similar
proceeding, and whether or not a claim for post-filing or post- petition
interest is allowed in any such proceeding.
 
“Indemnified Matters” has the meaning assigned in Section 10.4.
 
“Indemnitee” has the meaning assigned in Section 10.4.
 
“Land” means, collectively, the real property described in Exhibits A-l through
A-9 attached hereto.
 
 
 
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“Laws” means, collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations and guidances and judicial opinions or
presidential authority in the applicable jurisdiction, including but not limited
to quality and safety standards, accreditation standards and requirements of any
Governmental Authority or State Regulator having jurisdiction over the
ownership, use, occupancy or operations of the Projects, each as it may be
amended from time to time.
 
“Leases” means all leases of, subleases of and occupancy agreements affecting
the Projects or any part thereof now existing or hereafter executed (including
all patient and resident care agreements and service agreements which include an
occupancy agreement) and all amendments, modifications or supplements thereto.
 
“Legal Requirements” means, with respect to Borrower and each Project (a) all
federal, state, county, municipal and other governmental statutes, laws
(including all Health Care Requirements, and Environmental Laws), rules,
policies, guidance, codes, orders, regulations, ordinances, permits, licenses,
covenants, conditions, restrictions, judgments, decrees and injunctions of any
Governmental Authority, affecting the Projects or the construction, use or
alteration thereof, whether now or hereafter enacted and in force, including any
which may (i) require repairs, modifications or alterations in or to the
Projects, (ii) in any way adversely affect the use and enjoyment thereof, or
(iii) regulate the transport, handling, use, storage or disposal or require the
cleanup or other treatment of any Hazardous Substances, and (b) all covenants,
agreements, restrictions, and encumbrances either now or hereafter of record or
known to Borrower affecting the Projects.
 
“Lender” has the meaning assigned in the preamble to this Agreement.
 
“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, taxes, commissions, charges, disbursements and expenses, in each case of
any kind or nature (including interest accrued thereon or as a result thereto
and fees, charges and disbursements of financial, legal and other advisors and
consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.
 
“Lien” means any interest, or claim thereof, in the Projects securing an
obligation owed to, or a claim by, any Person other than the owner of the
Projects, whether such interest is based on common law, statute or contract,
including the lien or security interest arising from a deed of trust, mortgage,
assignment, encumbrance, pledge, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes.  The term
“Lien” shall include reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting the Projects.
 
“Loan” has the meaning assigned in Section 2.1.
 
 
 
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“Loan Commitment” means that certain commitment letter from Lender to Borrower,
dated October 16, 2012, pursuant to which Lender has agreed to provide Borrower
with up to $52,000,000 to finance the purchase of the Projects on the Closing
Date on and subject to the terms and conditions set forth therein and the
definitive documents to be entered into by Lender and Borrower in connection
therewith.
 
“Loan Documents” means: (a) this Agreement, (b) the Notes, (c) the Mortgages,
(d) the Assignment of Leases and Rents, (e) Uniform Commercial Code financing
statements and fixture filings, (f) all other documents evidencing, securing,
governing or otherwise pertaining to the Loan, and (g) all amendments,
modifications, renewals, substitutions and replacements of any of the foregoing.
 
“Loan Year” means (a) for the first Loan Year, the period between the date
hereof and October 31, 2013, and (b) each consecutive twelve month calendar
period after the first Loan Year until the Maturity Date.
 
“Master Commercial Lease” means a Commercial Lease with respect to more than ten
percent (10%) of the square footage within a Project in the aggregate to any
Person and/or its Affiliates, directly or indirectly, or through one or more
step transactions or tiered transactions (including subleases or sub-subleases).
 
“Master Lease” means that certain Master Lease and Security Agreement, dated of
even date herewith, by and between Master Lessor and Master Lessee.
 
“Master Lessee” means Borrower, in its capacity as ground lessee under the
Master Lease.
 
“Master Lessor” means the Subsidiaries of Lender who are the ground lessors
under the Master Lease.
 
“Material Adverse Effect” or “material adverse effect” means a material adverse
effect on (i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of Borrower taken as a whole, (ii) the ability
of Borrower to perform any material obligation under the Loan Documents, (iii)
on the Liens secured by the Loan Documents, or (iv) the ability of Borrower to
operate all or a material portion of the Projects.
 
“Maturity Date” means the earlier of (i) the last day of the fourth (4th) Loan
Year (the “Stated Maturity Date”) and (ii) any earlier date on which the entire
Loan is required to be paid in full, by acceleration or otherwise, under this
Agreement or any of the other Loan Documents.
 
“Medicaid” means Title XIX of the Social Security Act, which was enacted in 1965
to provide a cooperative federal-state program for low income and medically
indigent persons, which is partially funded by the federal government and
administered by the states.
 
 
 
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“Medicare” means Title XVIII of the Social Security Act, which was enacted in
1965 to provide a federally funded and administered health program for the aged
and certain disabled persons.
 
“Mortgages” means, collectively, each of the fee and leasehold mortgages, deeds
of trust and deeds to secure debt executed by Borrower as of the date hereof for
the benefit of Lender and covering the Projects, as the same may be amended,
restated, supplemented or modified from time to time.
 
“Non-U.S. Lender Party” means a Lender that is not a U.S. Lender Party.
 
“Note” means that certain Promissory Note of even date herewith executed by
Borrower for the benefit of Lender in the amount of Fifty-Two Million Dollars
($52,000,000.00), as the same may be amended, restated, supplemented or modified
from time to time,.
 
“Obligations” means the Indebtedness and all other obligations of Borrower
hereunder and under the other Loan Documents.
 
“Other Taxes” has the meaning assigned in Section 2.9(c).
 
“Partial Release” has the meaning assigned in Section 2.8(a).
 
“Partial Release Price” has the meaning assigned in Section 2.8(a)(vii).
 
“Partial Release Project” has the meaning assigned in Section 2.8(a).
 
“Patriot Act” means the USA Patriot Act of 2001, Pub.  L.  No.  107-56.
 
“Payment Date” has the meaning assigned in Section 2.3(a), and is the date that
a regularly scheduled payment of interest is due under the Loan.
 
“Permit” means, with respect to any Person, any permit, approval, authorization,
license, registration, certificate (including certificates of occupancy),
concession, grant, franchise, variance or permission from, and any other
contractual obligations with, any Governmental Authority, in each case whether
or not having the force of law and applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is subject.
 
“Permitted Exceptions” means the exceptions to title contained in the Title
Policies insuring the liens created pursuant to the Mortgages and any other
title matter to which Lender consents in writing.
 
“Person” means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee, estate, limited liability
company, unincorporated organization, real estate investment trust, government
or any agency or political subdivision thereof, or any other form of entity.
 
 
 
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“Primary Intended Use”  means, with respect to each Project, the licensed use(s)
set forth under the heading “Project Description and Primary Intended Use” on
Exhibit B attached hereto and incorporated herein by this reference with respect
to such Project, such other uses necessary or incidental to such use and any
change to such Primary Intended Use approved by Lender in accordance with
Section 7.2.2 of the Master Lease as incorporated herein pursuant to Section 1.4
hereof.
 
“Primary License” means, with respect to any Project or Person operating such
Project, as the case may be, the certificate of need, permit or license to
operate as a senior housing facility, and each Medicaid/Medicare/TRICARE
provider agreement.
 
“Projects” means the Land and the senior housing facilities located on the Land,
and all related facilities, amenities, fixtures, and personal property owned or
leased by Borrower and any improvements now or hereafter located on the Land and
described in Exhibit A, but shall exclude any Partial Release Project as and
when (if at all) released from the Lien of the Loan Documents in accordance with
Section 2.8.
 
“Prorated Interest” has the meaning assigned in Section 2.4(b).
 
“Register” has the meaning assigned in Section 2.10.
 
 “Related Persons” means, with respect to any Person, each of such Person’s
Affiliates, officers, directors, employees, agents, trustees, representatives,
attorneys, accountants, and each insurance, environmental, legal, financial and
other advisor and other consultants and agents of or to such Person or any of
its Affiliates.
 
“Restoration Threshold” means, as of any date, the lesser of (a) 10% of the
replacement value of the improvements at the affected Project as of such date,
and (b) $500,000.00.
 
“S&P” shall mean Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.
 
“Secured Parties” means Lender and its Related Persons.
 
“Security” means all of the real and personal property securing the Obligations
described in the Loan Documents.
 
“Social Security Act” means 42 U.S.C. 401 et seq., as enacted in 1935, and
amended, restated or otherwise supplemented thereafter from time to time and all
rules and regulations promulgated thereunder.
 
“Subsidiaries”  means, with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership
 
 
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interests representing or entitling the holder thereof to more than 50% of the
equity or more than 50% of the ordinary voting power or, in the case of a
partnership or limited liability company, more than 50% of the general
partnership or membership interests are, as of such date, owned, controlled or
held.
 
“Tenant” means any tenant or occupant of a Project under a Lease.
 
“Term” shall mean the term of the Loan.
 
“Transfer” has the meaning assigned in Section 24.1.2 of the Master Lease as
incorporated herein pursuant to Section 1.4 hereof.
 
“Treasury Regulation” means U.S. Department of Treasury regulations.
 
“U.S. Lender Party” means a Lender that is a “United States person” as defined
in Section 7701(a)(30) of the Code.

“Withholding Taxes” has the meaning assigned in Section 2.9.
 
  
 

 

 
Section 1.2 Definitions.  All terms defined in Section 1.1 above or otherwise in
this Agreement shall, unless otherwise defined therein, have the same meanings
when used in any other Loan Document or any certificate or other document made
or delivered pursuant hereto.  The words “hereof”, “herein”, and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole.  The words “include” and “include(s)” when used in this
Agreement and the other Loan Documents means “include(s), without limitation,”
and the word “including” means “including, but not limited to.”  All accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP as at the time applicable.
 
Section 1.3 Phrases.  When used in this Agreement and the other Loan Documents,
the phrase “including” shall mean “including, but not limited to,” the phrase
“satisfactory to Lender,” shall mean “in form and substance satisfactory to
Lender in all respects”, the phrases “with Lender’s consent,” and “with Lender’s
approval,” shall mean such consent or approval at Lender’s sole discretion, and
the phrase “acceptable to Lender,” shall mean “acceptable to Lender at Lender’s
sole discretion” unless otherwise specified in this Agreement.
 
Section 1.4 Incorporation by Reference
 
.  The following provisions of the Master Lease are incorporated herein by this
reference as if such provisions were set forth herein in full (as between Lender
and Borrower with respect to the Projects as if they were Lessor and Lessee,
respectively, of the Leased Property demised under the Master Lease), except to
the extent that they are inapplicable, inconsistent with, in conflict with, or
are specifically modified by the terms of this Agreement:  Section 4.1.1
(Impositions); the first sentence of Section 4.2 (Utility Charges); Section 4.3
(Insurance Premiums); the first and third sentences of Section 6.2 (Personal
Property) (provided that the phrase “parcels of the Land or in any of the Leased
Improvements” in the first
 
 
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sentence thereof shall be deleted and replaced with “Projects”); Section 7.2
(Use of the Projects); Section 8.1 (Compliance with Legal and Insurance
Requirements, Instruments, Etc.); Section 9.1 (Maintenance and Repair) (except
for Section 9.1.4 thereof); Section 9.2 (Encroachments, Restrictions, Mineral
Leases, Etc.), Section 9.7 (Inspections; Due Diligence Fee); Article X (relating
to alterations) (assuming for purposes hereof that there are no “Pre-Existing
Projects”); Section 12.1 (Permitted Contests) (except for the third and fourth
sentences thereof and provided that no such contests shall be brought in
Lender’s name or if such contests would have a material adverse effect on the
Liens created by the Loan Documents); Article XIII (relating to insurance
requirements); Section 16.10 (Leases and Residential Care Agreements); Section
21.1 (General REIT Provisions); Section 23.1 (General Indemnification (except
that the word “subleases” in clause (iv) thereof shall be deleted and replaced
with “Leases”); subject to Section 7.1 hereof, Section 24.1.1 (Prohibition)
(except for the first parenthetical in the first sentence thereof and the last
sentence thereof, and except that the reference in clause (i) to “this Lease or
Lessee’s leasehold estate hereunder” shall be deleted and replaced with “the
Projects or Borrower’s interest therein”), Section 24.1.2.1 (except for the last
sentence thereof), the second sentence of Section 24.1.2.2, Section 24.1.2.3 and
Section 24.1.2.4 (Consent); Section 24.1.3 (Release); Section 24.1.4 (Attornment
and Related Matters); Section 24.1.5 (Assignment of Lessee’s Rights Against
Occupant Under a Master Sublease); Section 24.1.6 (Costs); Section 24.1.7 (No
Release); subject to Section 7.1 hereof; Section 24.1.9 (Transfers in
Bankruptcy); Section 24.1.10 (Public Offering/Public Trading); Section 24.1.11
(Certain Other Transfers); Section 24.1.12 (Affiliate Transactions) (except that
the security interest to be granted to Lender pursuant to Section 24.1.12.6
shall be consistent with the security interest granted by the Loan Documents
rather than by Section 16.9 of the Master Lease); Section 25.1.2 (Statements);
Section 25.1.3 (Lessee’s Submission of Certificates/Statements); Article XXXVII
(relating to hazardous substances) (except for the last paragraph of Section
37.4 thereof); Section 41.1(g) (OFAC); and Section 45.17 (Confidentiality)
(collectively, the “Incorporated Provisions”); provided, in each case, that for
purposes of this Section 1.4 (a) the capitalized terms used in the Incorporated
Provisions and not otherwise defined herein shall have the meanings assigned to
such terms in the Master Lease; (b) each reference in an Incorporated Provision
to another Incorporated Provision shall be deemed to be a reference to such
Incorporated Provision as incorporated herein; (c) the term “Lease” as used in
the Incorporated Provisions shall mean this Agreement; (d) the term “Lessor” as
used in the Incorporated Provisions shall mean Lender; (e) the terms “Lessee”,
“lessee” and “Lessee Parties” as used in the Incorporated Provisions shall mean
Borrower; (f) the terms “Leased Property”, “Capital Additions” and “Personal
Property” as used in the Incorporated Provisions shall mean the Projects; (g)
the term “Facility” as used in the Incorporated Provisions shall mean an
individual Project; (h) the term “Commencement Date” as used in the Incorporated
Provisions shall mean the Closing Date; (i) the term “Lease Year” as used in the
Incorporated Provisions shall mean Loan Year; (j) the term “Additional Charges”
as used in the Incorporated Provisions shall mean amounts which (in addition to
principal, interest and all other amounts due hereunder) shall be secured by the
Loan Documents and payable by Borrower to Lender upon demand; (k) the term
“Master Sublease” as used in the Incorporated Provisions shall mean Master
Commercial Lease; (l) the term “Controlling Person” as used in the
 
 
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Incorporated Provisions shall mean Borrower Controlling Person; (m) the term
“Occupancy Arrangement” as used in the Incorporated Provisions shall mean Lease;
(n) the term Occupant as used in the Incorporated Provisions shall mean Tenant;
(o) the term “Fair Market Value” as used in the Incorporated Provisions shall
mean fair market value; (p) the term “Rent” as used in the Incorporated
Provisions shall mean Obligations; and (q) all references in the Incorporated
Provisions to any “Facility Mortgagee” or “Collateral Agent” shall be
disregarded; (r) all references in the Incorporated Provisions to “Guarantor”
shall be disregarded unless and until there is a “replacement Guarantor”
pursuant to a Transfer in accordance with Section 24.1 of the Master Lease as
incorporated herein; and (s) there shall be no “Transfer Consideration” in
connection with any Transfer.
 
ARTICLE 2
 
LOAN TERMS
 
Section 2.1 The Loan
 
.  Lender agrees to make a loan to Borrower in the amount of Fifty-Two Million
Dollars ($52,000,000.00) (the “Loan”), which sum shall repaid in accordance with
the terms of this Agreement and the Notes.  Borrower hereby agrees to accept the
Loan, subject to and upon the terms and conditions set forth herein.
 
Section 2.2 Interest Rate; Late Charge
 
.  The outstanding principal balance of the Loan shall bear interest at the
applicable Contract Rate.  Interest at the applicable Contract Rate shall be
computed on the basis of a fraction, the denominator of which is three hundred
sixty (360) and the numerator of which is the actual number of days elapsed from
the date of the initial disbursement under the Loan or the date of the preceding
Payment Date, as the case may be, to the date of the next Payment Date or the
Maturity Date (which results in more interest being paid than if computed on the
basis of a 365-day year).  If Borrower fails to pay any installment of interest
within five (5) Business Days after the date on which the same is due and
payable Borrower shall pay to Lender a late charge on such past due amount, as
liquidated damages and not as a penalty, equal to five percent (5%) of such
amount, but not in excess of the maximum amount of interest allowed by
applicable law.  The foregoing late charge is intended to compensate Lender for
the expenses incident to handling any such delinquent payment and for the losses
incurred by Lender as a result of such delinquent payment.  Borrower agrees
that, considering all of the circumstances existing on the date this Agreement
is executed, the late charge represents a reasonable estimate of the costs and
losses Lender will incur by reason of late payment.  Borrower and Lender further
agree that proof of actual losses would be costly, inconvenient, impracticable
and extremely difficult to fix.  Acceptance of the late charge shall not
constitute a waiver of any Event of Default arising from the overdue
installment, and shall not prevent Lender from exercising any other rights or
remedies available to Lender with respect to such Event of Default.  While any
Event of Default exists, the Loan shall bear interest at the Default Rate.
 
Section 2.3 Terms of Payment
 
.  The Loan shall be payable as follows:
 
(a) Interest and Principal.
 
 
 
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(i) Borrower shall pay to Lender, on the date hereof, a payment of interest only
on the Loan for the period from the date hereof through and including November
30, 2012, at the Contract Rate.
 
(ii) Commencing on January 2, 2013, and continuing on the first (1st) day of
each calendar month thereafter (each such date a “Payment Date”) through and
including the Payment Date immediately prior to the Maturity Date, Borrower
shall pay to Lender all accrued and unpaid interest due and payable on the Loan.
 
(b) Maturity.  On the Maturity Date, Borrower shall pay to Lender all
outstanding principal, accrued and unpaid interest, default interest, late
charges, and any and all other amounts due under the Loan Documents with respect
to the Loan.
 
Section 2.4 Prepayment
 
.
 
(a) Voluntary Prepayment.  The Loan may be prepaid in whole or in part, at any
time and without penalty, provided Borrower provides not less than one (1)
Business Days' notice to Lender of such prepayment and pay with such prepayment
all accrued interest and all other outstanding amounts then due and unpaid under
the Loan Documents.
 
(b) Prepayment Not Made on a Payment Date.  If for any reason the Loan or any
portion thereof is prepaid on a day other than a scheduled monthly Payment Date,
interest shall be prorated through the date of prepayment (the “Prorated
Interest”).  On the prepayment date, Borrower shall pay to Lender the applicable
principal of the Loan, Prorated Interest, and any other amounts, if any,
required under this Agreement.
 
Section 2.5 Security; Establishment of Funds
 
.  The Loan shall be secured by the Mortgages creating a first lien on the
Projects, the Assignment of Leases and Rents and the other Loan Documents.
 
Section 2.6 Application of Payments
 
.
 
(a) Waterfall.  Prior to the occurrence of an Event of Default, all payments
received by Lender under the Loan Documents shall be applied, (i) first, to pay
Obligations in respect of any cost or expense reimbursements, fees or
indemnities then due to Lender pursuant to this Agreement or any other Loan
Document, (ii) second, to pay interest then due and payable to Lender in respect
of the Loan calculated at the applicable Contract Rate or Default Rate, as
applicable, (iii) third, to principal payments due under the Loan owing to
Lender, and (iv) fourth, to the payment of all other Obligations.  Upon the
occurrence and during the continuance of an Event of Default, all payments shall
be applied in such order as Lender shall determine in its sole discretion.
 
(b) Application of Payments Generally.  If sufficient amounts are not available
to repay all outstanding Obligations then due described in any priority
 
 
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level set forth in this Section 2.6, the available amounts shall be applied,
unless otherwise expressly specified herein, to such Obligations ratably based
on the proportion of the Secured Parties’ interest in such Obligations.  Any
priority level set forth in this Section 2.6 that includes interest shall
include all such interest, whether or not accruing after the filing of any
petition in bankruptcy or the commencement of any insolvency, reorganization or
similar proceeding, and whether or not a claim for post-filing or post-petition
interest is allowed in any such proceeding.
 
(c) Payments and Computations.
 
(i) Procedure.  Borrower shall make each payment under any Loan Document not
later than 4:00 p.m. (Eastern Standard or Daylight Savings time) on the day when
due to Lender by wire transfer or Automated Clearing House (“ACH”) transfer
(which shall be the exclusive means of payment hereunder) to the following
account (or at such other account or by such other means to such other address
as Lender shall have notified Borrower in writing within a reasonable time prior
to such payment) in immediately available Dollars and without setoff or
counterclaim:
 
Account Name:                                               HCP, Inc.

Account Number:                                           12353-68670

Bank Name:                                                     Bank of America

Routing Number:
Wires:                                                  026 009 593
 
ACH:                                                    122 000 661
 
HCP Contact:                                                Wendi Evans
 
                           (562) 733-5167
 

 
Payments received by Lender after 4:00 p.m.  (Eastern Standard or Daylight
Savings time) shall be deemed to be received on the next Business Day.
 
(d) Computations of Interests and Fees.  All computations of interest and of
fees shall be made by Lender on the basis of a year of 360 days (which results
in more interest being paid than if computed on the basis of a 365-day year), in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest and fees are
payable.  All such determinations made by Lender shall be conclusive, binding
and final for all purposes, absent manifest error.
 
(e) Payment Dates.  Whenever any payment hereunder shall be stated to be due on
a day other than a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day without any increase in such payment as a
result of additional interest or fees.
 
 
 
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Section 2.7 Sources and Uses
 
.  The proceeds of the Loan are intended and will be used by Borrower for the
acquisition of the Projects and for no other purposes.
 
Section 2.8 Partial Releases
 
.
 
(a) General Provisions.  Notwithstanding anything contained in this Agreement or
any of the other Loan Documents to the contrary (including the restrictions on
Transfers set forth in Section 7.1 hereof and Section 24.1.1 of the Master Lease
as incorporated herein pursuant to Section 1.4 hereof), provided that no Event
of Default shall have occurred and be continuing, Borrower shall have the right
to sell individual Projects, and Lender agrees to release any such Project
(each, a “Partial Release Project”) from the Lien of the related Mortgage and
the other Loan Documents, provided that all of the following terms and
conditions are satisfied (such release herein called a “Partial Release”):
 
(i) Borrower shall certify in writing to Lender that no Event of Default shall
have occurred and be continuing immediately after giving effect to the
applicable Partial Release and the execution and delivery of all documents
connected therewith.
 
(ii) Borrower shall provide ten (10) Business Days prior written notice to
Lender of its desire to have the applicable Partial Release Project released as
security for the Loan, and provide Lender with the proposed form of release of
the Lien of the related Mortgage which must be reasonably satisfactory to Lender
in form and substance.
 
(iii) Such release will not affect the priority of lien or liens on the
remainder of the Security, or Lender’s rights in and to the remainder of the
Security.
 
(iv) Borrower shall pay all reasonable expenses of Lender, including, without
limitation, reasonable attorneys’ fees and expenses, recording costs and similar
costs in connection with the Partial Release.
 
(v) [Intentionally Deleted]
 
(vi) Borrower shall pay to Lender the release price for the applicable Partial
Release Project (the “Partial Release Price”) specified on Schedule 2.8 of this
Agreement.
 
Upon receipt of the amounts required under Sections 2.8(a)(iv) and 2.8(a)(vi)
above and satisfaction of all of the other requirements contained in this
Section 2.8, in addition to releasing the applicable Project from the lien of
the applicable Mortgage, Assignment of Leases and Rents and other Loan Documents
specific to the Partial Release Project, Lender shall also partially-release all
obligations of Borrower under all other Loan Documents as, but only to the
extent, they relate to the Project being released.
 
 
 
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Section 2.9 Withholding Taxes
 
.
 
(a) Payments Free and Clear of Withholding Taxes.  Except as otherwise provided
in this Section 2.9, each payment by Borrower under any Loan Document shall be
made free and clear of all present or future Impositions with respect thereto
(and without deduction for any of them) (collectively, but excluding the taxes
set forth in clauses (i) through (v) below,  the “Withholding Taxes”) other than
for (i) taxes measured by net income (including branch profits taxes) and taxes
imposed in lieu of net income taxes or by capital, in each case (A) imposed on
Lender as a result of a present or former connection between Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than such connection
arising solely from Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, any Loan Document) or (B)
imposed as a result of Lender being organized under the laws of, or having its
principal office (or its applicable lending office) located in, the jurisdiction
imposing such tax (or any political subdivision thereof); (ii) taxes that are
attributable to the failure by Lender to deliver the documentation required to
be delivered pursuant to clause (e) below; (iii) taxes imposed by way of
withholding on net or gross income, except such taxes solely to the extent
arising as a result of a change in applicable Law occurring after (X) the date
that Lender became a party to this Agreement, (Y) with respect to an assignment
by Lender, the time such assignment became effective, except to the extent that
such Person’s predecessor was entitled to receive additional amounts under
clauses (b) or (d) below, or (Z) with respect to the designation of a new
lending office, the effective date of such designation, except to the extent
such Person was entitled to receive additional amounts under clauses (b) or (d)
below immediately before it designated a new lending office; (iv) taxes imposed
as a result of the willful misconduct or gross negligence of Lender; and (v) any
U.S. federal withholding taxes imposed under FATCA.
 
(b) Gross-Up.  If any Withholding Taxes shall be required by law to be deducted
from or in respect of any amount payable under any Loan Document to Lender (i)
such amount shall be increased as necessary to ensure that, after all required
deductions for Withholding Taxes are made (including deductions applicable to
any increases to any amount under this Section 2.9), Lender receives the amount
it would have received had no such deductions been made, (ii) Borrower shall
make such deductions, (iii) Lender shall timely pay the full amount deducted to
the relevant taxing authority or other authority in accordance with applicable
Requirements of Law and (iv) within 30 days after such payment is made, Borrower
shall deliver to Lender, at its address referred to in Section 10.1, an original
or certified copy of a receipt evidencing such payment, or, if such receipt is
not available, a certificate of Borrower setting forth the amount of such
payment and the date on which such payment was made.
 
(c) Other Taxes.  In addition, Borrower agrees to pay, and authorize Lender to
pay in Borrower’s name, any present and future stamp, documentary, excise or
property tax, intangibles tax, charges or similar levies imposed by any
applicable Legal Requirement or Governmental Authority and all Liabilities with
respect thereto (including by reason of any delay in payment thereof), in each
case (A)  arising from the execution, delivery or registration of, or otherwise
with respect to, any Loan
 
 
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Document or any transaction contemplated therein, and (B) excluding any taxes
imposed as a result of an assignment or designation of a new lending office
(other than pursuant to clauses (g) or (h) below) (collectively, “Other
Taxes”).  Within 30 days after the date of any payment of Withholding Taxes or
Other Taxes by Borrower, Borrower shall furnish to Lender, at its address
referred to in Section 10.1, the original or a certified copy of a receipt
evidencing payment thereof, or, if such receipt is not available, a certificate
of Borrower setting forth the amount of such payment and the date on which such
payment was made.
 
(d) Indemnification.  Borrower shall reimburse and indemnify, within thirty (30)
days after receipt of demand therefor, Lender for all Withholding Taxes and
Other Taxes (including any Withholding Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.9) paid by Lender and any
Liabilities arising therefrom or with respect thereto, whether or not such
Withholding Taxes or Other Taxes were correctly or legally asserted.  A
certificate of Lender claiming any compensation under this clause (d), setting
forth the amounts to be paid thereunder and delivered to Borrower, shall be
conclusive, binding and final for all purposes, absent manifest error.  In
determining such amount, Lender may use any reasonable averaging and attribution
methods.
 
 Notwithstanding anything else to the contrary in this Section 2.9, Borrower
shall not be under any obligation to compensate Lender under this Section 2.9
for Withholding Taxes or Other Taxes with respect to any period prior to the
date that is 270 days prior to such certificate of Lender claiming compensation.

(e) Tax Forms.
 
(i) Each Non-U.S. Lender Party that, at any of the following times, is entitled
to an exemption from, or a reduction of, United States withholding tax
(including pursuant to an applicable tax treaty) shall (w) on or prior to the
date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x)
on or prior to the date on which any such form or certification expires or
becomes obsolete, (y) after the occurrence of any event requiring a change in
the most recent form or certification previously delivered by it pursuant to
this clause (e) and (z) from time to time if requested by Borrower, provide
Borrower with two properly completed and executed originals of each of the
following, as applicable:  (A) Form W-8ECI (claiming exemption from U.S.
withholding tax because the income is effectively connected with a U.S. trade or
business), Form W-8BEN (claiming exemption from, or a reduction of, U.S.
withholding tax under an income tax treaty), Form W-8IMY (claiming exemption
from, or a reduction of, U.S. withholding tax because such Lender serves as an
intermediary, and including proper attachments) or any successor forms, (B) in
the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h) or
881(c) of the Code, Form W-8BEN (claiming exemption from U.S. withholding tax
under the portfolio interest exemption), Form W-8IMY (claiming exemption from,
or a reduction of, U.S. withholding tax because such Lender serves as an
intermediary, and including proper attachments) or any successor form and a
certificate in form and substance acceptable to Borrower that such Non-U.S.
Lender Party is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of
the Code, (2) a “10 percent shareholder” of a Borrower within the meaning of
Section 871(h)(3)(B) of the Code or (3) a “controlled foreign corporation”
 
 
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described in Section 864(d)(4) of the Code or (C) any other applicable form or
document prescribed by the Internal Revenue Service or other taxing authority
certifying as to the entitlement of such Non-U.S. Lender Party to such exemption
from U.S. or other withholding tax or reduced rate with respect to any payments
to be made to such Non-U.S. Lender Party under the Loan Documents.  Unless
Borrower has received forms or other documents satisfactory to them indicating
that payments under any Loan Document to or for a Non-U.S. Lender Party are not
subject to U.S. withholding tax or are subject to such tax at a reduced rate,
Borrower shall withhold amounts required to be withheld by applicable Legal
Requirements from such payments at the applicable statutory rate.
 
(ii) Each U.S. Lender Party shall (A) on or prior to the date such U.S. Lender
Party becomes a “U.S. Lender Party” hereunder, (B) on or prior to the date on
which any such form or certification expires or becomes obsolete, (C) after the
occurrence of any event requiring a change in the most recent form or
certification previously delivered by it pursuant to this clause (e) and (D)
from time to time if requested by Borrower, provide Borrower with two properly
completed and executed originals of Form W-9 (certifying that such U.S. Lender
Party is entitled to an exemption from U.S. backup withholding tax) or any
successor form.
 
(iii) If a payment made to Lender under any Loan Document would be subject to
U.S. federal withholding tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA, Lender shall deliver
to Borrower, at the time or times prescribed by law and at such time or times
reasonably requested by Borrower, such documentation prescribed by applicable
law and such additional documentation reasonably requested by Borrower as may be
necessary for Borrower to comply with its obligations under FATCA, to determine
that Lender has or has not complied with Lender’s obligations under FATCA and,
as necessary, to determine the amount to deduct and withhold from such payment.
 
(f) Refunds.  If Lender has received a refund of (or tax credit with respect to)
any Withholding Taxes or Other Taxes as to which it has been indemnified by
Borrower or with respect to which Borrower has paid additional amounts pursuant
to this Section 2.9, the Lender shall pay over such refund (or the benefit
realized as a result of such tax credit) to Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by Borrowers under this
Section 2.9 with respect to the Withholding Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Lender (including any
Withholding Taxes imposed with respect to such refund) as is determined by the
Lender in good faith, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, that
Borrower, upon the request of the Lender, agrees to repay as soon as reasonably
practicable the amount paid over to Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority, unless imposed as
a result of the willful misconduct or gross negligence of the Lender) to the
Lender in the event the Lender is required to repay such refund to such
Governmental Authority.  This Section 2.9 shall not be construed to require the
Lender to make available its tax returns (or any other information relating to
its Withholding Taxes or Other Taxes which it deems in good faith to be
confidential) to Borrower or any other Person.
 
 
 
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(g) Mitigation.  Any Lender claiming any additional amounts payable pursuant to
this Section 2.9 shall use its reasonable efforts (consistent with its internal
policies and Legal Requirements) to change the jurisdiction of its lending
office, or to assign its rights and obligations under the Loan to another of its
offices, branches or affiliates, if such a change or assignment would reduce any
such additional amounts (or any similar amount that may thereafter accrue) and
would not be otherwise disadvantageous to such Lender.
 
(h) Replacement of Lenders.  If Borrower is required to pay any additional
amount to Lender or any Governmental Authority for the account of Lender
pursuant to Section 2.9, then Borrower may, upon notice to Lender, require
Lender to assign and delegate, without recourse, all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations; provided, that (i) Lender shall have received payment of an amount
equal to the outstanding principal of the Loan (or Lender’s portion thereof, if
applicable), accrued interest thereon, and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest) or the Borrower (in the case of all other amounts) and (ii)
such assignment will result in a reduction in payments required to be made
pursuant to Section 2.9.  Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by Lender
or otherwise, the circumstances entitling Borrower to require such assignment
and delegation cease to apply.
 
Section 2.10 Records of Administrative Agent.  Lender, acting as agent of
Borrower solely for tax purposes and solely with respect to the actions
described in this Section 2.10, shall establish and maintain at its address
referred to in Section 10.1 (or at such other address as Lender may notify
Borrower) (i) a record of ownership (the “Register”) in which Lender agrees to
register by book entry the interests (including any rights to receive payment
hereunder) of each Lender in the Loans, and any assignment of any such interest,
obligation or right and (ii) accounts in the Register in accordance with its
usual practice in which it shall record (A) the names and addresses of Lender
(and each change thereto), (B) the Loan Commitment of Lender, (C) the amount of
the Loan and any assignment of Lender’s share of the Loan, (D) the amount of any
principal or interest due and payable or paid and (E) any other payment received
by Lender from Borrowers and its application to the Obligations.
 
Section 2.11 Registered Obligations.  Notwithstanding anything to the contrary
contained in this Agreement, (i) the Loan (including any Notes evidencing such
Loan) shall constitute a registered obligation, (ii) the right, title and
interest of the Lenders and their assignees in and to the Loan shall be
transferable only upon notation of such transfer in the Register and (iii) no
assignment thereof shall be effective until recorded therein.  This Section 2.11
shall be construed so that the Loan is at all times maintained in “registered
form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code
and any related regulations (and any successor provisions).
 

 
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Section 2.12 Prima Facie Evidence.  The entries made in the Register and in the
accounts maintained pursuant to Sections 2.10 and 2.11 shall, to the extent
permitted by applicable Legal Requirements, be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided, however,
that no error in such account and no failure of Lender to maintain any such
account shall affect the obligations of Borrower to repay the Loan in accordance
with its terms.  In addition, Borrower and Lender shall treat each Person, whose
name is recorded in the Register as a Lender, as a Lender for all purposes of
this Agreement.  Information contained in the Register with respect to any
Lender shall be available for access by Borrower and such Lender at any
reasonable time and from time to time upon reasonable prior notice.
 
 
 
 
ARTICLE 3
 
INSURANCE AND CONDEMNATION
 
Section 3.1 Generally
 
.  If requested by Lender, Borrower shall deliver copies of all original
policies maintained by Borrower certified to Lender by the insurance company or
authorized agent as being true copies, together with the endorsements required
hereunder.  If Borrower elects to obtain any insurance which is not required
under this Agreement, all related insurance policies shall be endorsed in
compliance with Section 13.1.2 of the Master Lease as incorporated herein
pursuant to Section 1.4 hereof, and such additional insurance shall not be
canceled without prior notice to Lender.  From time to time upon Lender’s
request, Borrower shall identify to Lender all insurance maintained by Borrower
with respect to the Projects.  The proceeds of insurance policies coming into
the possession of Lender shall not be deemed trust funds, and Lender shall be
entitled to apply such proceeds as herein provided.
 
Section 3.2 Adjustments
 
.  Borrower shall give prompt written notice of any loss as a result of a
Casualty or other event for which insurance has been procured pursuant to the
terms hereof, to the insurance carrier and to Lender.  Borrower hereby
irrevocably authorizes and empowers Lender, as attorney in fact for Borrower
coupled with an interest, to notify any of Borrower’s insurance carriers to add
Lender as a loss payee, mortgagee insured or additional insured, as the case may
be, to any policy maintained by Borrower (regardless of whether such policy is
required under this Agreement).  Nothing contained in this Section 3.2, however,
shall require Lender to incur any expense or take any action hereunder.
 
Section 3.3 WARNING REGARDING RIGHT OF LENDER TO PURCHASE INSURANCE
 
 : If Borrower fails to provide Lender with evidence of the insurance coverages
required by this Agreement, Lender may purchase such insurance at Borrower’s
expense to protect the interest of Lender.  This insurance may, but need not,
also protect Borrower’s interest, provided, however, if Lender receives any
proceeds from such insurance, such proceeds shall be applied in accordance with
Section 3.4(b) hereof.  If the Collateral becomes damaged, the coverage Lender
purchases may not pay any claim Borrower make or any claim made against
Borrower.  Borrower may later cancel this coverage by providing evidence that
the required property coverage was purchased elsewhere.  Borrower is responsible
for the cost of any insurance purchased pursuant to this provision and such cost
is payable on demand; if Borrower fails to pay
 
 
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such cost, it may be added to the Indebtedness and bear interest at the Default
Rate.  The effective date of coverage may be the date Borrower’s prior coverage
lapsed or the date Borrower failed to provide proof of coverage.  The coverage
Lender purchases may be considerably more expensive than insurance Borrower can
obtain and may not satisfy any need for property damage coverage or any
mandatory liability insurance imposed by applicable Laws.
 
Section 3.4 Use and Application of Insurance Proceeds
 
.
 
(a) Notice; Repair Obligation.  If any Project shall be damaged or destroyed, in
whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give
prompt notice thereof to Lender.  Following the occurrence of a Casualty,
Borrower, regardless of whether insurance proceeds are available, shall promptly
proceed to restore, repair, replace or rebuild the same to be of at least equal
value and of substantially the same character as prior to such damage or
destruction, all to be effected in accordance with applicable Law.  Lender may,
but shall not be obligated to, make proof of loss if not made promptly by
Borrower. In addition, Lender may participate in any settlement discussion with
insurance companies (and shall approve any final settlement) with respect to any
Casualty in which the costs of completing the restoration are equal to or
greater than the Restoration Threshold and Borrower will deliver to Lender all
instruments necessary or required by Lender to permit such participation. In the
event of a Casualty in which the costs of completing the restoration are less
than the Restoration Threshold, Borrower may settle and adjust such claim
without Lender's consent or participation.
 
(b) Application of Insurance Proceeds. All insurance proceeds received by either
Borrower or Lender shall be applied to the costs of restoring the damaged
Project or to the payment of the Loan as follows:
 
(i) if the cost to rebuild or repair the Casualty  is less than or equal to the
Restoration Threshold, Borrower shall use, or Lender shall disburse the
insurance proceeds to Borrower to be used, for the restoration of the damaged
Project provided (A) no Event of Default exists, and (B) Borrower promptly
commences and is diligently pursuing restoration of the damaged Project;
 
(ii) if the cost to rebuild or repair the Casualty exceeds the Restoration
Threshold or if an Event of Default exists, Lender may elect, in its sole
discretion, to apply any insurance proceeds Lender receives as a prepayment
pursuant to Section 2.4, or allow all or any portion of such proceeds to be used
by Borrower for the restoration of the damaged Project.
 
(c) Disbursement of Insurance Proceeds.  Insurance proceeds received by Lender
and to be applied to restoration pursuant to the terms of this Section 3.4, will
be disbursed by Lender to Borrower on a monthly basis, commencing within ten
(10) Business Days following receipt by Lender of plans and specifications,
contracts and subcontracts, schedules, budgets, lien waivers and architects’
certificates all in form reasonably satisfactory to Lender, and otherwise in
accordance with prudent commercial
 
 
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lending practices for insurance claim payment advances and construction loan
advances (including appropriate retainages to ensure that all work is completed
in a workmanlike manner).
 
Section 3.5 Condemnation Awards
 
.  Borrower shall, within five (5) Business Days of actual receipt by Borrower
of such notice, give Lender written notice of the actual or threatened
commencement of any condemnation or eminent domain proceeding affecting any
Project (a “Condemnation”) and shall deliver to Lender copies of any and all
papers served in connection with such Condemnation.  Notwithstanding anything
contained herein to the contrary, following the occurrence of a Condemnation,
regardless of whether any award or compensation (an “Award”) is available or
paid to Borrower, Borrower shall promptly proceed to restore, repair, replace or
rebuild the same to the extent practicable to be of substantially equal value
and of substantially the same character as prior to such Condemnation, all to be
effected in accordance with and subject to applicable law.  With respect to any
Condemnation for which the Award is reasonably anticipated to be less than or
equal to the Condemnation Threshold, Borrower shall be permitted to agree,
without Lender's prior consent, to any such Award and such Award shall be paid
directly to Borrower.  With respect to any Condemnation for which the Award is
reasonably anticipated to exceed the Condemnation Threshold, (a) to the extent
permitted by applicable law, Lender may participate in any such proceeding and
Borrower will deliver to Lender all instruments necessary or required by Lender
to permit such participation; (b) without Lender’s prior consent, which consent
shall not be unreasonably withheld, conditioned or delayed, Borrower shall not
agree to any such Award or knowingly take any action or fail to take any action
which would cause an Award to be determined; and (c) the entirety of each such
Award shall be paid to Lender, except that Lender shall make available to
Borrower the portion of the Award necessary and specifically identified or
allocated for restoration of the applicable Project, and Lender may elect, in
its sole discretion, to either apply the remainder of such Award as a prepayment
pursuant to Section 2.4 or remit the same to Borrower.  Anything herein to the
contrary notwithstanding, if an Event of Default exists, Lender is authorized to
adjust any Award without the consent of Borrower and to collect such Award in
the name of Lender and Borrower and apply the entirety thereof as a prepayment
pursuant to Section 2.4.
 
ARTICLE 4
 
ENVIRONMENTAL MATTERS
 
Section 4.1 No Waiver
 
.  Notwithstanding any provision in this Article 4 or elsewhere in the Loan
Documents, or any rights or remedies granted by the Loan Documents, Lender does
not waive and expressly reserves all rights and benefits now or hereafter
accruing to Lender under the “security interest” or “secured creditor” exception
under applicable Environmental Laws, as the same may be amended.  No action
taken by Lender pursuant to the Loan Documents shall be deemed or construed to
be a waiver or relinquishment of any such rights or benefits under the “security
interest exception.”
 

 
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ARTICLE 5
 
LEASING MATTERS
 
Section 5.1 Representations, Warranties and Covenants on
 
Ground Lease
 
.  Borrower represents and warrants to Lender with respect to the Ground Lease
that: (i) the Ground Lease is valid and in full force and effect; (ii) the
Ground Lease (including amendments) is in writing, and there are no oral
agreements with respect thereto; (iii) the copies of the Ground Lease delivered
to Lender are true and complete; (iv) neither Ground Lessee nor, to Borrower’s
Knowledge, the landlord under the Ground Lease, is in default under the Ground
Lease; (v) Borrower has no Knowledge of any notice of termination or default
with respect to the Ground Lease; (vi) Ground Lessee has not assigned or pledged
its interests in the Ground Lease, except to Lender; (vii) except as set forth
in the Ground Lease, the Ground Lessor does not have the right to terminate the
Ground Lease prior to expiration of the stated term of the Ground Lease (unless
due to casualty or condemnation of the Projects subject to the Ground Lease);
and (ix) Ground Lessee has not prepaid more than one month’s rent in
advance.  For so long as any interest in the Projects is held pursuant to the
Ground Lease, Borrower covenants and agrees, at its sole cost and expense, to
operate such Project in compliance with the terms and conditions of the Ground
Lease in all material respects and to timely perform all of the obligations of
Ground Lessee thereunder.
 
Section 5.2 Ground Lease Estoppels
 
.  At Lender’s request, Borrower shall use commercially reasonable efforts to
obtain from Ground Lessor and furnish to Lender, a written estoppel in form and
substance satisfactory to Lender, executed by Ground Lessor and confirming the
term, rent, status and other provisions and matters relating to the Ground
Lease.
 
ARTICLE 6
 
REPRESENTATIONS AND WARRANTIES
 
Borrower represents, warrants and covenants to Lender unless otherwise
specified, as of the Closing Date and as of the date of each certificate and
statement required be delivered to Lender pursuant to Section 25.1.2 of the
Master Lease as incorporated herein pursuant to Section 1.4 hereof, that:
 
Section 6.1 Organization, Power and Authority; Formation Documents
 
.  Borrower is duly organized, validly existing and in good standing under the
laws of the state of its formation or existence and is in compliance in all
material respects with all legal requirements applicable to doing business in
the state in which the Projects are located.  Borrower is not a “foreign person”
within the meaning of §l445(f)(3) of the Code.  Borrower has only one state of
incorporation or organization.  All other information regarding Borrower
contained in Borrower’ Certificate, including the ownership structure of
Borrower and its constituent entities, is true and correct as of the Closing
Date.
 
Section 6.2 Validity of Loan Documents
 
.  The execution, delivery and performance by Borrower of the Loan Documents to
which Borrower is a party: (a) are
 
 
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duly authorized and do not require the consent or approval of any other party or
Governmental Authority which has not been obtained; and (b) will not violate any
law or result in the imposition of any Lien, charge or encumbrance upon the
assets of any such party, except as contemplated by the Loan Documents.  The
Loan Documents constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, or similar laws generally affecting the enforcement of
creditors’ rights.
 
Section 6.3 Margin Stock
 
.  No part of proceeds of the Loan will be used for purchasing or acquiring any
“margin stock” within the meaning of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
 
Section 6.4 Forfeiture
 
.  There has not been committed by Borrower any act or omission affording the
federal government or any state or local government the right of forfeiture as
against the Projects or any part thereof or any monies paid in performance of
Borrower’ obligations under any of the Loan Documents.
 

ARTICLE 7
 
COVENANTS
 
Section 7.1 Transfers
 
(i) .  Supplementing the provisions of Section 24.1.2 of the Master Lease as
incorporated herein pursuant to Section 1.4 hereof, it shall be a condition to
Lender’s consent to any Transfer that the proposed Tenant, assignee, manager or
other transferee (a) agrees to such modifications to the Loan Documents as
Lender may reasonably require and which are not materially adverse to Borrower,
and (b) causes to be delivered such legal opinions and title insurance
endorsements as may be reasonably requested by Lender.
 
Section 7.2 Taxes
 

 
.  Borrower shall prepare and file all material tax returns and reports as may
be required by Legal Requirements with respect to or relating to the
Projects.  Borrower shall not suffer or permit the joint assessment of any
Project with any other real property constituting a separate tax lot or with any
other real or personal property.
 
Section 7.3 Utility Service Charges
 
. Borrower shall pay or cause to be paid when due all electricity, power, gas,
oil, water and other utility services provided to the Projects.
 
Section 7.4 [Intentionally Deleted].
 
Section 7.5 Further Assurances
 
.  Borrower shall promptly (a) cure any defects in the execution and delivery of
the Loan Documents to which Borrower is a party, (b) provide, and cause each
Borrower Controlling Person to provide, Lender such additional information and
documentation on Borrower’s and such Borrower Controlling Person’s legal or
beneficial ownership, policies, procedures, and sources of funds as Lender deems
necessary or prudent to enable Lender to comply with Anti-Money Laundering Laws
as now in existence or hereafter amended, and (c) execute and deliver,
 
 
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or cause to be executed and delivered, all such other documents, agreements and
instruments as Lender may reasonably request to further evidence and more fully
describe the Collateral for the Loan, to correct any omissions in the Loan
Documents to perfect, protect or preserve any liens created under any of the
Loan Documents, or to make any recordings, file any notices, or obtain any
consents, as may be necessary or appropriate in connection therewith. From time
to time upon the written request of Lender, Borrower shall deliver to Lender a
schedule of the name, legal domicile address and jurisdiction of organization,
if applicable, for each holder of a controlling legal interest in Borrower.
 
Section 7.6 Estoppel Certificates
 
.  Within fifteen (15) Business Days after receipt of written request therefor
(which written request may be made through electronic mail), Borrower shall
furnish to Lender a written statement, duly acknowledged, setting forth the
amount due on the Loan, the terms of payment of the Loan, the date to which
interest has been paid, whether any offsets or defenses exist against the Loan
and, if any are alleged to exist, the nature thereof in detail, and such other
matters as Lender reasonably may request.
 
Section 7.7 Payment For Labor and Materials
 
.  Subject to Borrower’s right to contest in accordance with Article XII of the
Master Lease as incorporated herein pursuant to Section 1.4 hereof, Borrower
will promptly pay when due all bills and costs for labor, materials, and
specifically fabricated materials incurred by Borrower in connection with the
Projects and never permit to exist beyond the due date thereof in respect of any
Project or any part thereof any Lien arising in connection with such work by
Borrower, even though inferior to the Liens hereof, and in any event never
permit to exist in respect of any Project or any part thereof any other or
additional Lien other than the Liens hereof, except for the Permitted Exceptions
and liens for taxes not yet due and payable or that are being contested pursuant
to Article XII of the Master Lease as incorporated herein pursuant to Section
1.4 hereof, provided, however, Borrower shall not be deemed in default hereunder
for failure to pay any of the foregoing amounts which do not exceed $250,000.00
individually or in the aggregate, unless, in the reasonable opinion of Lender,
any Project or any part thereof or interest therein may be in imminent danger of
being sold, forfeited, foreclosed, terminated, canceled or lost as a result of
such failure.
 
Section 7.8 Use and Proceeds; Revenues
 
.  Borrower shall use the proceeds of the Loan for proper business purposes.  No
portion of the proceeds of the Loan shall be used by Borrower in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation D, Regulation T or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Securities Act of
1933 or the Securities Exchange Act of 1934.  Except as otherwise specifically
provided in the Loan Documents, revenue and other proceeds from the Projects
received by Borrower shall be applied to the Indebtedness then due and payable,
expenses or other budgeted capital improvements, repairs or replacements for the
Projects before distribution by Borrower to any of its shareholders.
 
 
 
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Section 7.9 Cooperation Regarding Primary Licenses and Permits
 
.  Upon the request of Lender, if an Event of Default has occurred and is
continuing hereunder, Borrower shall complete, execute and deliver to Lender any
applications, notices, documentation, and other information necessary or
desirable, in Lender’s judgment, to permit Lender or its designee (including a
receiver) to obtain, maintain or renew any one or more of the Primary Licenses
for the Projects and to the extent permitted by applicable Laws to obtain any
other provider agreements or Governmental Approvals then necessary or desirable
for the operation of the Projects by Lender or its designee for their current
use (including, without limitation, any applications for change of ownership of
the existing Primary Licenses.  To the extent permitted by applicable Laws, and
solely under the circumstances described in the immediately preceding sentence,
(i) Lender is hereby authorized (without the consent of Borrower) to submit any
such applications, notices, documentation or other information in accordance
with the above provisions to the applicable Governmental Authorities, or to take
such other steps as Lender may deem advisable to obtain, maintain or renew any
Primary Licenses, Permits or other Governmental Approvals in connection with the
operation of the Projects for their current use, and Borrower agrees to
cooperate with Lender in connection with the same and (ii) Borrower, upon demand
by Lender, shall take any action necessary or desirable, in Lender’s sole
judgment, to permit Lender or its designee (including a receiver) to use,
operate and maintain the Projects for its current use.  If Borrower fails to
comply with the provisions of this Section 7.9 for any reason whatsoever,
Borrower hereby irrevocably appoints Lender and its designee as Borrower’s
attorney-in-fact, with full power of substitution, to take any action and
execute any documents and instruments necessary or desirable in Lender’s sole
judgment to permit Lender or its designee to undertake Borrower’s obligations
under this Section 7.9, including obtaining any Primary Licenses, Permits or
Governmental Approvals then required for the operation of the Projects by Lender
or its designee for their current uses.  The foregoing power of attorney is
coupled with an interest and is irrevocable and Lender may exercise its rights
thereunder in addition to any other remedies which Lender may have against
Borrower as a result of Borrower’s breach of the obligations contained in this
Section 7.9.
 
Section 7.10 Transactions With Affiliates
 
.  Without the prior written consent of Lender, which consent shall not be
unreasonably withheld, conditioned or delayed, Borrower shall not engage in any
transaction affecting the Projects with an Affiliate of Borrower, except as
expressly contemplated by this Agreement or on arms-length, market terms or on
terms which are more favorable to Borrower than arms-length market terms.
 
Section 7.11 Representations and Warranties
 
.  Borrower shall cause all representations and warranties in the Loan Documents
(including those incorporated herein pursuant to Section 1.4 hereof) to remain
true and correct in all material respects, at all times while any portion of the
Loan remains outstanding.
 
Section 7.12 Business and Operations
 
.  Borrower will continue to engage only in the businesses currently conducted
by it on the date hereof.  Borrower
 
 
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shall at all times cause each of the Projects to be maintained in accordance
with such  Project’s Primary Intended Use.
 
Section 7.13 Limitations on Debt, Actions
 
.  Notwithstanding anything to the contrary in the Loan Documents or in any
other document governing the formation, management or operation of Borrower,
Borrower shall not incur, create, assume or permit to exist or remain any Debt
secured by the Collateral or any part thereof or any Lien on any property or
asset now or hereafter acquired by Borrower (including, without limitation, any
Project or any portion thereof) other than (A) the Loan and the Liens under the
Loan Documents, (B) equipment leases entered into in the ordinary course of its
business that are related to the ownership and operation of the Projects, the
value of which equipment covered by such leases does not exceed $50,000 on a per
Project basis, (C) unsecured trade payables incurred in the ordinary course of
its business that are related to the ownership, operation, management,
maintenance and/or leasing of the Projects and which shall (1) not exceed two
percent (2%) of the outstanding balance of the Loan, (2) not be evidenced by a
note, (3) be paid within the time period permitted under the terms of the
applicable vendor’s contract (or 120 days if no period is specified), and (4)
otherwise expressly be permitted under the Loan Documents, (D) with respect to
each Project, Permitted Encumbrances (as defined in the applicable Mortgage) and
(E) liens for taxes not yet due and payable or that are being contested pursuant
to Article XII of the Master Lease as incorporated herein pursuant to Section
1.4 hereof.
 
Section 7.14 REIT Representations and Covenants
 
.
 
(a) As of the date of this Agreement and at all times thereafter while any
portion of the Loan remains outstanding, Borrower will hold real property
(within the meaning of Treasury Regulation section 1.856-3(d)) directly that
secures such Loan.
 
(b) [Intentionally Deleted].
 
(c) The fair market value of the real property (within the meaning of Treasury
Regulation section 1.856-3(d)) directly held by Borrower as of the date of this
Agreement, after reducing such value by any lien or other liability of Borrower,
equals or exceeds the principal amount of the Loan.
 
(d)  (i) Rents payable under the Leases are not based in whole or in part on the
income or profits of any Person; (ii) as of the date the Leases were entered
into or modified, rents payable under such Leases were set at a fair market
rental amount or formula, and the landlords under such Leases had a reasonable
expectation that the lessees under such Leases would be able to make the
payments required; (iii) except with respect to Leases for residential
occupancy, no services or amenities are provided to tenants under the Leases,
other than services that are both (1) customarily furnished or rendered by or on
behalf of landlords in connection with the rental of real property of a similar
class in the geographic areas in which the relevant property is located and (2)
customarily furnished or rendered in connection with the rental of space for
occupancy only (as opposed to primarily for the convenience of the tenant); and
(iv) rent allocable to
 
 
 
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personal property that is leased under the Leases does not exceed fifteen
percent (15%) of the total rent payable under such Leases.
 
 
 
ARTICLE 8
 
EVENTS OF DEFAULT
 
Section 8.1 Events of Default
 
.  Each of the following shall constitute an Event of Default hereunder and
under the Loan:
 
(a) Payments.  Failure of Borrower to pay any regularly scheduled installment of
principal, interest or other amount due under the Loan Documents within five (5)
Business Days after the date when due (or such by other date as is expressly set
forth in this Agreement or any other Loan Document), or failure of Borrower to
pay the Loan at the Maturity Date, whether by acceleration or otherwise.
 
(a) Impositions.  Borrower fails to comply with its obligations pursuant to
Section 4.1.1 of the Master Lease as incorporated herein pursuant to Section 1.4
hereof, provided that it shall not be an Event of Default hereunder if Borrower
pays the amounts then due with respect to such real estate taxes (including any
penalties or late charges) within a period of ten (10) Business Days after the
same becoming delinquent;
 
(b) Insurance.  Borrower fails to pay insurance premiums on or before the date
due to ensure continued coverage under all policies required to be maintained
under this Agreement.
 
(c) except as otherwise specifically provided for in this Section 8.1, if
Borrower shall fail to observe or perform any other term, covenant or condition
of this Agreement and such failure is not cured by Borrower within forty-five
(45) days after notice thereof from Lender, unless such failure cannot with due
diligence be cured within a period of forty-five (45) days, in which case such
failure shall not be deemed to be an Event of Default if Borrower proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof; provided, however, that such notice shall be in lieu of and not
in addition to any notice required under applicable law;
 
(d) Borrower shall:
 
(i) file a petition in bankruptcy or a petition to take advantage of any
insolvency act,
 
(ii) make an assignment for the benefit of its creditors,
 
(iii) consent to the appointment of a receiver of itself or of the whole or any
substantial part of its property, or
 
 
 
 
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(iv) file a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof;
 
(e) Borrower shall be adjudicated as bankrupt or a court of competent
jurisdiction shall enter an order or decree appointing, without the consent of
Borrower, a receiver of Borrower or of the whole or substantially all of its
property, or approving a petition filed against it seeking reorganization or
arrangement of Borrower under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state thereof,
and such judgment, order or decree shall not be vacated or set aside or stayed
within sixty (60) days from the date of the entry thereof;
 
(f) Borrower shall be liquidated or dissolved, or shall begin proceedings toward
such liquidation or dissolution, or shall, in any manner, permit the sale or
divestiture of substantially all of its assets (except to the extent permitted
pursuant to Section 7.1 hereof and Section 24.1.1 of the Master Lease as
incorporated herein pursuant to Section 1.4 hereof);
 
(g) the estate or interest of Borrower in the Projects shall be levied upon or
attached, in an amount in excess of Five Hundred Thousand Dollars ($500,000)
with respect to any one (1) Project, in any proceeding and the same is not
either (i) fully bonded over by Borrower, (ii) being contested by Borrower as
permitted by Article XII of the Master Lease as incorporated herein pursuant to
Section 1.4 hereof, or (ii) vacated or discharged within the later of ninety
(90) days after commencement thereof or thirty (30) days after receipt by
Borrower of notice thereof from Lender; provided, however, that such notice
shall be in lieu of and not in addition to any notice required under applicable
law;
 
(h) any Transfer occurs without Lender’s consent in accordance with the
provisions of Section 7.1 and Section 24.1.1 of the Master Lease as incorporated
herein pursuant to Section 1.4 hereof;
 
(i) (x) there is issued any final non-appealable (i) stop placement order
against Borrower, or (ii) termination or revocation of a Project’s applicable
license material to such Project’s operation for its Primary Intended Use, or
any termination or revocation of any third-party provider reimbursement
agreements (including, without limitation, its certification for participation
in the Medicare or Medicaid reimbursement programs) that is not reinstated or
replaced within twenty (20) days, or (y) there occurs any termination or
revocation that is subject to appeal by Borrower, or any suspension of any such
license that results in the subject Project ceasing operation for a period of
more than twenty (20) days at any time;
 
(j) (i) any local, state or federal agency having jurisdiction over the
operation of any Project removes ten percent (10%) or more of the patients or
residents located in such Project, (ii) any local, state or federal agency
having jurisdiction over any Project reduces the number of licensed units for
such Project from that number set forth under the heading “Project Description
and Primary Intended Use” on Exhibit B
 
 
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attached hereto (in other than a de minimis amount not to exceed three percent
(3%) in the aggregate for each Project during the Term and provided that such
reductions are need or budget based and not related to any quality of care
issues at the Project or any other matter reasonably within Borrower’s control),
(iii) Borrower voluntarily reduces the number of licensed units for any Project
from that number set forth on Exhibit B attached hereto or (iv) Borrower
voluntarily removes from service (so-called “bed banking”) any licensed units
for any Project;
 
(k) Subject to Article XII of the Master Lease as incorporated herein pursuant
to Section 1.4 hereof regarding permitted contests, Borrower fails to cure or
abate any violation occurring during the Term that is claimed by any
Governmental Authority, or any officer acting on behalf thereof, of any Legal
Requirement pertaining to the operation of any Project, and within the time
permitted by such authority for such cure or abatement and such failure to cure
or abate has a Material Adverse Effect;
 
(l) any default and acceleration of any indebtedness of Borrower for borrowed
money (other than the Loan) with an outstanding principal amount of Twenty Five
Million Dollars ($25,000,000) has occurred;
 
(m) a default beyond any applicable notice, grace or cure period shall occur
under any lease agreement or guaranty (including the Master Lease), any other
loan documents or any other material agreement or instrument, now or hereafter
with or in favor of Lender or any Affiliate of Lender and made by or with
Borrower or any Affiliate of Borrower, which default (i) relates to a failure to
pay an amount of not less than One Million Dollars ($1,000,000) or (ii) is a
material nonmonetary default (including, without limitation, any default that
relates to a transfer or non-competition restriction, and/or to an environmental
or licensing obligation); and
 
(n) subject to Article XII of the Master Lease as incorporated herein pursuant
to Section 1.4 hereof, any default under any document or instrument, other than
the Loan Documents, evidencing or creating a Lien on any Project or any part
thereof, is not cured within any applicable grace or cure period therein, and
with respect to any mechanic’s or materialman’s liens, such lien remains
outstanding for a period in excess of thirty (30) days without being bonded off
by Borrower or other arrangements made that is reasonably acceptable to Lender.
 
ARTICLE 9
 
REMEDIES
 
Section 9.1 Remedies - Insolvency Events
 
.  Upon the occurrence and during the continuance of any Event of Default
described in Sections 8.1(d), (e), or (f), all amounts due under the Loan
Documents immediately shall become due and payable, all without written notice
and without presentment, demand, protest, notice of protest or dishonor, notice
of intent to accelerate the maturity thereof, notice of acceleration of the
maturity thereof, or any other notice of default of any kind, all of which are
hereby expressly waived by Borrower.
 
 
 
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Section 9.2 Remedies - Other Events
 
.  Except as set forth in Section 9.1 above, while any Event of Default exists,
Lender may (a) by written notice to Borrower, declare the entire Loan to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or other notice of default of any kind,
all of which are hereby expressly waived by Borrower, and (b) exercise all
rights and remedies therefor under the Loan Documents and at law or in equity.
 
Section 9.3 Lender’s Right to Perform the Obligations
 
.  If Borrower shall fail, refuse or neglect to make any payment or perform any
act required by the Loan Documents, then, while any Event of Default exists, and
without notice to or demand upon Borrower and without waiving or releasing any
other right, remedy or recourse Lender may have because of such Event of
Default, Lender may (but shall not be obligated to) make such payment or perform
such act for the account of and at the expense of Borrower, and shall have the
right to enter upon the Projects for such purpose and to take all such action
thereon and with respect to the Projects as it may deem necessary or
appropriate.  If Lender shall elect to pay any sum due with reference to the
Projects, Lender may do so in reliance on any bill, statement or assessment
procured from the appropriate Governmental Authority or other issuer thereof
without inquiring into the accuracy or validity thereof.  Similarly, in making
any payments to protect the security intended to be created by the Loan
Documents, Lender shall not be bound to inquire into the validity of any
apparent or threatened adverse title, lien, encumbrance, claim or charge before
making an advance for the purpose of preventing or removing the same.  Borrower
shall indemnify, defend and hold Lender harmless from and against any and all
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs, or disbursements of any kind or nature whatsoever,
including reasonable attorneys’ fees, incurred or accruing by reason of any acts
performed by Lender pursuant to the provisions of this Section 9.3, including
those arising from the joint, concurrent, or comparative negligence of Lender,
except as a result of Lender’s gross negligence or willful misconduct.  All sums
paid by Lender pursuant to this Section 9.3, and all other sums expended by
Lender to which it shall be entitled to be indemnified, together with interest
thereon at the Default Rate from the date of such payment or expenditure until
paid, shall constitute additions to the Loan, shall be secured by the Loan
Documents and shall be paid by Borrower to Lender upon demand.
 
ARTICLE 10
 
MISCELLANEOUS
 
Section 10.1 Notices
 
.  Except for those notices and requests that are expressly permitted to be sent
by electronic mail, any notice or request required or permitted to be given
under this Agreement shall be in writing and either shall be mailed by certified
mail, postage prepaid, return receipt requested, or sent by overnight air
courier service, or personally delivered to a representative of the receiving
party, or sent by telecopy (provided an identical notice is also sent
simultaneously by mail, overnight courier, or personal delivery as otherwise
provided in this Section 10.1).  All such communications shall be mailed, sent
or delivered, addressed to the party for whom it is intended at its address set
forth below.
 
 
 
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If to Borrower:
 
 
Emeritus Corporation
 
3131 Elliott Ave., Ste. 500
 
Seattle, WA 90121
 
Fax No. (206) 204-6706
 
Attention: Mark A. Finkelstein
 
E-mail: mark.finkelstein@emeritus.com
 
with a copy to:
 
Skadden, Arps, Slate, Meagher & Flom LLP
 
4 Times Square
 
New York, New York 10036-6522
 
Fax No. (917) 777-3000
 
Attention: Joseph A. Coco, Audrey L. Sokoloff, and Peter D. Serating
 
E-mails: joseph.coco@skadden.com, audrey.sokoloff@skadden.com, and
peter.serating@skadden.com
 
If to Lender:
 
HCP, Inc.
 
3760 Kilroy Airport Way, Suite 300
 
Long Beach, California 90806
 
Fax No. (562) 733-5200
 
Attention: General Counsel
 
E-mail: legaldept@hcpi.com
 
with a copy to:
 
Paul, Weiss, Rifkind, Wharton & Garrison LLP
 
1285 Avenue of the Americas
 
New York, NY 10019-6064
 
Fax No. (212) 492-0064
 
Attention: Harris B. Freidus
 
E-mail: hfreidus@paulweiss.com

Any notice or request so addressed and sent by United States mail or overnight
courier shall be deemed to be given on the earliest of (1) when actually
delivered, (2) on the first Business Day after deposit with an overnight air
courier service, or (3) on the third Business Day after deposit in the United
States mail, postage prepaid, in each case to the address of the intended
addressee (except as otherwise provided in the Mortgages).  Any notice so
delivered in person shall be deemed to be given when receipted for by, or
actually received by Lender or Borrower, as the case may be.  If given by
telecopy, a notice or request shall be deemed given and received when the
telecopy is transmitted to the party’s telecopy number specified above and
confirmation of complete receipt is received by the transmitting party during
normal business hours or
 
 
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on the next Business Day if not confirmed during normal business hours, and an
identical notice is also sent simultaneously by mail, overnight courier, or
personal delivery as otherwise provided in this Section 10.1.  If given by
electronic mail, a notice or request shall be deemed given and received when the
electronic mail is transmitted to the recipient’s electronic mail address
specified above and electronic confirmation of receipt (either by reply from the
recipient or by automated response to a request for delivery receipt) is
received by the sending party during normal business hours or on the next
Business Day if not confirmed during normal business hours and an identical
notice is also sent simultaneously by mail, overnight courier or personal
delivery as otherwise provided in this Section 10.1.  Except for telecopy and
electronic mail notices sent as expressly described above, no notice hereunder
shall be effective if sent or delivered by electronic means.  Either party may
designate a change of address by written notice to the other by giving at least
ten (10) days prior written notice of such change of address.
 
Section 10.2 Amendments and Waivers
 
.
 
(a) No amendment or waiver of any provision of any Loan Document and no consent
to any departure by Borrower therefrom shall be effective unless the same shall
be in writing and signed by Lender and Borrower.
 
(b) Each waiver or consent under any Loan Document shall be effective only in
the specific instance and for the specific purpose for which it was given.  No
notice to or demand on Borrower shall entitle Borrower to any notice or demand
in the same, similar or other circumstances.  No failure on the part of Lender
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.
 
(c) Any reference to a Loan Document, whether in this Agreement or in any other
Loan Document, shall be deemed to be a reference to such Loan Document as it may
hereafter from time to time be amended, modified, supplemented and restated in
accordance with the terms hereof.
 
Section 10.3 Binding Effect; Assignment
 
.  This Agreement shall become effective when it shall have been executed by
Lender and Borrower.  Thereafter, it shall be binding upon and inure to the
benefit of Borrower, Lender and, to the extent provided in Section 10.4, each
other Indemnitee and, in each case, their respective successors and permitted
assigns.  Except as expressly provided in Section Section 7.1 and Section 24.1.1
of the Master Lease as incorporated herein pursuant to Section 1.4
hereof,  Borrower shall not have the right to assign any rights or obligations
hereunder or any interest herein.
 
Section 10.4 Indemnities
 
.  Borrower agrees to indemnify, hold harmless and defend Lender and each of its
Related Persons (each such Person being an “Indemnitee”) from and against all
Liabilities (including brokerage commissions, fees and other compensation and
excluding taxes and costs attributable to taxes for which Lender is responsible
pursuant to Section 2.9 hereof) that may be imposed on, incurred
 
 
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by or asserted against any such Indemnitee in any matter relating to or arising
out of, in connection with or as a result of (i) any Loan Document, any
Obligation (or the repayment thereof), any related transaction, or any
securities filing of, or with respect to, Borrower or the Projects, (ii) any
commitment letter, proposal letter or term sheet with any Person, (iii) any
actual or prospective investigation, litigation or other proceeding, whether or
not brought by any such Indemnitee or any of its Related Persons, any holders of
securities or creditors (and including reasonable attorneys’ fees in any case),
whether or not any such Indemnitee, Related Person, holder or creditor is a
party thereto, and whether or not based on any securities or commercial law or
regulation or any other Legal Requirement or theory thereof, including common
law, equity, contract, tort or otherwise, or (iv) any other act, event or
transaction related, contemplated in or attendant to any of the foregoing
(collectively, the “Indemnified Matters”); provided, however, that Borrower
shall have no liability under this Section 10.4 to any Indemnitee with respect
to any Indemnified Matter, and no Indemnitee shall have any liability with
respect to any Indemnified Matter other than (to the extent otherwise liable),
to the extent such liability has resulted primarily from the gross negligence or
willful misconduct of such Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.  Furthermore, Borrower
waives and agrees not to assert against any Indemnitee any right of contribution
with respect to any Liabilities that may be imposed on, incurred by or asserted
against any Related Person.  Without limiting the foregoing, “Indemnified
Matters” includes all environmental Liabilities as set forth in Article XXXVII
of the Master Lease as incorporated herein pursuant to Section 1.4 hereof,
whether or not, with respect to any such environmental Liabilities, any
Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in
possession, the successor-in- interest to any Related Person or the owner,
lessee or operator of any property of any Related Person through any foreclosure
action, in each case except to the extent such environmental Liabilities (i) are
incurred solely following foreclosure by Lender or following Lender having
become the successor-in-interest to Borrower and (ii) are attributable solely to
acts of such Indemnitee.  Any indemnification or other protection provided to
any Indemnitee pursuant to any Loan Document and all representations and
warranties made in any Loan Document shall (i) survive the payment in full of
other Obligations and (ii) inure to the benefit of any Person that at any time
held a right thereunder (as an Indemnitee or otherwise) and, thereafter, its
successors and permitted assigns.  Notwithstanding the foregoing, in no event
shall Borrower or any Indemnitee be liable on any theory of liability for any
special, indirect, consequential or punitive damages (including any loss of
profits, business or anticipated savings). Borrower and each Indemnitee each
hereby waives, releases and agrees not to sue upon any such claim for any
special, indirect, consequential or punitive damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
 
Section 10.5 Lender-Creditor Relationship
 
.  The relationship between Lender, on the one hand, and Borrower, on the other
hand, is solely that of lender and creditor.  Lender has no any fiduciary
relationship or duty to Borrower arising out of or in connection with, and there
is no agency, tenancy, partnership or joint venture relationship between the
Secured Parties and Borrower by virtue of, any Loan Document or any transaction
contemplated therein.
 
 
 
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Section 10.6 Right of Setoff
 
.  Lender, and each Affiliate (including each branch office thereof) of any of
them is hereby authorized, without notice or demand (each of which is hereby
waived by Borrower), at any time and from time to time during the continuance of
any Event of Default and to the fullest extent permitted by applicable Legal
Requirements, to set off and apply any and all deposits (whether general or
special, time or demand, provisional or final) at any time held and other
indebtedness, claims or other obligations at any time owing by Lender or any of
its Affiliates to or for the credit or the account of Borrower against any
Obligation of Borrower now or hereafter existing, whether or not any demand was
made under any Loan Document with respect to such Obligation and even though
such Obligation may be unmatured.  Lender agrees promptly to notify Borrower
after any such setoff and application made by Lender or its Affiliates;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application.  The rights under this Section 10.6 are
in addition to any other rights and remedies (including other rights of setoff)
that Lender, its Affiliates, and other Secured Parties may have.
 
Section 10.7 Marshaling; Payments Set Aside
 
.  Lender shall not be under any obligation to marshal any property in favor of
Borrower or any other party or against or in payment of any Obligation.  To the
extent that Lender receives a payment from Borrower, from the proceeds of the
Collateral, from the exercise of its rights of setoff, any enforcement action or
otherwise, and such payment is subsequently, in whole or in part, invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not occurred.
 
Section 10.8 Limitation on Interest
 
.  It is the intention of the parties hereto to conform strictly to applicable
usury laws.  Accordingly, all agreements between Borrower and Lender with
respect to the Loan are hereby expressly limited so that in no event, whether by
reason of acceleration of maturity or otherwise, shall the amount paid or agreed
to be paid to Lender or charged by Lender for the use, forbearance or detention
of the money to be lent hereunder or otherwise, exceed the maximum amount
allowed by law.  If the Loan would be usurious under applicable law (including
the laws of the State of New York and the laws of the United States of America),
then, notwithstanding anything to the contrary in the Loan Documents: (a) the
aggregate of all consideration which constitutes interest under applicable law
that is contracted for, taken, reserved, charged or received under the Loan
Documents shall under no circumstances exceed the maximum amount of interest
allowed by applicable law, and any excess shall be credited on the Note by the
holder thereof (or, if the Note has been paid in full, refunded to Borrower);
and (b) if maturity is accelerated by reason of an election by Lender, or in the
event of any prepayment, then any consideration which constitutes interest may
never include more than the maximum amount allowed by applicable law.  In such
case, excess interest, if any, provided for in the Loan Documents or otherwise,
to the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread from the date of advance until payment in full so that the
actual rate of interest is uniform through the term hereof.  If such
amortization, proration, allocation and spreading is not permitted
 
 
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under applicable law, then such excess interest shall be canceled automatically
as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited on the Note (or, if the Note has been paid in full, refunded
to Borrower).  The terms and provisions of this Section 10.8 shall control and
supersede every other provision of the Loan Documents.  The Loan Documents are
contracts made under and shall be construed in accordance with and governed by
the laws of the State of New York, except that if at any time the laws of the
United States of America permit Lender to contract for, take, reserve, charge or
receive a higher rate of interest than is allowed by the laws of the State of
New York (whether such federal laws directly so provide or refer to the law of
any state), then such federal laws shall to such extent govern as to the rate of
interest which Lender may contract for, take, reserve, charge or receive under
the Loan Documents.
 
Section 10.9 Invalid Provisions
 
.  If any provision of any Loan Document is held to be illegal, invalid or
unenforceable, such provision shall be fully severable; the Loan Documents shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof; the remaining provisions thereof shall
remain in full effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom; and in lieu of such
illegal, invalid or unenforceable provision there shall be added automatically
as a part of such Loan Document a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible to be legal, valid and
enforceable.
 
Section 10.10 Reimbursement of Expenses
 
(a) Any action taken by Borrower or any Borrower Controlling Person under or
with respect to any Loan Document, even if required under any Loan Document or
at the request of Lender, shall be at the expense of Borrower or Borrower
Controlling Person, and Lender shall not be required under any Loan Document to
reimburse Borrower or any Borrower Controlling Person therefor except as
expressly provided therein.  In addition, Borrower jointly and severally agree
to pay or reimburse upon demand (a) Lender for all reasonable out-of-pocket
costs and expenses actually incurred by it or any of its Related Persons in
connection with the investigation, development, preparation, negotiation,
syndication, execution, interpretation or administration of, any modification of
any term of or termination of, any Loan Document, any commitment or proposal
letter therefor, any other document prepared in connection therewith or the
consummation and administration of any transaction contemplated therein
(including periodic audits in connection therewith and environmental audits and
assessments), in each case including the reasonable fees, charges and
disbursements of legal counsel to Lender or such Related Persons, fees, costs
and expenses actually incurred in connection with any electronic transmissions
and allocated to the Loans by Lender in its sole discretion and fees, charges
and disbursements of the auditors, appraisers, printers and other of their
Related Persons retained by or on behalf of any of them or any of their Related
Persons, (b) Lender for all reasonable costs and expenses incurred by it or any
of its Related Persons in connection with internal audit reviews, field
examinations, financial investigation, and Collateral examinations, including,
without limitation, any tax service company (which shall be reimbursed, in
addition to the out-of-pocket costs and expenses of such examiners, at the
 
 
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per diem rate per individual charged by Lender for its examiners) and (c) Lender
and its Related Persons for all costs and expenses incurred in connection with
(i) any refinancing or restructuring of the credit arrangements provided
hereunder in the nature of a “work-out”, (ii) the enforcement or preservation of
any right or remedy under any Loan Document, any Obligation, with respect to the
Collateral or any other related right or remedy or (iii) the commencement,
defense, conduct of, intervention in, or the taking of any other action with
respect to, any proceeding (including any bankruptcy or insolvency proceeding)
related to Borrower or any Loan Document, Obligation or related transaction (or
the response to and preparation for any subpoena or request for document
production relating thereto), including fees and disbursements of counsel
(including allocated costs of internal counsel).
 
Section 10.11 Approvals; Third Parties; Conditions
 
.  All approval rights retained or exercised by Lender with respect to Leases,
contracts, plans, studies and other matters are solely to facilitate Lender’s
credit underwriting, and shall not be deemed or construed as a determination
that Lender has passed on the adequacy thereof for any other purpose and may not
be relied upon by Borrower or any other Person.  This Agreement is for the sole
and exclusive use of Lender and Borrower and may not be enforced, nor relied
upon, by any Person other than Lender and Borrower.  All conditions of the
obligations of Lender hereunder, including the obligation to make advances, are
imposed solely and exclusively for the benefit of Lender, its successors and
assigns, and no other Person shall have standing to require satisfaction of such
conditions or be entitled to assume that Lender will refuse to make advances in
the absence of strict compliance with any or all of such conditions, and no
other Person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part
by Lender at any time in Lender’s sole discretion.
 
Section 10.12 Lender Not in Control; No Partnership
 
.  None of the covenants or other provisions contained in this Agreement shall,
or shall be deemed to, give Lender the right or power to exercise control over
the affairs or management of Borrower, the power of Lender being limited to the
rights to exercise the remedies referred to in the Loan Documents.  No covenant
or provision of the Loan Documents is intended, nor shall it be deemed or
construed, to create a partnership, joint venture, agency or common interest in
profits or income between Lender, on the one hand, and Borrower, on the other
hand, or to create an equity interest in the Projects in Lender.  Lender does
not undertake or assume any responsibility or duty to Borrower or to any other
Person with respect to the Projects or the Loan, except as expressly provided in
the Loan Documents; and notwithstanding any other provision of the Loan
Documents: (a) None of Lender are, and shall not be construed as, a partner,
joint venturer, alter ego, manager, controlling person or other business
associate or participant of any kind of Borrower or Borrower’s stockholders,
members, or partners and Lender does not intend to ever assume such status; (b)
Lender shall in no event be liable for any Debts, expenses or losses incurred or
sustained by Borrower; and (c) Lender shall not be deemed responsible for or a
participant in any acts, omissions or decisions of Borrower or Borrower’s
stockholders, members, or partners.  Lender and Borrower disclaim any intention
to create any partnership, joint venture, agency or common interest in profits
or
 
 
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income between Lender, on the one hand, and Borrower, on the other hand, or to
create an equity interest in the Projects in Lender, or any sharing of
liabilities, losses, costs or expenses.
 
Section 10.13 [Intentionally Deleted]
 

 
Section 10.14 [Intentionally Deleted]
 
Section 10.15 Successors and Assigns
 
.  This Agreement shall be binding upon and inure to the benefit of Lender and
Borrower and their respective successors and assigns.
 
Section 10.16 Renewal, Extension or Rearrangement
 
.  All provisions of the Loan Documents shall apply with equal effect to each
and all promissory notes and amendments thereof hereinafter executed which in
whole or in part represent a renewal, extension, increase or rearrangement of
the Loan.
 
Section 10.17 Waivers
 
.  No course of dealing on the part of Lender, its officers, employees,
consultants or agents, nor any failure or delay by Lender with respect to
exercising any right, power or privilege of Lender under any of the Loan
Documents, shall operate as a waiver thereof.
 
Section 10.18 Cumulative Rights; Joint and Several Liability
 
.  Rights and remedies of Lender under the Loan Documents shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy.  If more than one person or
entity has executed this Agreement as a “Borrower,” the obligations of all such
persons or entities hereunder shall be joint and several.
 
Section 10.19 Singular and Plural
 
.  Words used in this Agreement, the other Loan Documents, in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa.  The definitions of words in the singular in this Agreement and the other
Loan Documents shall apply to such words when used in the plural where the
context so permits and vice versa.
 
Section 10.20 Exhibits and Schedules
 
.  The exhibits and schedules attached to this Agreement are incorporated herein
and shall be considered a part of this Agreement for the purposes stated herein.
 
Section 10.21 Titles of Articles, Sections and Subsections
 
.  All titles or headings to articles, sections, subsections or other divisions
of this Agreement and the other Loan Documents or the exhibits hereto and
thereto are only for the convenience of the parties and shall not be construed
to have any effect or meaning with respect to the other content of such
articles, sections, subsections or other divisions, such other content being
controlling as to the agreement between the parties hereto.
 
Section 10.22 Survival
 
.  All of the representations, warranties, covenants, and indemnities hereunder
(including environmental matters under Article XXXVII of
 
 
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the Master Lease as incorporated herein pursuant to Section 1.4 hereof), under
the indemnification provisions of the other Loan Documents, shall survive the
repayment in full of the Loan and the release of the liens evidencing or
securing the Loan, and shall survive the transfer (by sale, foreclosure,
conveyance in lieu of foreclosure or otherwise) of any or all right, title and
interest in and to the Projects to any party, whether or not an Affiliate of
Borrower.
 
Section 10.23 WAIVER OF JURY TRIAL
 
.  TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE
BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY
RELATING TO THE LOAN OR THE PROJECTS (INCLUDING, WITHOUT LIMITATION, ANY ACTION
TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT
THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).  THIS
WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT.
 
Section 10.24 Waiver of Punitive Damages
 
.  Neither Lender nor Borrower shall be responsible or liable to the other or to
any other Person for any punitive or exemplary damages which may be alleged as a
result of the Loan or the transaction contemplated hereby, including any breach
or other default by any party hereto.  Borrower represents and warrants to
Lender that as of the Closing Date Borrower has no claims against Lender in
connection with the Loan.
 
Section 10.25 Governing Law
 
.  The Loan Documents shall be governed by and construed in accordance with the
laws of the State of New York and the applicable laws of the United States of
America.
 
Section 10.26 Entire Agreement
 
.  This Agreement, the other Loan Documents embody the entire agreement and
understanding between Lender and Borrower and supersede all prior agreements and
understandings between such parties relating to the subject matter hereof and
thereof.  Accordingly, the Loan Documents may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties, including,
without limitation, the Loan Commitment.
 
Section 10.27 Counterparts
 
.  This Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which shall constitute one document.
 
Section 10.28 Consents and Approvals
 
.  To the extent that Lender provides any consent or approval as provided for in
this Loan Agreement, such consent shall be limited to the specific matter
approved and shall NOT be construed to (a) relieve
 
 
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Borrower from compliance with all of the other terms and obligations of the Loan
Agreement, or (b) constitute a consent to any further similar action (as to
which a prospective consent or approval shall be required and may not
necessarily be granted), or (c) constitute a consent to any other obligation to
which Lender may be a party.
 
Section 10.29 Effectiveness of Facsimile Documents and Signatures
 
.  The Loan Documents may be transmitted and/or signed by facsimile.  The
effectiveness of any such documents and signatures shall, subject to applicable
law, have the same force and effect as manually signed originals and shall be
binding on all parties to the Loan Documents.  Lender may also require that any
such documents and signatures be confirmed by a manually signed original
thereof; provided, however, that the failure to request or deliver the same
shall not limit the effectiveness of any facsimile document or signature.
 
Section 10.30 Venue
 
.  EACH PARTY HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES
THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  EACH PARTY HERETO
EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAYBE
MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO
MADE SHALL BE DEEMED COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
 

[Signatures Begin on Following Page]
 

 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
attested by their respective officers thereunto duly authorized.
 
 

 
 
BORROWER:
 
EMERITUS CORPORATION,
 
a Washington corporation
 

 

 
By: /s/ Eric Mendelsohn 
 
Name: Eric Mendelsohn 
 
Title: SVP Corporate Development 
 

 
LENDER:

HCP, INC.,
a Maryland corporation

By: /s/ Kendall K. Young 
       Name:  Kendall K. Young
       Title:    Executive Vice President

 
 

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EXHIBIT A
 
Projects
 

 
 

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EXHIBIT B
 
Primary Intended Use and Licensed Units
 

 
 

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SCHEDULE 2.8
 
Partial Release Prices
 
Terrace at Jasper $8,580,000
Chris Ridge $16,610,000
Paradise Valley $4,290,000
Sunshine Village $5,720,000
Emerald Estates Sunwest $5,720,000
Minnetonka $6,930,000
Canterbury Court $7,150,000
Canterbury Gardens$440,000
West Park Place $1,760,000
 

 
 

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