Execution
 

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

 

 
CREDIT AND SECURITY AGREEMENT
 
dated as of July 13, 2012
 
by and among
 
EMERICHIP WALLA WALLA LLC,
 
as Borrower
 
and
 
MIDCAP FUNDING VIII, LLC,
 
as Administrative Agent and as a Lender
 
and
 
THE ADDITIONAL LENDERS
 
FROM TIME TO TIME PARTY HERETO
 

 
MIDCAP LOGO [midcaplogo.jpg]

 

 

 

     

CHICAGO/#2321168.11
 
 

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

 

CREDIT AND SECURITY AGREEMENT
 
THIS CREDIT AND SECURITY AGREEMENT (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the “Agreement”) is dated as
of July 13, 2012 by and between EMERICHIP WALLA WALLA LLC, a Delaware limited
liability company, and any additional borrower that may hereafter be added to
this Agreement (each individually as a “Borrower” and collectively as
“Borrowers”), MIDCAP FUNDING VIII, LLC, a Delaware limited liability company,
individually as a Lender, and as Agent, and the financial institutions or other
entities from time to time parties hereto, each as a Lender.
 
RECITALS
 
Borrowers have requested that Lenders make available to Borrowers the financing
facilities as described herein.  Lenders are willing to extend such credit to
Borrowers under the terms and conditions herein set forth.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrowers, Lenders and Agent agree as follows:
 
ARTICLE 1 – DEFINITIONS
 
Section 1.1 Certain Defined Terms.  The following terms have the following
meanings:
 
“Accounts” means, collectively, (a) any right to payment of a monetary
obligation, whether or not earned by performance, (b) without duplication, any
“account” (as defined in the UCC), any accounts receivable (whether in the form
of payments for services rendered or goods sold, rents, license fees or
otherwise), any “health-care-insurance receivables” (as defined in the UCC), any
“payment intangibles” (as defined in the UCC) and all other rights to payment
and/or reimbursement of every kind and description, whether or not earned by
performance, (c) all accounts, “general intangibles” (as defined in the UCC),
rights, remedies, guarantees, “supporting obligations” (as defined in the UCC),
“letter-of-credit rights” (as defined in the UCC) and security interests in
respect of the foregoing, all rights of enforcement and collection, all books
and records evidencing or related to the foregoing, and all rights under the
Financing Documents in respect of the foregoing, (d) all information and data
compiled or derived by any Borrower or to which any Borrower is entitled in
respect of or related to the foregoing, and (e) all proceeds of any of the
foregoing.
 
“Affiliate” means with respect to any Person (a) any Person that directly or
indirectly controls such Person, (b) any Person which is controlled by or is
under common control with such controlling Person, and (c) each of such Person’s
(other than, with respect to any Lender, any Lender’s) officers or directors (or
Persons functioning in substantially similar roles).  As used in this
definition, the term “control” of a Person means the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of any class
of voting securities of such Person or to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.  Notwithstanding anything to the contrary
in this definition, with respect to Borrower, any Guarantor and any Principal,
the term “Affiliate” shall exclude Daniel R. Baty and Columbia Pacific
Management, Inc., a Washington corporation.
 

     

CHICAGO/#2321168.11
 
 

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

 

“Agent” means MCF, in its capacity as administrative agent for itself and for
Lenders hereunder, as such capacity is established in, and subject to the
provisions of, Article 13, and the successors and assigns of MCF in such
capacity.
 
“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering,
including, without limitation, Executive Order No. 13224 (effective
September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing
the Bank Secrecy Act, and the Laws administered by OFAC.
 
“Applicable Margin” means 5.85%.
 
“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as the same may be amended, modified or supplemented from time to
time, and any successor statutes thereto.
 
“Base LIBOR Rate” means, for each Interest Period, the rate per annum,
determined by Agent in accordance with its customary procedures, and utilizing
such electronic or other quotation sources as it considers appropriate (rounded
upwards, if necessary, to the next 1/100%), to be the rate at which Dollar
deposits (for delivery on the first day of such Interest Period or, if such day
is not a Business Day on the preceding Business Day) in the amount of $1,000,000
are offered to major banks in the London interbank market on or about 11:00 a.m.
(Eastern time) two (2) Business Days prior to the commencement of such Interest
Period, for a term comparable to such Interest Period, which determination shall
be conclusive in the absence of manifest error.
 
“Base Rate” means a per annum rate of interest equal to the rate of interest
announced, from time to time, within Wells Fargo at its principal office in San
Francisco as its “prime rate,” with the understanding that the “prime rate” is
one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto and is evidenced by the recording thereof
after its announcement in such internal publications as Wells Fargo may
designate; provided that Agent may, upon prior written notice to Borrower,
choose a reasonably comparable index or source to use as the basis for the Base
Rate.
 
“Blocked Person” means any Person:  (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b)  owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c)  with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (d)  that commits,
threatens or conspires to commit or supports “terrorism” as defined in Executive
Order No. 13224, or (e)  that is named a “specially designated national” or
“blocked person” on the most current list published by OFAC or other similar
list or is named as a “listed person” or “listed entity” on other lists made
under any Anti-Terrorism Law.
 
“Borrower” and “Borrowers” mean the entity(ies) described in the first paragraph
of this Agreement and each of their successors and permitted assigns.  As of the
Closing Date, there is one Borrower.
 
“Borrower Representative” means (a) at all times during which there is only one
Borrower, the Borrower, and (b) at all times during which there are two or more
Borrowers, any one Borrower which shall be designated as the Borrower
Representative in accordance with the provisions of Section 2.8, or any
successor Borrower Representative selected by Borrowers and approved by Agent.
 
“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
Washington, D.C. and New York City are authorized by law to close.
 

 
 
 

CHICAGO/#2321168.11
 
2

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

 

“Capital Replacement Reserve” has the meaning set forth in Section 2.4(d).
 
“Casualty Proceeds” has the meaning set forth in Section 9.3(b).
 
“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended
from time to time.
 
“Change in Control” means any of the following:  (a) any change in the legal or
beneficial ownership of the capital stock, partnership interests or membership
interests, or in the capital structure, organizational documents or governing
documents, of any Borrower; (b) any pledge, assignment or hypothecation of or
Lien or encumbrance on any of the legal or beneficial equity interests in any
Borrower; (c) any change in the legal or beneficial ownership or control of the
outstanding voting equity interests of any Credit Party necessary at all times
to elect a majority of the board of directors (or similar governing body) of
each such Person and to direct the management policies and decisions of such
Person; (d) the applicable Person shall cease to, directly or indirectly, own
and control one hundred percent (100%) of each class of the outstanding equity
interests of each Subsidiary of such Person; (e) any “Change of Control”,
“Change in Control”, or terms of similar import under any Operative Document;
(f) any sale, transfer, lease (other than a Lease approved by Agent),
conveyance, alienation, pledge, assignment, mortgage, encumbrance, hypothecation
(other than Permitted Liens) or other disposition of (i) all or any portion of
any Project or any material portion of any other Collateral, or (ii) all or any
portion of the Borrower’s right, title and interest (legal or equitable) in and
to the Projects or any portion of any other Collateral; and (g) if Principal
fails to continue to exercise control over (i) the day to day management and
operation of Borrowers’ business or the Projects, and (ii) all material business
decisions (including a sale or refinance) for Borrower during the term of the
Loan.
 
“Closing Date” means the date of this Agreement.
 
“CMS” means the federal Centers for Medicare and Medicaid Services (formerly the
federal Health Care Financing Administration), and any successor Governmental
Authority.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of, Agent, for
the benefit of Agent and Lenders, pursuant to this Agreement and the Security
Documents, including, without limitation, all of the Personal Property described
in Article 10 of this Agreement.
 
“Commitment Annex” means Annex A to this Agreement.
 
“Commitment Expiry Date” means three (3) years from the Closing Date, subject to
extension pursuant to the terms of Section 2.1(c).
 
“Compliance Certificate” means a certificate, duly executed by a Responsible
Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit B hereto.
 
“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person:  (a) with respect to any Debt of another
Person (a “Third Party Obligation”) if the purpose or intent of such Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such Third Party Obligation that such Third Party Obligation will be
paid or discharged, or that any agreement relating thereto will be complied
with, or that any holder of such Third Party Obligation will be protected, in
whole or in part, against loss with respect thereto; (b) with respect to any
undrawn
 

 
 
 

CHICAGO/#2321168.11
 
3

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

 

 portion of any letter of credit issued for the account of such Person or as to
which such Person is otherwise liable for the reimbursement of any drawing;
(c) under any Swap Contract, to the extent not yet due and payable; (d) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement; or (e) for any obligations of another
Person pursuant to any Guarantee or pursuant to any agreement to purchase,
repurchase  or otherwise acquire any obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to preserve the solvency, financial condition or level of income
of another Person.  The amount of any Contingent Obligation shall be equal to
the amount of the obligation so Guaranteed or otherwise supported or, if not a
fixed and determinable amount, the maximum amount so Guaranteed or otherwise
supported.
 
“Controlled Group” means all members of any group of companies and all members
of a group of trades or businesses (whether or not incorporated) under common
control which, together with any Borrower, are treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
 
“Credit Exposure” means, at any time, any portion of the Loan Commitment or any
Obligations remains unpaid or outstanding; provided, however, that no Credit
Exposure shall be deemed to exist solely due to the existence of contingent
indemnification liability, absent the assertion of a claim with respect thereto.
 
“Credit Party” means any Guarantor and Borrower; and “Credit Parties” means all
such Persons, collectively.
 
“Debt” of a Person means at any date, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable arising and paid on a timely basis and in the Ordinary
Course of Business, (d) all capital leases of such Person, (e) all
non-contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts paid under a letter of credit, banker’s acceptance or
similar instrument, (f) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person,
(g) all obligations secured by a Lien on any asset of such Person, whether or
not such obligation is otherwise an obligation of such Person, (h) “earnouts”,
purchase price adjustments, profit sharing arrangements, deferred purchase money
amounts and similar payment obligations or continuing obligations of any nature
of such Person arising out of purchase and sale contracts; (i) all Debt of
others Guaranteed by such Person; (j) off-balance sheet liabilities and/or
pension plan liabilities; (k) obligations arising under non-compete agreements;
and (l) obligations arising under bonus, deferred compensation, incentive
compensation or similar arrangements, other than those arising in the Ordinary
Course of Business.  Without duplication of any of the foregoing, Debt of
Borrowers shall include the Loan.
 
“Debt Service” means all debt service (principal, interest and recurring charges
or fees) due and payable by Borrowers under this Agreement.
 
“Debt Yield Percentage” has the meaning set forth in Section 6.1.
 
“Default” means any condition or event which with the giving of notice or lapse
of time or both would, unless cured or waived, become an Event of Default.
 

 
 
 

CHICAGO/#2321168.11
 
4

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

 

“Deposit Account” means a “deposit account” (as defined in Article 9 of the
UCC), an investment account, or other account in which funds are held or
invested for credit to or for the benefit of any Borrower.
 
“Distribution” means as to any Person (a) any dividend or other distribution
(whether in cash, securities or other property) on any equity interest in such
Person (except those payable solely in its equity interests of the same class),
(b) any payment on account of (i) the purchase, redemption, retirement,
defeasance, surrender, cancellation, termination or acquisition of any equity
interests in such Person or any claim respecting the purchase or sale of any
equity interest in such Person, or (ii) any option, warrant or other right to
acquire any equity interests in such Person, (c) any management fees, salaries,
compensation or other fees or payments to an Affiliate of a Borrower, (d) any
lease or rental payments to an Affiliate of a Borrower, or (e) repayments of
Debt held by any Person holding an equity interest in a Borrower or an Affiliate
of a Borrower, unless permitted under and made pursuant to a Subordination
Agreement applicable to such loans or other indebtedness.
 
“Dollars” or “$” means the lawful currency of the United States of America.
 
 “Environmental Assessments” means the environmental site assessments delivered
to Agent prior to the Closing Date.
 
“Environmental Laws” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
governmental directives or requirements, as well as common law, pertaining to
the environment, natural resources, pollution, health (including any
environmental clean up statutes and all regulations adopted by any local, state,
federal or other Governmental Authority, and any statute, ordinance, code,
order, decree, law rule or regulation all of which pertain to or impose
liability or standards of conduct concerning medical waste or medical products,
equipment or supplies), safety or clean-up that apply to any Borrower or the
Project and relate to Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42
U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §
1251 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 5101 et
seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning
and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Occupational
Safety and Health Act (29 U.S.C. § 651 et seq.), the Residential Lead-Based
Paint Hazard Reduction Act (42 U.S.C. § 4851 et seq.), any analogous state or
local laws, any amendments thereto, and the regulations promulgated pursuant to
said laws, together with all amendments from time to time to any of the
foregoing and judicial interpretations thereof.
 
“Environmental Liens” means all Liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of any Borrower or any
other Person.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as the same
may be amended, modified or supplemented from time to time, and any successor
statute thereto, and any and all rules or regulations promulgated from time to
time thereunder.
 
“ERISA Plan” means any “employee benefit plan”, as such term is defined in
Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower
maintains, sponsors or contributes to, or, in the case of an employee benefit
plan which is subject to Section 412 of the Code or Title IV of ERISA, to which
any Borrower or any member of the Controlled Group may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at
 

 
 
 

CHICAGO/#2321168.11
 
5

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

 

any time during the preceding five (5) years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
 
“Event of Default” has the meaning set forth in Section 11.1.
 
“Excess Cash Flow” means Net Operating Income for the Projects for the
applicable measurement period, less all amounts payable in respect of Debt
Service.
 
 “Fee Letter” means that certain letter agreement between Agent and Borrower
relating to fees payable to Agent, for its own account, in connection with the
execution of this Agreement.
 
“FF&E” means personal property delivered upon, attached to, used or required to
be used in connection with the operation of any Project.
 
“Financing Documents” means this Agreement, any Notes, the Security Documents,
any fee letter among MCF and any of the Borrowers relating to the transactions
contemplated hereby, any subordination or intercreditor agreement pursuant to
which any Debt and/or any Liens securing such Debt is subordinated to all or any
portion of the Obligations and all other documents, instruments and agreements
related to the Obligations and heretofore executed, executed concurrently
herewith or executed at any time and from time to time hereafter, as any or all
of the same may be amended, supplemented, restated or otherwise modified from
time to time.
 
“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.
 
“Garrison Creek Lodge Project” means the assisted living facility located at
1460 Dalles Military Road, Walla Walla, Washington containing 80 licensed units
and commonly known as the Emeritus at Garrison Creek Lodge.
 
“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other Person owned or controlled
(through stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.
 
“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and the term “Guarantee” used as a verb has a corresponding
meaning.
 
“Guarantor” means the Principal and any other Person that has executed or
delivered, or shall in the future executes or delivers, any Guarantee of any
portion of the Obligations.
 
“Hazardous Materials” means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which on the Project is
prohibited by any Environmental Laws; toxic mold, any substance that requires
special handling; and any other material or substance now
 

 
 
 

CHICAGO/#2321168.11
 
6

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

 

or in the future defined as a “hazardous substance,” “hazardous material,”
“hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,”
“pollutant” or other words of similar import within the meaning of any
Environmental Law, including:  (a) any “hazardous substance” defined as such in
(or for purposes of) CERCLA, or any so-called “superfund” or “superlien” Law,
including the judicial interpretation thereof; (b) any “pollutant or
contaminant” as defined in 42 U.S.C.A. § 9601(33); (c) any material now defined
as “hazardous waste” pursuant to 40 C.F.R. Part 260; (d) any petroleum or
petroleum by-products, including crude oil or any fraction thereof; (e) natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for
fuel; (f) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910;
(g) any toxic or harmful substances, wastes, materials, pollutants or
contaminants (including, without limitation, asbestos, polychlorinated biphenyls
(“PCB’s”), flammable explosives, radioactive materials, infectious substances,
materials containing lead-based paint or raw materials which include hazardous
constituents); and (h) any other toxic substance or contaminant that is subject
to any Environmental Laws or other past or present requirement of any
Governmental Authority.
 
“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.
 
“Healthcare Laws” means all applicable Laws relating to the possession, control,
warehousing, marketing, sale and distribution of pharmaceuticals, the operation
of medical or senior housing facilities (such as, but not limited to, nursing
homes, skilled nursing facilities, rehabilitation hospitals, intermediate care
facilities and adult care facilities), patient healthcare, patient healthcare
information, patient abuse, the quality and adequacy of medical care, rate
setting, equipment, personnel, operating policies, fee splitting.
 
“Healthcare Permit” means a Permit (a) issued or required under Healthcare Laws
applicable to the business of any Borrower or any of its Affiliates or necessary
in the possession, ownership, marketing, promoting, sale, furnishing,
distribution or delivery of goods or services under Healthcare Laws, (b) issued
by any Person from which any Borrower or Operator has, as of the Closing Date,
received an accreditation, and/or (c) issued or required under Healthcare Laws
applicable to the ownership, leasing and/or operation of a Project.
 
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as the same may be amended, modified or supplemented from time to time, and any
successor statute thereto, and any and all rules or regulations promulgated from
time to time thereunder.
 
“HIPAA Compliant” means that the applicable Person is in compliance with each of
the applicable requirements of the so-called “Administrative Simplification”
provisions of HIPAA, and is not and could not reasonably be expected to become
the subject of any civil or criminal penalty, process, claim, action or
proceeding, or any administrative or other regulatory review, survey, process or
proceeding (other than routine surveys or reviews conducted by any government
health plan or other accreditation entity) that could result in any of the
foregoing or that could reasonably be expected to adversely affect such Person’s
business, operations, assets, properties or condition (financial or otherwise),
in connection with any actual or potential violation by such Person of the
provisions of HIPAA.
 
“Indemnitees” has the meaning set forth in Section 14.15(c).
 
“Insurance Premiums” has the meaning set forth in Section 2.4(c).
 

 
 
 

CHICAGO/#2321168.11
 
7

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

 

“Interest Period” means any period commencing on the first day of a calendar
month and ending on the last day of such calendar month.
 
 “Inventory” means “inventory” as defined in Article 9 of the UCC.
 
“JCAHO” means the Joint Commission on Accreditation of Healthcare Organizations.
 
“Laws” means any and all federal, state, provincial, territorial, local and
foreign statutes, laws, judicial decisions, regulations, guidances, guidelines,
ordinances, rules, judgments, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, governmental agreements and
governmental restrictions, whether now or hereafter in effect, which are
applicable to any Credit Party in any particular circumstance.  “Laws” includes,
without limitation, Healthcare Laws and Environmental Laws.
 
“Leases” means the singular or collective reference to leases, subleases or
other arrangements for occupancy of space within any Project or any part thereof
now existing or hereafter executed, including, without limitation, all Operating
Leases; provided, however, that the term “Leases” as used herein shall not
include Resident Agreements; and provided, further, that use of the term
“Leases” in any Security Document shall include Resident Agreements even if
Resident Agreements are, under applicable Laws, not governed as creating a
landlord-tenant relationship (the intent being that Agent shall have, as part of
the Security Documents, a lien upon and collateral assignment of all Leases and
Resident Agreements).
 
“Lender” means each of (a) MCF, in its capacity as a lender hereunder, (b) each
other Person party hereto in its capacity as a lender hereunder, (c) each other
Person that becomes a party hereto as Lender pursuant to Section 13.17(a), and
(d) the respective successors of all of the foregoing, and “Lenders” means all
of the foregoing.
 
“LIBOR Rate” means, for each Loan, a per annum rate of interest equal to the
greater of (a) 1.0% and (b) the rate determined by Agent (rounded upwards, if
necessary, to the next 1/100th%) by dividing (i) the Base LIBOR Rate for the
Interest Period, by (ii) the sum of one minus the daily average during such
Interest Period of the aggregate maximum reserve requirement (expressed as a
decimal) then imposed under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities”
(as defined therein).
 
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, in respect of such asset.  For the
purposes of this Agreement and the other Financing Documents, any Borrower or
any Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
 
“Litigation” means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.
 
“Loan” has the meaning set forth in Section 2.1(a).
 
“Loan Account” has the meaning set forth in Section 2.5(b).
 
“Loan Commitment” means the sum of each Lender’s Loan Commitment Amount as set
forth in Annex A to this Agreement.
 
“Loan Commitment Percentage” means, as to any Lender, (a) on the Closing Date,
the percentage set forth opposite such Lender’s name on Annex A to this
Agreement under the column “Loan
 

 
 
 

CHICAGO/#2321168.11
 
8

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

 

Commitment Percentage”, and (b) on any date following the Closing Date, the
percentage equal to the principal amount of the Loan held by such Lender on such
date divided by the aggregate principal amount of the Loan on such date.
 
“Management Agreement” has the meaning set forth in Section 8.2(a).
 
“Manager” has the meaning set forth in Section 8.2(a).
 
“Material Adverse Effect” means with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, (a) a material
adverse change in, or a material adverse effect upon, any of (i) the condition
(financial or otherwise), operations, business, properties or prospects of any
of the Credit Parties, (ii) the rights and/or remedies of Agent or Lenders under
any Financing Document, or the ability of any Credit Party to perform any of its
obligations under any Financing Document to which it is a party, (iii) the
legality, validity or enforceability of any Financing Document, (iv) the
existence, perfection or priority of any security interest granted in any
Financing Document, (v) the value of the Project or any other material
Collateral, (vi) any Operator’s ability to accept, admit and/or retain patients
or residents at the Project, (vii)  the rate at which any Third Party Payor
reimburses a Credit for goods or services provided by such Credit Party at a
Project; and (viii) the use or scope of any Healthcare Permits; or (b) the
imposition of a fine against or the creation of any liability of any Operator to
any Governmental Authority under any Healthcare Law in excess of $50,000.00.
 
“Material Contracts” has the meaning set forth in Section 3.17.
 
“Maximum Lawful Rate” has the meaning set forth in Section 2.6.
 
“Medicaid” means the medical assistance programs administered by state agencies
and approved by CMS pursuant to the terms of Title XIX of the Social Security
Act, codified at 42 U.S.C. 1396 et seq.
 
“Medicare” means the program of health benefits for the aged and disabled
administered by CMS pursuant to the terms of Title XVIII of the Social Security
Act, codified at 42 U.S.C. 1395 et seq.
 
“MCF” means MidCap Funding VIII, LLC, and its successors and assigns.
 
“Modified Debt Service Coverage Ratio” has the meaning set forth in Section 6.1.
 
“Multiemployer Plan” means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA to which any Borrower or any other member of the
Controlled Group (or any Person who in the last five years was a member of the
Controlled Group) is making or accruing an obligation to make contributions or
has within the preceding five plan years (as determined on the applicable date
of determination) made contributions.
 
“Net Tax Benefit” means (a) the total amount of reduction in the income tax
liability of the shareholders or members of Borrowers realized as a result of
any loss generated by Borrowers’ business during any prior tax year, assuming in
such calculation that the full amount of such loss has been used to reduce such
shareholders’ or members’ adjusted gross income in the same tax year that such
loss was generated by Borrowers’ business, plus (b) the amount by which (i) the
aggregate amount of Tax Distributions made, based on good faith estimates, to
such shareholders or members in such tax year is in excess of (ii) the tax
obligations owing by such shareholders or members for income generated by
 

 
 
 

CHICAGO/#2321168.11
 
9

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

 

Borrowers’ business during such year; provided, however, to the extent that any
loss is included in clause (a) above in calculating Net Tax Benefit, then the
amount to be used for such loss in clause (b)(ii) above in calculating the Net
Tax Benefit shall be deemed to be zero dollars ($0).
 
“Non-Excluded Taxes” has the meaning set forth in Section 2.7(a).
 
“Note” and/or “Notes” has the meaning set forth in Section 2.3.
 
“Obligations” means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this Agreement or any other Financing Document, in each case
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due.
 
“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.
 
“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.
 
“Operating Lease” means any lease of any Project to an Operator entity, and all
amendments thereto and extensions thereof, as has been previously approved by
Agent as required hereunder.  As of the Closing Date, there is one Operating
Lease.
 
“Operative Documents” means the Financing Documents, any Operating Leases,
Management Agreements, Subordinated Debt Documents, and any documents effecting
any purchase or sale or other transaction that is closing contemporaneously with
the closing of the financing under this Agreement.
 
“Operator” means the singular or collective (as the context requires) reference
to the following Persons:  (a) any Borrower or any Affiliate that is properly
licensed to operate a Project, or is otherwise providing or furnishing goods or
services, or is otherwise providing or furnishing goods or services (other than
the mere leasing of a Project as a lessor and the collection of rentals in
connection therewith) from a Project, (b) any Person with whom a Borrower or any
Affiliate has contracted for management or other services for a Project, and/or
(c) any Person to whom a Borrower has leased a Project pursuant to an Operating
Lease.
 
“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of business of such Credit Party, as conducted
by such Credit Party in accordance with regular and customary practices.
 
“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement).
 
“Payment Account” means the account specified on the signature pages hereof into
which all payments by or on behalf of each Borrower to Agent under the Financing
Documents shall be made, or such other account as Agent shall from time to time
specify by notice to Borrower Representative.
 

 
 
 

CHICAGO/#2321168.11
 
10

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

 

“Payment Notification” means a written notification substantially in the form of
Exhibit C hereto.
 
“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding
to any or all of its functions under ERISA.
 
“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code
or Title IV of ERISA.
 
“Permits” means all governmental licenses, authorizations, provider numbers,
supplier numbers, registrations, permits, drug or device authorizations and
approvals, certificates, franchises, qualifications, accreditations, consents
and approvals required under all applicable Laws and required in order to carry
on its business as now conducted, including, without limitation, Healthcare
Permits.
 
“Permitted Contest” means, with respect to any tax obligation or other
obligation allegedly or potentially owing from any Borrower or its subsidiaries
to any governmental tax authority or other third party, a contest maintained in
good faith by appropriate proceedings promptly instituted and diligently
conducted and with respect to which such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made on the
books and records and financial statements of the applicable Credit Party(ies);
provided, however, that (a) compliance with the obligation that is the subject
of such contest is effectively stayed during such challenge; (b) Borrowers’ and
its Subsidiaries’ title to, and its right to use, the Collateral is not
adversely affected thereby and Agent’s Lien and priority on the Collateral are
not adversely affected, altered or impaired thereby; (c) Borrowers have given
prior written notice to Agent of a Borrower’s or its subsidiaries’ intent to so
contest the obligation; (d) in the case of real estate taxes or assessments or
mechanic’s, workmen’s, materialmen’s or other like Liens, Borrowers have
obtained an endorsement, in form and substance satisfactory to Agent, to the
loan policy of title insurance issued to Agent insuring over any Lien created by
such obligation, or Borrowers have deposited with Agent a bond or other security
satisfactory to Agent, in its reasonable discretion, against loss or injury by
reason of such contest or the non-payment of such obligation or charge (and if
such security is cash, Agent may, but shall not be obligated to, deposit the
same in an interest-bearing account and interest accrued thereon, if any, shall
be deemed to constitute a part of such security for purposes of this Agreement,
but Agent (i) makes no representation or warranty as to the rate or amount of
interest, if any, which may accrue thereon and shall have no liability in
connection therewith and (ii) shall not be deemed to be a trustee or fiduciary
with respect to its receipt of any such security and any such security may be
commingled with other monies of Agent); (e) the Collateral or any part thereof
or any interest therein shall not be in any danger of being sold, forfeited or
lost by reason of such contest by Borrowers or its Subsidiaries; (f) Borrowers
have given Agent notice of the commencement of such contest and upon request by
Agent, from time to time, notice of the status of such contest by Borrowers
and/or confirmation of the continuing satisfaction of this definition; and
(g) upon a final determination of such contest, Borrowers and its Subsidiaries
shall promptly comply with the requirements thereof.
 
“Permitted Contingent Obligations” means (a) Contingent Obligations arising in
respect of the Debt under the Financing Documents; (b) Contingent Obligations
resulting from endorsements for collection or deposit in the Ordinary Course of
Business; (c) Contingent Obligations outstanding on the date of this Agreement
and set forth on Schedule 5.1 (but not including any refinancings, extensions,
increases or amendments to the indebtedness underlying such Contingent
Obligations other than extensions of the maturity thereof without any other
change in terms); (d) Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety and appeal bonds, performance bonds and other
similar obligations not to exceed $25,000 in the aggregate at any time
outstanding; (f) Contingent Obligations arising under indemnity agreements with
title insurers to cause such title insurers to issue to Agent mortgagee title
insurance policies; (g) Contingent Obligations arising with
 

 
 
 

CHICAGO/#2321168.11
 
11

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

 

respect to customary indemnification obligations in favor of purchasers in
connection with dispositions of personal property assets permitted under
Section 5.6; and (h)  other Contingent Obligations not permitted by clauses (a)
through (g) above, not to exceed $25,000 in the aggregate at any time
outstanding.
 
“Permitted Indebtedness” means (a) Borrower’s Debt to Agent and each Lender
under this Agreement and the other Financing Documents; (b) Debt incurred as a
result of endorsing negotiable instruments received in the Ordinary Course of
Business; (c) Debt existing on the date of this Agreement and described on
Schedule 5.1 (but not including any refinancings, extensions, increases or
amendments to such Debt other than extensions of the maturity thereof without
any other change in terms); (d) [Reserved]; (e) Debt constituting financed
insurance premiums (if maintaining insurance is not the obligation of an
Operator not a party to this Agreement); and (f) Subordinated Debt.
 
“Permitted Liens” means:  (a) to the extent Borrower has employees, deposits or
pledges of cash to secure obligations under workmen’s compensation, social
security or similar laws, or under unemployment insurance (but excluding Liens
arising under ERISA) pertaining to a Borrower’s employees, if any; (b) deposits
or pledges of cash to statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the Ordinary Course of Business;
(c) mechanic’s, workmen’s, materialmen’s or other like Liens arising in the
Ordinary Course of Business with respect to obligations which are not due, or
which are being contested pursuant to a Permitted Contest; (d) Liens on
Collateral for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or the subject of a Permitted Contest;
(e) attachments, appeal bonds, judgments and other similar Liens on Collateral
for sums not exceeding $25,000 in the aggregate arising in connection with court
proceedings; provided, however, that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are the subject of a
Permitted Contest; (f) those matters that are set forth as exceptions to or
subordinate matters in the title insurance policy accepted by Agent insuring the
lien of the Security Documents; and (g) Liens and encumbrances in favor of Agent
under the Financing Documents.
 
“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.
 
“Principal” means Emeritus Corporation, a Washington corporation.
 
“Project” means any facility (a) from which a Borrower or any Affiliate provides
or furnishes goods or services, including, without limitation, any skilled
nursing facility, assisted living facility, independent living facility or
similar facility, and (b) owned by a Borrower or any Affiliate from which any
Person furnishes goods or services, and includes, without limitation, any
business location of a Borrower which is subject to any Healthcare
Permit.  “Project” also means the singular reference to each respective portion
of the Collateral consisting of the land, improvements and all other real and
personal property encumbered by the lien of each respective mortgage, deed of
trust, deed to secure debt or similar Security Document constituting a part of
the Financing Documents.  As of the Closing Date, the Projects consist of only
the Garrison Creek Lodge Project.
 
“Property Taxes” has the meaning set forth in Section 2.4(b).
 
“Pro Rata Share” means (a) with respect to a Lender’s right to receive payments
of principal and interest with respect to the Loan, the Loan Commitment
Percentage of such Lender, and (b) for all other purposes (including, without
limitation, the indemnification obligations arising under Article 13) with
 

 
 
 

CHICAGO/#2321168.11
 
12

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

 

respect to any Lender, the percentage obtained by dividing (i) such Lender’s
then outstanding principal amount of the Loan, by (ii) the then outstanding
principal amount of the Loan of all Lenders.
 
“Release” has the meaning set forth in 42 U.S.C. §9601 (22).
 
“Required Lenders” means, subject to the provisions of Section 13.13(c), at any
time Lenders holding sixty-six and two thirds percent (66 2/3%) or more of the
outstanding principal balance of the Loan.
 
“Resident Agreements” means the singular or collective reference to all patient
and resident care agreements, admission agreements and service agreements which
include an occupancy agreement and all amendments, modifications or supplements
thereto.
 
“Responsible Officer” means any authorized officer designated by the Member of
the Borrower.
 
“Securities Account” means a “securities account” (as defined in Article 8 and
Article 9 of the UCC), an investment account, or other account in which
investment property or securities are held or invested for credit to or for the
benefit of any Borrower.
 
“Security Document” means this Agreement and any other agreement, document or
instrument executed concurrently herewith or at any time hereafter pursuant to
which one or more Credit Parties or any other Person either (a) Guarantees
payment or performance of all or any portion of the Obligations, and/or
(b) provides, as security for all or any portion of the Obligations, a Lien on
any of its assets in favor of Agent for its own benefit and the benefit of the
Lenders, as any or all of the same may be amended, supplemented, restated or
otherwise modified from time to time.
 
“Solvent” means, with respect to any Person, that such Person (a) owns and will
own assets the fair saleable value of which are (i) greater than the total
amount of its liabilities (including Contingent Obligations), and (ii) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it;
(b) has capital that is not unreasonably small in relation to its business as
presently conducted or after giving effect to any contemplated transaction; and
(c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.  For purposes of this
definition, the amount of Contingent Obligations (such as litigation, guaranties
and pension plan liabilities) at any time shall be computed as the amount that,
in light of all the facts and circumstances existing at the time, represents the
amount that can be reasonably be expected to become an actual or matured
liability.
 
“Subordinated Debt” means any Debt of Borrowers incurred pursuant to the terms
of the Subordinated Debt Documents and with the prior written consent of Agent,
all of which documents must be in form and substance acceptable to Agent in its
sole discretion.  As of the Closing Date, there is no Subordinated Debt.
 
“Subordinated Debt Documents” means any documents evidencing and/or securing
Debt governed by a Subordination Agreement, all of which documents must be in
form and substance acceptable to Agent in its sole discretion.  As of the
Closing Date, there are no Subordinated Debt Documents.
 
 “Subordination Agreement” means any agreement between Agent and another
creditor of Borrowers, as the same may be amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms thereof,
pursuant to which the Debt owing from any Borrower(s) and/or the
 

 
 
 

CHICAGO/#2321168.11
 
13

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

 

Liens securing such Debt granted by any Borrower(s) to such creditor are
subordinated in any way to the Obligations and the Liens created under the
Security Documents, the terms and provisions of such Subordination Agreements to
have been agreed to by and be acceptable to Agent in the exercise of its sole
discretion.
 
“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, capital stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than fifty percent (50%) of such
capital stock whether by proxy, agreement, operation of law or otherwise, and
(b) any partnership or limited liability company in which such Person and/or one
or more Subsidiaries of such Person shall have an interest (whether in the form
of voting or participation in profits or capital contribution) of more than
fifty percent (50%) or of which any such Person is a general partner or may
exercise the powers of a general partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
a Borrower.
 
“Swap Contract” means any “swap agreement”, as defined in Section 101 of the
Bankruptcy Code, which is obtained by Borrower for the Loan to provide
protection against fluctuations in the applicable Base Rate or Libor Base Rate,
but only to the extent Agent provides its prior written consent to the entry
into such “swap agreement”.
 
“Taking” means a condemnation or taking pursuant to the lawful exercise of the
power of eminent domain.
 
“Tax Distributions” means, for any taxable year for which Borrowers are treated
under the Code as a Subchapter S corporation, partnership for income tax
purposes or otherwise disregarded under the Code for income tax purposes,
dividends and/or distributions paid by any Borrowers to its shareholders or
members in an amount not to exceed the product of (a) taxable income related to
such shareholders’ or members’ ownership interest in such Borrower multiplied by
(b) the sum of the highest marginal federal and state income tax rates in any
State in which any shareholder or member is organized which were applicable in
such taxable year.
 
“Taxes” has the meaning set forth in Section 4.4(b).
 
“Termination Date” means the earlier to occur of (a) the Commitment Expiry Date,
(b) any date on which Borrower elects to prepay the Obligations as may be
permitted hereunder and to terminate the Loan, or (c) any date on which Agent
accelerates the maturity of the Loan pursuant to Section 11.2.
 
“Third Party Payor” means Medicare, Medicaid, TRICARE, and other state or
federal health care program, Blue Cross and/or Blue Shield, private insurers,
managed care plans and any other Person or entity which presently or in the
future maintains Third Party Payor Programs.
 
“Third Party Payor Programs” means all payment and reimbursement programs,
sponsored by a Third Party Payor, in which an Operator participates.
 
“TRICARE” means the program administered pursuant to 10 U.S.C. Section 1071 et
seq., Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and
the regulations promulgated
 

 
 
 

CHICAGO/#2321168.11
 
14

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

 

pursuant to such statutes.
 
“UCC” means the Uniform Commercial Code of the State of Maryland or of any other
state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.
 
“United States” means the United States of America.
 
Section 1.2 Accounting Terms and Determinations.  Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder (including, without limitation, determinations made
pursuant to the exhibits hereto) shall be made, and all financial statements
required to be delivered hereunder shall be prepared on a consolidated basis in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of each Borrower and its consolidated
subsidiaries delivered to Agent and each of the Lenders on or prior to the
Closing Date.
 
Section 1.3 Other Definitional and Interpretive Provisions.  References in this
Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or “Schedules” shall
be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement
unless otherwise specifically provided.  Any term defined herein may be used in
the singular or plural.  References to capitalized terms that are not defined
herein, but are defined in the UCC, shall have the meanings given them in the
UCC.  All references herein to times of day shall be references to daylight or
standard time, as applicable.
 
Section 1.4 Funding and Settlement Currency.  Unless otherwise specified herein,
the settlement of all payments and fundings hereunder between or among the
parties hereto shall be made in lawful money of the United States and in
immediately available funds.
 
ARTICLE 2 – LOANS
 
Section 2.1 Loan and Advances; Payments; Extension Options.
 
(a) Term Loan.  On the terms and subject to the conditions set forth herein, the
Lenders hereby agree to make to Borrowers a term loan in an original principal
amount equal to Six Million Eight Hundred Thousand and No/100 Dollars
($6,800,000.00) (the “Loan”).  Each Lender’s obligation to fund the Loan shall
be limited to such Lender’s Loan Commitment Percentage, and no Lender shall have
any obligation to fund any portion of any Loan required to be funded by any
other Lender, but not so funded.  No Borrower shall have any right to reborrow
any portion of the Loan that is repaid or prepaid from time to time.  The Loan
shall be funded in one advance on the Closing Date.
 
(b) Scheduled Repayments; Mandatory Prepayments; Optional Prepayments.
 
(i) There shall become due and payable, and Borrowers shall repay the Loan
through, scheduled monthly payments equal to $50,000.00 each beginning on August
1, 2012 and continuing on the first day of each calendar month
thereafter.  Notwithstanding the payment schedule set forth above, the
outstanding principal amount of the Loan shall become immediately due and
payable in full on the Termination Date.
 
(ii) There shall become due and payable and Borrowers shall prepay the Loan in
the following amounts and at the following times:
 

 
 
 

CHICAGO/#2321168.11
 
15

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

 

(iii) 
 
(A) on the date on which any Borrower (or Agent as loss payee or assignee)
receives any casualty proceeds in excess of $25,000 for personal property, or
the amount set forth in Section 9.3 for real property, in respect of assets upon
which Agent maintained a Lien, an amount equal to one hundred percent (100%) of
such proceeds (net of out-of-pocket expenses and, in the case of personal
property, repayment of any permitted purchase money debt  encumbering the
personal property that suffered such casualty), or such lesser portion of such
proceeds as Agent shall elect to apply to the Obligations;
 
(B) an amount equal to any interest that is deemed to be in excess of the
Maximum Lawful Rate (as defined below) and is required to be applied to the
reduction of the principal balance of the Loan by any Lender as provided for in
Section 2.6;
 
(C) upon receipt by any Borrower of the proceeds of any asset disposition of
personal property not made in the Ordinary Course of Business, an amount equal
to one hundred percent (100%) of the net cash proceeds of such asset disposition
(net of out-of-pocket expenses and repayment of any permitted purchase money
debt encumbering such asset), or such lesser portion as Agent shall elect to
apply to the Obligations; and
 
(D) upon receipt by any Borrower of any revenues not in the Ordinary Course of
Business, an amount equal to one hundred percent (100%) of such revenues, or
such lesser portion as Agent shall elect to apply to the Obligations.
 
(iv) With at least thirty (30) days prior delivery to Agent of an appropriately
completed Payment Notification, Borrowers may prepay the Loan in whole but not
in part (other than mandatory partial prepayments required under this
Agreement); provided, however, that any such partial prepayment shall be
accompanied by any prepayment fees required hereunder and under the Fee Letter.
 
(v) Except as this Agreement may specifically provide otherwise, all prepayments
of the Loan shall be applied by Agent to the Obligations in inverse order of
maturity.  The monthly payments required under Section 2.1(b)(i) above shall
continue in the same amount (for so long as the Loan shall remain outstanding)
notwithstanding any partial prepayment, whether mandatory or optional, of the
Loan.
 
(c) Extension Option.  Borrowers may extend the Commitment Expiry Date one time
for a period of twelve (12) months (the “Extension Option”) upon Borrowers’
satisfaction of the following conditions:
 
(i) Borrowers shall have delivered to Agent written notice of such election (an
“Extension Notice”) no earlier than ninety (90) days and no later than
forty-five (45) days prior to the applicable Commitment Expiry Date, together
with the Extension Fee set forth in the Fee Letter;
 
(ii) no Default or Event of Default shall have occurred and be continuing;
 

 
 
 

CHICAGO/#2321168.11
 
16

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

 

 
(iii) Agent shall have received Borrowers’ and Guarantors’ current financial
statements, certified as correct by each Borrower and Guarantor, and no Material
Adverse Effect shall have occurred;
 
(iv) the Debt Yield Percentage is not less than 8.5%; and
 
(v) the Modified Debt Service Coverage Ratio (calculated on a six (6) month
trailing basis and calculated prospectively for the six (6) months of the
Extension Option term, based on projections reasonably acceptable to Agent) is
not less than 1.10 to 1.00.
 
Section 2.2 Interest; Interest Calculations and Certain Fees.
 
(a)           From and following the Closing Date, except as expressly set forth
in this Agreement, the Loan and the other Obligations shall bear interest at the
sum of the LIBOR Rate plus the Applicable Margin.  Interest on the Loan shall be
paid in arrears on the first (1st) day of each month and on the maturity of the
Loan, whether by acceleration or otherwise.  Interest on all other Obligations
shall be payable upon demand.
 
(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable Law occurring subsequent to the
commencement of the then applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), which additional or increased costs
would increase the cost of funding loans bearing interest based upon the LIBOR
Rate; provided, however, that notwithstanding anything in this Agreement to the
contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in applicable Law”, regardless of the date
enacted, adopted or issued.  In any such event, the affected Lender shall give
Borrowers and Agent written notice of such a determination and adjustment as to
that portion of the Loan held by the affected Lender and Agent promptly shall
transmit the notice to each other Lender, which notice shall include a  detailed
statement setting forth the basis for adjusting such LIBOR Rate with respect to
the affected Lender and the method for determining the amount of such adjustment
as to that portion of the Loan held by the affected Lender.
 
(ii) In the event that any change in any law, regulation, treaty, or directive,
or any change therein or in the interpretation of application thereof, shall at
any time after the date hereof, in the reasonable opinion of any Lender, make it
unlawful or impractical for such Lender to maintain Loan bearing interest based
upon the LIBOR Rate or to continue such maintaining, or to determine or charge
interest rates at the LIBOR Rate, (x) such Lender shall give written notice of
such changed circumstances to Agent and Borrowers and Agent promptly shall
transmit the notice to each other Lender, (y) in the case of the Pro Rata Share
of the Loan held by such Lender and then outstanding, the date specified in such
Lender’s notice shall be deemed to be the last day of the Interest Period of
such portion of the Loan, and interest upon such portion thereafter shall
 

 
 
 

CHICAGO/#2321168.11
 
17

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

 

accrue interest at the Base Rate plus the Applicable Margin, and (z) such
portion of the Loan shall continue to accrue interest at the Base Rate plus the
Applicable Margin until such Lender determines that it would no longer be
unlawful or impractical to maintain such Loan at the LIBOR Rate.
 
(iii) Anything to the contrary contained herein notwithstanding, neither Agent
nor any Lender is required actually to acquire eurodollar deposits to fund or
otherwise match fund any Obligation as to which interest accrues based on the
LIBOR Rate.
 
(b) Fee Letter.  Prior to or contemporaneous with Borrowers’ execution of this
Agreement, Borrowers shall pay to Agent, for its own account and not for the
benefit of any other Lenders, the fees provided for in the Fee Letter.
 
(c) Audit Fees.  Borrowers shall pay to Agent, for its own account and not for
the benefit of any other Lenders, all reasonable fees and expenses in connection
with audits of Borrowers’ books and records, audits, examinations, monitoring
activity, regulatory desktop reviews, valuations or appraisals of the
Collateral, audits of Borrowers’ compliance with applicable Laws and such other
matters as Agent shall deem appropriate (including, without limitation,
healthcare regulatory surveys), which shall be due and payable on the first
Business Day of the month following the date of issuance by Agent of a written
request for payment thereof to Borrowers; provided, however, that so long as no
Event of Default or Default has occurred and is continuing, Borrowers shall be
liable for such fees and expenses for no more than one (1) such audits in any
given calendar year.
 
(d) Wire Fees.  Borrowers shall pay to Agent, for its own account and not for
the account of any other Lenders, on written demand, any and all fees, costs or
expenses which Agent pays to a bank or other similar institution (including,
without limitation, any fees paid by Agent to any other Lender) arising out of
or in connection with (i) the forwarding to Borrowers or any other Person on
behalf of Borrowers, by Agent, of proceeds of the Loan made by any Lender to
Borrowers pursuant to this Agreement, and (ii) the depositing for collection, by
Agent, of any check or item of payment received or delivered to Agent on account
of Obligations.
 
(e) Late Charges.  If payments of principal (other than a final installment of
principal upon the Termination Date), interest due on the Obligations, or any
other amounts due hereunder or under the other Financing Documents are not
timely made and remain overdue for a period of five (5) days, Borrowers, without
notice or demand by Agent, promptly shall pay to Agent, for its own account and
not for the benefit of any other Lenders, as additional compensation to Agent in
administering the Obligations, an amount equal to five percent (5.0%) of each
delinquent payment.
 
(f) Computation of Interest and Related Fees.  All interest and fees under each
Financing Document shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.  The date of funding of the Loan shall be
included in the calculation of interest.  The date of payment of the Loan shall
be excluded from the calculation of interest.
 
Section 2.3 Notes.  The portion of the Loan made by each Lender shall be
evidenced, if so requested by such Lender, by one or more promissory notes
executed by Borrowers on a joint and several basis (each, a “Note”) in an
original principal amount (or, if more than one Note is issued to a Lender, in
an aggregate original principal amount) equal to such Lender’s Pro Rata Share of
the Loan Commitment.
 

 
 
 

CHICAGO/#2321168.11
 
18

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

 

 
Section 2.4 Reserves and Escrows.
 
(a) General Reserve and Escrow Requirements.  Borrowers agree to establish and
maintain all of the reserves and escrows required in this Section 2.4.  All sums
so reserved or escrowed may be commingled with the general funds of Agent and no
such sums shall be deemed to be held in trust for the benefit of Borrowers.  No
interest shall be payable on any funds reserved or escrowed hereunder.  All sums
so reserved or escrowed shall be part of the Collateral and shall stand as
additional security for all of the Obligations.  If Agent at any time reasonably
determines that the amount on deposit in any reserve or escrow pursuant to
subsections (b) or (c) of this Section 2.4 is insufficient for its intended
purposes, Borrowers shall, within ten (10) Business Days following notice from
Agent, which notice shall describe the reserve or escrow shortage, deposit such
additional sums as may be required by Agent.  In the event of any Default by
Borrowers under the terms of this Agreement or any other Financing Document,
Agent may, at its discretion, apply amounts on hand in the reserves or escrows
to cure such Default.  Upon demand of Agent, Borrowers shall replenish the
applicable reserve or escrow to restore any sums so applied by Agent.  Upon the
occurrence of an Event of Default and/or the maturity of any portion of the
Obligations, the moneys then remaining on deposit with Agent shall, at Agent’s
option, be applied against the Obligations in such order and manner as Agent may
elect or as may otherwise be required under this Agreement.
 
(b) Property Taxes.  Borrowers shall pay when due all Property Taxes (as defined
below).  During the term of Loan, Borrowers shall deliver to Agent written
evidence that all such Property Taxes have been paid by no later than the date
that such Property Taxes are due, which evidence shall be acceptable to Agent in
its sole but reasonable discretion.  In the event that Borrowers fail to timely
provide Agent with acceptable evidence that the Property Taxes have been paid,
upon notice by Agent, at the time of and in addition to the monthly installments
of principal and/or interest due under the Notes, Borrowers shall pay to Agent a
sum equal to one-twelfth (1/12) of the amount estimated by Agent to be
sufficient (when aggregated with an initial deposit to be designated by Agent
and paid by Borrowers to Agent on the Closing Date or otherwise upon demand of
Agent) to pay at least thirty (30) days before they become due and payable, all
taxes, assessments and other similar charges levied against any portion of the
Collateral constituting real property (collectively, the “Property Taxes”).  In
the event such real property or any portion thereof is part of a larger tract
for purposes of taxation and assessments, Agent may require the Borrowers (if
permitted by the taxing authority) to have the real property taxed and assessed
as a separate parcel or separate parcels, or, in the alternative, to make the
deposits required under this section based upon the taxation and assessment of
the larger tract.  So long as no Event of Default exists hereunder, Agent shall
apply funds deposited in the escrow to pay the Property Taxes.  The obligation
of Borrowers to pay the Property Taxes is not affected or modified by the
provisions of this paragraph.
 
(c) Insurance Premiums.  Borrowers shall pay when due all insurance premiums and
other similar charges in connection with the insurance required to be carried by
Borrowers pursuant to this Agreement or the other Financing Documents
(collectively, the “Insurance Premiums”).  During the term of Loan, Borrowers
shall deliver to Agent written evidence that all such Insurance Premiums have
been paid by no later than the date that such Insurance Premiums are due, which
evidence shall be acceptable to Agent in its sole but reasonable discretion.  In
the event that Borrowers fail to timely provide Agent with acceptable evidence
that the Insurance Premiums have been paid, upon notice by Agent, at the time of
and in addition to the monthly installments of principal and/or interest due
under the Notes, Borrowers shall pay to Agent a sum equal to one-twelfth (1/12)
of the amount estimated by Agent to be sufficient (when aggregated with an
initial deposit to be designated by Agent and paid by Borrower to Agent on the
Closing Date or otherwise upon demand of Agent) to pay at least ten (10) days
before
 

 
 
 

CHICAGO/#2321168.11
 
19

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

 

they become due and payable all insurance premiums and other similar charges in
connection with the insurance required to be carried by Borrowers pursuant to
this Agreement or the other Financing Documents (collectively, the “Insurance
Premiums”).  So long as no Event of Default exists hereunder, Agent shall apply
the sums to pay the Insurance Premiums.  The obligation of Borrowers to pay the
Insurance Premiums is not affected or modified by the provisions of this
section.  Notwithstanding the foregoing, if the insurance premiums are paid via
a premium financing arrangement to which Agent has given its written consent,
which consent shall not be unreasonably withheld, then (i) the amount to be
escrowed with Agent at any given time in respect of such Insurance Premiums
shall be three months of payments under the premium finance arrangement,
(ii) Borrowers shall tender to Agent each month (on such schedule as Agent shall
reasonably request) evidence that Borrowers (or the owner of the policy if the
Borrowers share in a blanket policy) has paid the applicable premium finance
amount due for the preceding month, and (iii) Agent shall have no obligation to
remit such escrowed sums in payment of the premium finance amounts.
 
(d) Capital Replacement Reserve.  Borrowers shall make or reserve capital
expenditures and improvements to the Projects in an amount equal to $450 per
unit per year at each Project.  Borrower shall deliver to Agent evidence of such
capital expenditures or reserves for each Project by no later than January 31st
of each year throughout the term of the Loan, which evidence shall be acceptable
to Agent in its sole but reasonable discretion.  In the event that Borrowers
have not expended or reserved such amount, any shortfall shall be deposited with
the Agent to be held by Agent in a capital replacement reserve (“Capital
Replacement Reserve”).  Agent shall reimburse Borrowers from the Capital
Replacement Reserve to the extent that Borrowers have deposited any funds in
such reserve for the actual cost of such approved capital improvements upon
Borrowers’ providing Agent with paid receipts, lien waivers and other
documentation deemed reasonably necessary by Agent with minimum draws of
$5,000.00 which shall occur no more frequently than once per month.
 
Section 2.5 General Provisions Regarding Payment; Loan Account.
 
(a) All payments to be made by each Borrower under any Financing Document,
including payments of principal and interest made hereunder and pursuant to any
other Financing Document, and all fees, expenses, indemnities and
reimbursements, shall be made without set-off, recoupment or counterclaim, in
lawful money of the United States and in immediately available funds.  If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension (it being understood and agreed that,
solely for purposes of calculating financial covenants and computations
contained herein and determining compliance therewith, if payment is made, in
full, on any such extended due date, such payment shall be deemed to have been
paid on the original due date without giving effect to any extension
thereto).  Any payments received in the Payment Account before 12:00 Noon
(Eastern time) on any date shall be deemed received by Agent on such date, and
any payments received in the Payment Account after 12:00 Noon (Eastern time) on
any date shall be deemed received by Agent on the next succeeding Business Day.
 
(b) Agent shall maintain a loan account (the “Loan Account”) on its books to
record Loan and other extensions of credit made by the Lenders hereunder or
under any other Financing Document, and all payments thereon made by each
Borrower.  All entries in the Loan Account shall be made in accordance with
Agent’s customary accounting practices as in effect from time to time.  The
balance in the Loan Account, as recorded in Agent’s books and records at any
time shall be conclusive and binding evidence of the amounts due and owing to
Agent by each Borrower absent manifest error; provided, however, that any
failure to so record or any error in so recording shall not limit or otherwise
affect any Borrower’s duty to pay all amounts owing hereunder or under any other
Financing Document.
 

 
 
 

CHICAGO/#2321168.11
 
20

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

 

Agent shall endeavor to provide Borrowers with a monthly statement regarding the
Loan Account (but neither Agent nor any Lender shall have any liability if Agent
shall fail to provide any such statement).  Unless any Borrower notifies Agent
of any objection to any such statement (specifically describing the basis for
such objection) within ninety (90) days after the date of receipt thereof, it
shall be deemed final, binding and conclusive upon Borrowers in all respects as
to all matters reflected therein.
 
Section 2.6 Maximum Interest.  In no event shall the interest charged with
respect to the Loan or any other Obligations of any Borrower under any Financing
Document exceed the maximum amount permitted under the laws of the State of
Maryland or of any other applicable jurisdiction.  Notwithstanding anything to
the contrary herein or elsewhere, if at any time the rate of interest payable
hereunder or under any Note or other Financing Document (the “Stated Rate”)
would exceed the highest rate of interest permitted under any applicable law to
be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful
Rate would be so exceeded, the rate of interest payable shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Lawful Rate, each Borrower shall, to the
extent permitted by law, continue to pay interest at the Maximum Lawful Rate
until such time as the total interest received is equal to the total interest
which would have been received had the Stated Rate been (but for the operation
of this provision) the interest rate payable.  Thereafter, the interest rate
payable shall be the Stated Rate unless and until the Stated Rate again would
exceed the Maximum Lawful Rate, in which event this provision shall again
apply.  In no event shall the total interest received by any Lender exceed the
amount which it could lawfully have received had the interest been calculated
for the full term hereof at the Maximum Lawful Rate.  If, notwithstanding the
prior sentence, any Lender has received interest hereunder in excess of the
Maximum Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Loan or to other amounts (other than interest) payable
hereunder, and if no such principal or other amounts are then outstanding, such
excess or part thereof remaining shall be paid to Borrowers within thirty (30)
days after such determination.  In computing interest payable with reference to
the Maximum Lawful Rate applicable to any Lender, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made.
 
Section 2.7 Non-Excluded Taxes; Capital Adequacy.
 
(a) All payments of principal and interest on the Loan and all other amounts
payable hereunder shall be made free and clear of and without deduction for any
present or future income, excise, stamp, documentary, payroll, employment,
property or franchise taxes and other taxes, fees, duties, levies, assessments,
withholdings or other charges of any nature whatsoever (including interest and
penalties thereon) imposed by any taxing authority, excluding taxes imposed on
or measured by Agent’s or any Lender’s net income by the jurisdictions under
which Agent or such Lender is organized or conducts business (other than solely
as the result of entering into any of the Financing Documents or taking any
action thereunder) (all non-excluded items being called “Non-Excluded
Taxes”).  If any withholding or deduction from any payment to be made by any
Borrower hereunder is required in respect of any Non-Excluded Taxes pursuant to
any applicable Law, then Borrowers will: (i) pay directly to the relevant
authority the full amount required to be so withheld or deducted; (ii) promptly
forward to Agent an official receipt or other documentation satisfactory to
Agent evidencing such payment to such authority; and (iii) pay to Agent for the
account of Agent and Lenders such additional amount or amounts as is necessary
to ensure that the net amount actually received by Agent and each Lender will
equal the full amount Agent and such Lender would have received had no such
withholding or deduction been required.  If any Non-Excluded Taxes are directly
asserted against Agent or any Lender with respect to any payment received by
Agent or such Lender hereunder, Agent or such Lender may pay such Non-Excluded
Taxes and Borrowers will promptly pay such additional amounts (including any
penalty, interest or expense, which are not due to the gross negligence or
willful misconduct of Agent or Lenders as determined by a final non-appealable
judgment of a court of competent jurisdiction) as is
 

 
 
 

CHICAGO/#2321168.11
 
21

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

 

necessary in order that the net amount received by such Person after the payment
of such Non-Excluded Taxes (including any Non-Excluded Taxes on such additional
amount) shall equal the amount such Person would have received had such
Non-Excluded Taxes not been asserted.
 
(b) If any Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to Agent, for the account of
Agent and the respective Lenders, the required receipts or other required
documentary evidence, Borrowers shall indemnify Agent and Lenders for any
incremental Non-Excluded Taxes, interest or penalties that may become payable by
Agent or any Lender as a result of any such failure, except for taxes, interest
or penalties resulting from the gross negligence or willful misconduct of Agent
or such Lender as determined by a final non-appealable judgment of a court of
competent jurisdiction.
 
(c) Each Lender that (i) is organized under the laws of a jurisdiction other
than the United States, and (ii)(A) is a party hereto on the Closing Date or
(B) purports to become an assignee of an interest as a Lender under this
Agreement after the Closing Date (unless such Lender was already a Lender
hereunder immediately prior to such assignment) (each such Lender a “Foreign
Lender”) shall execute and deliver to each of Borrowers and Agent one or more
(as Borrowers or Agent may reasonably request) United States Internal Revenue
Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other applicable forms,
certificates or documents prescribed by the United States Internal Revenue
Service or reasonably requested by Agent certifying as to such Lender’s
entitlement to a complete exemption from withholding or deduction of
Non-Excluded Taxes.  Borrowers shall not be required to pay additional amounts
to any Lender pursuant to this Section 2.7 with respect to United States
withholding and income Taxes to the extent that the obligation to pay such
additional amounts would not have arisen but for the failure of such Lender to
comply with this paragraph other than as a result of a change in law.
 
(d) If any Lender (with respect to that portion of the Loan held by such Lender)
shall determine in its commercially reasonable judgment that the adoption or
taking effect of, or any change in, any applicable Law regarding capital
adequacy, in each instance, after the Closing Date, or any change after the
Closing Date in the interpretation, administration or application thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency adopted or
otherwise taking effect after the Closing Date, has or would have the effect of
reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder to a level below
that which such Lender or such controlling Person could have achieved but for
such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, upon written demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrowers shall promptly pay to such Lender such additional amount as
will compensate such Lender or such controlling Person for such reduction as to
that portion of the Loan held by the affected Lender; provided, however, that
notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank
Wall Street Reform and Consumer Protection Act and all requests, rules,
guidelines or directives thereunder or issued in connection therewith and (ii)
all requests, rules, guidelines or directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case be deemed to
be a “change in applicable Law”, regardless of the date enacted, adopted or
issued.
 

 
 
 

CHICAGO/#2321168.11
 
22

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

 

 
(e) If any Lender requires compensation under Section 2.7(d), or requires any
Borrower to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.7(a), then, upon
the written request of Borrower Representative, such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder (subject to the
terms of this Agreement) to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or materially reduce amounts payable pursuant to any such subsection,
as the case may be, in the future, and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender (as determined in its sole discretion).  Borrowers hereby agree to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
 
Section 2.8 Appointment of Borrower Representative.  Each Borrower hereby
designates Borrower Representative as its representative and agent on its behalf
for the purposes of giving and receiving all other notices and consents
hereunder or under any of the other Financing Documents and taking all other
actions (including in respect of compliance with covenants) on behalf of any
Borrower or Borrowers under the Financing Documents.  Borrower Representative
hereby accepts such appointment.  No Borrower other than Borrower Representative
shall be entitled to take any of the foregoing actions.  Each Borrower agrees
that each notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as if the same had been
made directly by such Borrower.
 
Section 2.9 Joint and Several Liability. Borrowers are defined collectively to
include all Persons named as one of the Borrowers herein; provided, however,
that any references herein to “any Borrower”, “each Borrower” or similar
references, shall be construed as a reference to each individual Person named as
one of the Borrowers herein.  Each Person so named shall be jointly and
severally liable for all of the obligations of Borrowers under this
Agreement.  Each Borrower, individually, expressly understands, agrees and
acknowledges, that the credit facilities would not be made available on the
terms herein in the absence of the collective credit of all of the Persons named
as the Borrowers herein, the joint and several liability of all such Persons,
and the cross-collateralization of the collateral of all such
Persons.  Accordingly, each Borrower, individually acknowledges that the benefit
to each of the Persons named as one of the Borrowers as a whole constitutes
reasonably equivalent value, regardless of the amount of the credit facilities
actually borrowed by, advanced to, or the amount of collateral provided by, any
individual Borrower.  In addition, each entity named as one of the Borrowers
herein hereby acknowledges and agrees that all of the representations,
warranties, covenants, obligations, conditions, agreements and other terms
contained in this Agreement shall be applicable to and shall be binding upon and
measured and enforceable individually against each Person named as one of the
Borrowers herein as well as all such Persons when taken together.  By way of
illustration, but without limiting the generality of the foregoing, the terms of
Section 11.1 of this Agreement are to be applied to each individual Person named
as one of the Borrowers herein (as well as to all such Persons taken as a
whole), such that the occurrence of any of the events described in Section 11.1
of this Agreement as to any Person named as one of the Borrowers herein shall
constitute an Event of Default even if such event has not occurred as to any
other Persons named as the Borrowers or as to all such Persons taken as a whole.
 
Section 2.10 Termination; Restriction on Termination.
 

 
 
 

CHICAGO/#2321168.11
 
23

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

 

 
(a) Termination by Lenders.  In addition to the rights set forth in Section
10.2, Agent may, and at the direction of Required Lenders shall, terminate this
Agreement without notice upon or after the occurrence and during the continuance
of an Event of Default.
 
(b) Termination by Borrowers.  Upon at least thirty (30) days' prior written
notice to Agent and Lenders, Borrower may, at its option, terminate this
Agreement; provided, however, that no such termination shall be effective until
Borrower has paid all amounts due to Agent and Lenders under the Financing
Documents.  Borrower may elect to terminate this Agreement in its entirety
only.  No section of this Agreement or type of Loan available hereunder may be
terminated singly.
 
(c) Effectiveness of Termination.  All of the Obligations shall be immediately
due and payable upon the Termination Date.  All undertakings, agreements,
covenants, warranties and representations of Borrowers contained in the
Financing Documents shall survive any such termination and Agent shall retain
its Liens in the Collateral and Agent and each Lender shall retain all of its
rights and remedies under the Financing Documents notwithstanding such
termination until all have been discharged or paid, in full, in immediately
available funds.
 
ARTICLE 3 – REPRESENTATIONS AND WARRANTIES
 
To induce Agent and Lenders to enter into this Agreement and to make the Loan
and other credit accommodations contemplated hereby, each Borrower hereby
represents and warrants to Agent and each Lender that:
 
Section 3.1 Existence and Power.  Each Credit Party is an entity as specified on
Schedule 3.1, is duly organized, validly existing and in good standing under the
laws of the jurisdiction specified on Schedule 3.1 and no other jurisdiction,
has the same legal name as it appears in such Credit Party’s Organizational
Documents and an organizational identification number (if any), in each case as
specified on Schedule 3.1, and has all powers and all Permits necessary or
desirable in the operation of its business as presently conducted or as proposed
to be conducted, except where the failure to have such Permits could not
reasonably be expected to have a Material Adverse Effect.  Each Credit Party is
qualified to do business as a foreign entity in each jurisdiction in which it is
required to be so qualified, which jurisdictions as of the Closing Date are
specified on Schedule 3.1, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect.  Except as set forth
on Schedule 3.1, no Credit Party (a) has had, over the five (5) year period
preceding the Closing Date, any name other than its current name, or (b) was
incorporated or organized under the laws of any jurisdiction other than its
current jurisdiction of incorporation or organization.
 
Section 3.2 Organization and Governmental Authorization; No Contravention.  The
execution, delivery and performance by each Credit Party of the Operative
Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action by or in respect of, or filing with, any Governmental
Authority and do not violate, conflict with or cause a breach or a default under
(a) any Law applicable to any Credit Party or any of the Organizational
Documents of any Credit Party, or (b) any agreement or instrument binding upon
it, except for such violations, conflicts, breaches or defaults as could not,
with respect to this clause (b), reasonably be expected to have a Material
Adverse Effect.
 
Section 3.3 Binding Effect.  Each of the Operative Documents to which any Credit
Party is a party constitutes a valid and binding agreement or instrument of such
Credit Party, enforceable against such Credit Party in accordance with its
respective terms, except as the enforceability thereof may be
 

 
 
 

CHICAGO/#2321168.11
 
24

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

 

limited by bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors’ rights generally and by general equitable principles.
 
Section 3.4 Capitalization.  The authorized equity securities of each of the
Borrowers as of the Closing Date is as set forth on Schedule 3.4.  All issued
and outstanding equity securities of each of the Borrowers are duly authorized
and validly issued, fully paid, nonassessable, free and clear of all Liens other
than those in favor of Agent for the benefit of Agent and the Lenders, and such
equity securities were issued in compliance with all applicable Laws.  The
identity of the holders of the equity securities of each of the Borrowers and
the percentage of their fully-diluted ownership of the equity securities of each
of the Borrowers as of the Closing Date is set forth on Schedule 3.4.  No shares
of the capital stock or other equity securities of any Borrower, other than
those described above, are issued and outstanding as of the Closing
Date.  Except as set forth on Schedule 3.4, as of the Closing Date there are no
preemptive or other outstanding rights, options, warrants, conversion rights or
similar agreements or understandings for the purchase or acquisition from any
Borrower of any equity securities of any such entity.
 
Section 3.5 Financial and Project Information.  All information delivered to
Agent and pertaining to the financial condition of any Credit Party fairly
presents the financial position of such Credit Party as of such date in
conformity with GAAP (and as to unaudited financial statements, subject to
normal year-end adjustments and the absence of footnote disclosures).  All
information delivered to Agent and pertaining to the financial, physical or
other condition or aspect of the Project is true, accurate and correct in all
material respects as of such date and as of the date hereof.  Since the date of
the most recent such information delivered to Agent, there has been no material
adverse change in the business, operations, properties, prospects or condition
(financial or otherwise) of any Credit Party or any Project.
 
Section 3.6 Litigation.  Except as set forth on Schedule 3.6 as of the Closing
Date, and except as hereafter disclosed to Agent in writing, there is no
Litigation pending against, or to such Borrower’s knowledge threatened against
or affecting, any Credit Party or Project or, to such Borrower’s knowledge, any
party to any Operative Document other than a Credit Party.  There is no
Litigation pending in which an adverse decision could reasonably be expected to
have a Material Adverse Effect or which in any manner draws into question the
validity of any of the Operative Documents.
 
Section 3.7 Ownership of Property.  Each Credit Party is the lawful owner of,
has good and marketable title to and is in lawful possession of, or has valid
leasehold interests in, all properties and other assets (real or personal,
tangible, intangible or mixed) purported or reported to be owned or leased (as
the case may be) by such Person.
 
Section 3.8 No Default.  No Event of Default, or to such Borrower’s knowledge,
Default, has occurred and is continuing.  No Borrower nor any Guarantor is in
breach or default under or with respect to any contract, agreement, lease or
other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.
 
Section 3.9 Labor Matters.  As of the Closing Date, there are no strikes or
other labor disputes pending or, to any Borrower’s knowledge, threatened against
any Borrower.  To Borrower’s knowledge after due inquiry, the hours worked and
payments made to the employees of the Borrowers, Operator and/or Managers have
not been in violation of the Fair Labor Standards Act or any other applicable
Law dealing with such matters.  To Borrower’s knowledge after due inquiry, all
payments due from the Borrowers, Operator and/or Managers or for which any claim
may be made against any of them, on account of wages and employee and retiree
health and welfare insurance and other benefits have been paid or accrued as a
liability on their books, as the case may be.  The consummation of the
transactions contemplated by the Financing Documents and the other Operative
Documents will not give rise to a right
 

 
 
 

CHICAGO/#2321168.11
 
25

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

 

of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which it is a party or by which it is bound.
 
Section 3.10 Regulated Entities.  No Credit Party is an “investment company” or
a company “controlled” by an “investment company” or a “subsidiary” of an
“investment company,” all within the meaning of the Investment Company Act of
1940.
 
Section 3.11 Margin Regulations.  None of the proceeds from the Loan have been
or will be used, directly or indirectly, for the purpose of purchasing or
carrying any “margin stock” (as defined in Regulation U of the Federal Reserve
Board), for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any “margin stock” or for any other
purpose which might cause any of the Loan to be considered a “purpose credit”
within the meaning of Regulation T, U or X of the Federal Reserve Board.
 
Section 3.12 Compliance with Laws; Anti-Terrorism Laws.
 
(a) Each Credit Party is in compliance with the requirements of all applicable
Laws, except for such Laws the noncompliance with which could not reasonably be
expected to have a Material Adverse Effect.
 
(b) None of the Credit Parties and, to the knowledge of the Credit Parties, none
of their Affiliates (i) is in violation of any Anti-Terrorism Law, (ii) engages
in or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled
by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked
Person, (v) is associated with, or will become associated with, a Blocked Person
or (vi) is providing, or will provide, material, financial or technical support
or other services to or in support of acts of terrorism of a Blocked Person.  No
Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates or
agents acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement, (A) conducts any business or engages in making
or receiving any contribution of funds, goods or services to or for the benefit
of any Blocked Person, or (B) deals in, or otherwise engages in any transaction
relating to, any property or interest in property blocked pursuant to Executive
Order No. 13224, any similar executive order or other Anti-Terrorism Law.
 
Section 3.13 Taxes.  All federal, state and local tax returns, reports and
statements required to be filed by or on behalf of each Credit Party have been
filed with the appropriate Governmental Authorities in all jurisdictions in
which such returns, reports and statements are required to be filed and, except
to the extent subject to a Permitted Contest, all Taxes (including Property
Taxes) and other charges shown to be due and payable in respect thereof have
been timely paid prior to the date on which any fine, penalty, interest, late
charge or loss may be added thereto for nonpayment thereof.  Except to the
extent subject to a Permitted Contest, all state and local sales and use taxes
required to be paid by each Credit Party have been paid.  All federal and state
returns have been filed by each Credit Party for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and, except to the extent subject to a Permitted Contest,
the amounts shown thereon to be due and payable have been paid in full or
adequate provisions therefor have been made.
 
Section 3.14 Compliance with ERISA.
 
(a) Each ERISA Plan (and the related trusts and funding agreements) complies in
form and in operation with, has been administered in compliance with, and the
terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the
Code in all material respects.  Each ERISA Plan
 

 
 
 

CHICAGO/#2321168.11
 
26

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

 

which is intended to be qualified under Section 401(a) of the Code is so
qualified, and the United States Internal Revenue Service has issued a favorable
determination letter with respect to each such ERISA Plan which may be relied on
currently.  No Credit Party has incurred liability for any material excise tax
under any of Sections 4971 through 5000 of the Code.
 
(b) Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, each Borrower and each Subsidiary
is in compliance with the applicable provisions of ERISA and the provision of
the Code relating to ERISA Plans and the regulations and published
interpretations therein. During the thirty-six (36) month period prior to the
Closing Date or the making of any Loan, (i) no steps have been taken to
terminate any Pension Plan, and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA.  No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by any Credit Party of any material liability, fine or penalty.  No Credit Party
has incurred liability to the PBGC (other than for current premiums) with
respect to any employee Pension Plan.  All contributions (if any) have been made
on a timely basis to any Multiemployer Plan that are required to be made by any
Credit Party or any other member of the Controlled Group under the terms of the
plan or of any collective bargaining agreement or by applicable Law; no Credit
Party nor any member of the Controlled Group has withdrawn or partially
withdrawn from any Multiemployer Plan, incurred any withdrawal liability with
respect to any such plan or received notice of any claim or demand for
withdrawal liability or partial withdrawal liability from any such plan, and no
condition has occurred which, if continued, could result in a withdrawal or
partial withdrawal from any such plan, and no Credit Party nor any member of the
Controlled Group has received any notice that any Multiemployer Plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits  or the imposition of any excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent.
 
Section 3.15 Consummation of Operative Documents; Brokers.  Except as set forth
on Schedule 3.15, and except for fees payable to Agent and/or Lenders, no Credit
Party has engaged any broker, finder or other intermediary to bring about the
obtaining, making or closing of the transactions contemplated by the Operative
Documents, and no Credit Party has or will have any obligation to any Person in
respect of any finder’s or brokerage fees, commissions or other expenses in
connection herewith or therewith.  All brokerage and finder’s fees, commissions
and other expenses payable in connection with the transactions contemplated by
the Operative Documents have been paid in full by Borrowers contemporaneously
with the execution of the Financing Documents and the initial funding of the
Loan.  Except for fees payable to Agent and/or Lenders, and except as set forth
in Schedule 3.15, no broker, finder or other intermediary has brought about the
obtaining, making or closing of the transactions contemplated by the Operative
Documents, and no Credit Party has or will have any obligation to any Person in
respect of any finder’s or brokerage fee in connection herewith or therewith.
 
Section 3.16 Related Transactions.  All transactions contemplated by the
Operative Documents to be consummated on or prior to the date hereof have been
so consummated (including, without limitation, the disbursement and transfer of
all funds in connection therewith) in all material respects pursuant to the
provisions of the applicable Operative Documents, true and complete copies of
which have been delivered to Agent, and in compliance with all applicable Law,
except for such Laws the noncompliance with which would not reasonably be
expected to have a Material Adverse Effect.
 
Section 3.17 Material Contracts.  Except for the Operative Documents and the
other agreements set forth on Schedule 3.17 (collectively with the Operative
Documents, the “Material Contracts”), as of the Closing Date there are no
(a) employment agreements covering the management of any Borrower,
(b) collective bargaining agreements or other similar labor agreements covering
any
 

 
 
 

CHICAGO/#2321168.11
 
27

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

 

employees of any Borrower, (c) agreements for managerial, consulting or similar
services to which any Borrower is a party or by which it is bound,
(d) agreements regarding any Borrower, its assets or operations or any
investment therein to which any of its equityholders is a party or by which it
is bound, (e) real estate leases, intellectual property licenses or other lease
or license agreements to which any Borrower is a party, either as lessor or
lessee, or as licensor or licensee (other than licenses arising from the
purchasing of “off the shelf” products), or (f) customer, distribution,
marketing or supply agreements to which any Borrower is a party, in each case
with respect to the preceding clauses (a), (c), (d), (e), and (f) requiring
payment of more than $50,000 in any year for each Project, (g) partnership
agreements to which any Borrower is a general partner or joint venture
agreements to which any Borrower is a party, (h) third party billing
arrangements to which any Borrower is a party, or (i) any other agreements or
instruments to which any Credit Party is a party, and the breach, nonperformance
or cancellation of which, or the failure of which to renew, could reasonably be
expected to have a Material Adverse Effect.  The consummation of the
transactions contemplated by the Financing Documents and the other Operative
Documents will not give rise to a right of termination in favor of any party to
any Material Contract (other than any Credit Party), except for such Material
Contracts the noncompliance with which would not reasonably be expected to have
a Material Adverse Effect.  All Material Contracts may be terminated by Borrower
upon ninety (90) days or sooner.
 
Section 3.18 Compliance with Environmental Requirements; No Hazardous
Materials.  Except in each case as set forth on Schedule 3.18 or as disclosed on
any Environmental Assessments:
 
(a) no Hazardous Materials are located on any of the Projects except those that
are both (i) in compliance with Environmental Laws and with permits issued
pursuant thereto (if such permits are required), if any, and (ii) either (A) in
amounts not in excess of that necessary to operate the applicable Project for
the purposes set forth herein or in amounts used in the Ordinary Course of
Business, or (B) fully disclosed to and approved by Agent nor have any Hazardous
Materials been or are threatened to be Released into the environment, or
deposited, discharged, placed or disposed of at, on, under or near any of the
Projects in a manner that would require the taking of any action under any
Environmental Law and have given rise to, or could reasonably be expected to
give rise to, remediation costs and expenses on the part of the Credit Parties
in excess of $50,000; and no portion of any Project is being used, or has been
used at any previous time, for the disposal, storage, treatment, processing or
other handling of Hazardous Materials in violation of any Environmental Law nor
is any such property affected by any Hazardous Materials Contamination;
 
(b) no Credit Party knows of, nor has received, any written or oral notice from
any Person relating to Hazardous Materials in, on, under or from any Project and
no notice, notification, demand, request for information, citation, summons,
complaint or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending, or to each Credit
Party’s knowledge, threatened by any Governmental Authority or other Person with
respect to any (i) alleged violation by any Credit Party of any Environmental
Law, (ii) alleged failure by any Credit Party to have any Permits required in
connection with the conduct of its business or to comply with the terms and
conditions thereof, (iii) any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Materials, or (iv) Release of
Hazardous Materials;
 
(c) to the knowledge of each Borrower, all oral or written notifications of a
Release of Hazardous Materials required to be filed by or on behalf of any
Credit Party under any applicable Environmental Law have been filed or are in
the process of being timely filed by or on behalf of the applicable Credit
Party;
 
(d) no property now owned or leased by any Credit Party and, to the knowledge of
each Borrower, no such property previously owned or leased by any Credit Party,
to which any Credit
 

 
 
 

CHICAGO/#2321168.11
 
28

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

 

Party has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Materials, is listed or, to such Borrower’s
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list
or is the subject of Federal, state or local enforcement actions or, to the
knowledge of such Borrower, other investigations which may lead to claims
against any Credit Party for clean-up costs, remedial work, damage to natural
resources or personal injury claims, including, without limitation, claims under
CERCLA;
 
(e) there are no underground storage tanks located on any property owned or
leased by any Credit Party that are not properly registered or permitted under
applicable Environmental Laws or that are leaking or disposing of Hazardous
Materials;
 
(f) there are no Liens under or pursuant to any applicable Environmental Laws on
any real property or other assets owned or leased by any Credit Party, and no
actions by any Governmental Authority have been taken or, to the knowledge of
such Borrower, are in process which could subject any of such properties or
assets to such Liens; and
 
(g) each Borrower has truthfully and fully provided to Agent, in writing, any
and all information relating to environmental conditions in, on, under or from
the Projects, known to each Borrower or contained in each Borrower’s files and
records, including but not limited to any reports relating to Hazardous
Materials in, on, under or migrating to or from the Projects and/or to the
environmental condition of the Projects.
 
Section 3.19 Solvency.  After giving effect to the Loan advance and the
liabilities and obligations of each Borrower under the Operative Documents, each
Borrower and each additional Credit Party is Solvent.
 
Section 3.20 Full Disclosure.  None of the written information (financial or
otherwise) furnished by or on behalf of any Credit Party to Agent or any Lender
in connection with the consummation of the transactions contemplated by the
Operative Documents, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which such statements
were made.  All financial projections delivered to Agent and the Lenders by
Borrowers (or their agents) have been prepared on the basis of the assumptions
stated therein.  Such projections represent each Borrower’s commercially
reasonable estimate of such Borrower’s future financial performance and such
assumptions are reasonably believed by such Borrower to be fair and reasonable
in light of current business conditions; provided, however, that Borrowers can
give no assurance that such projections will be attained.
 
Section 3.21 Interest Rate.  The rate of interest paid under the Notes and the
method and manner of the calculation thereof do not violate any usury or other
law or applicable Laws, any of the Organizational Documents or any of the
Operative Documents.
 
Section 3.22 Subsidiaries.  Borrowers do not own any stock, partnership
interests, limited liability company interests or other equity securities.
 

 
 
 

CHICAGO/#2321168.11
 
29

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

 

 
ARTICLE 4  – AFFIRMATIVE COVENANTS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
Section 4.1 Financial Statements and Other Reports.
 
(a) Each Borrower will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements on an accrual basis consistent with industry standards
and substantially in accordance with GAAP, and to provide the information
required to be delivered to Agent and the Lenders hereunder.
 
(b) Each Borrower will furnish to Agent (or cause to be furnished to Agent) the
following financial information and reports with respect to each Borrower and
each Operator, in each case in form and format and providing information
satisfactory to Agent in its reasonable discretion:
 
(i) within thirty (30) days of the end of each calendar month, internally
prepared monthly financial statements (including income statements, balance
sheets and an occupancy detail report) prepared for each Borrower and Project on
a consolidated basis which fairly present the financial condition for such
Borrower or Project for such period, together with a fully completed Compliance
Certificate evidencing compliance with the applicable financial covenants, as
applicable;
 
(ii) within thirty (30) days of the end of each calendar month, a current rent
roll;
 
(iii) within forty-five (45) days after the end of each calendar year, annual
projected profit and loss statements (prepared on a monthly basis) for the such
calendar year;
 
(iv) within ninety (90) days after the end of each fiscal year, internally
prepared annual financial statements prepared for Borrowers on a consolidated
basis in accordance with GAAP (except for the absence of footnotes and year-end
adjustments) and based on an accrual basis of accounting consistent with
industry standards;
 
(v) within one hundred twenty (120) days after the end of each fiscal year,
annual consolidated audited financial statements prepared for the Principal in
accordance with GAAP, together with an unqualified letter from an independent
certified public accounting firm;
 
(vi) as requested by Agent, (A) evidence satisfactory to Agent that all federal
and state taxes, including, without limitation payroll taxes, that are due have
been paid in full, (B) copies of all cost reports and rate letters filed with
Medicare or Medicaid or any other Third Party Payor, and (C) a written
statement, duly acknowledged by Borrower or Operator, setting forth any right of
set-off, counterclaim or other defense that may exist under any Leases; and
 
(vii) such additional information, reports or statements regarding the
Borrowers, the Projects, Guarantor or Operator as Agent may from time to time
reasonably request.
 

 
 
 

CHICAGO/#2321168.11
 
30

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

 

 
(c) From time to time, if Agent determines that obtaining appraisals is
necessary in order for a Lender to comply with applicable Laws, each Borrower
shall furnish to Agent appraisal reports in form and substance and from
appraisers reasonably satisfactory to Agent stating the then current fair market
values of all or any portion of the real estate owned by each Borrower.
 
(d) Promptly upon  (but in any event within thirty (30) days after) receipt or
filing thereof, each Borrower shall deliver to Agent copies of any reports or
notices related to any material taxes and any other material reports or notices
received by any Borrower or Guarantor from, or filed by any Borrower or
Guarantor with, any Governmental Authority.
 
Section 4.2 Payment and Performance of Obligations.  Each Borrower (a) will pay
and discharge, at or prior to maturity, all of their respective obligations and
liabilities, including tax liabilities, except for such obligations and/or
liabilities (i) that may be the subject of a Permitted Contest, and (ii) the
nonpayment or nondischarge of which could not reasonably be expected to have a
Material Adverse Effect or result in a Lien against any Collateral, except for
Permitted Liens, (b) will maintain, in accordance with GAAP, appropriate
reserves for the accrual of all of their respective obligations and liabilities,
(c) will not breach, or permit to exist any default under, the terms of any
lease, commitment, contract, instrument or obligation (other than Leases) to
which it is a party, or by which its properties or assets are bound, except for
such breaches or defaults which could not reasonably be expected to have a
Material Adverse Effect, and (d) will not breach or permit to exist any default
under, the terms of any Operating Lease or other material Lease to which it is a
lessor.
 
Section 4.3 Maintenance of Existence; Single Purpose Entity Requirements.  Each
Borrower will preserve, renew and keep in full force and effect their respective
existence and their respective rights, privileges and franchises necessary or
desirable in the normal conduct of business.  Each Borrower will preserve, renew
and keep in full force and effect their respective existence and their
respective rights, privileges and franchises necessary or desirable to, at all
times, comply with all Single Purpose Entity requirements set forth on
Exhibit A.  Each Borrower shall, as of the Closing Date and throughout the term
of the Loan, include in their respective Organizational Documents each of the
Single Purpose Entity requirements set forth on Exhibit A.
 
Section 4.4 Maintenance of Property; Payment of Taxes; Insurance.
 
(a) Each Borrower will keep all Collateral useful and necessary in its business
in good working order and condition, ordinary wear and tear excepted.  Subject
to the provisions of Section 9.3, if all or any part of the Collateral useful or
necessary in its business becomes damaged or destroyed, each Borrower will
promptly and completely repair and/or restore the affected Collateral in a good
and workmanlike manner.  Borrowers will not, and will not permit any other
Person to, commit or allow waste or permit impairment or deterioration of the
Collateral or abandon all or any part of the Collateral.  Borrowers will perform
such acts to preserve the value of Collateral.  Each Borrower will (i) preserve
its or their interest in and title to the Collateral and will forever warrant
and defend the same to Agent and Lenders against any and all claims made by,
through or under Borrowers, and (ii) except in respect of Permitted Liens,
forever warrant and defend the validity and priority of the lien and security
interest created in the Security Documents against the claims of all Persons
whomsoever claiming by, through or under Borrowers.  The foregoing warranty of
title shall survive the foreclosure of the Security Documents and shall inure to
the benefit of and be enforceable by Agent in the event Agent acquires title to
any Collateral pursuant to any foreclosure; provided, however, that the warranty
of title shall not extend to any period of time from and after the date that
Agent took physical possession and control of the Collateral.
 

 
 
 

CHICAGO/#2321168.11
 
31

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

 

 
(b) Each Borrower will pay or cause to be paid all taxes, fees, duties, levies,
assessments, withholdings or other similar charges of any nature whatsoever,
including Property Taxes (collectively, “Taxes”), at least five (5) days (thirty
(30) days in the case of Taxes assessed on real property constituting any
portion of the Collateral) prior to the date upon which any fine, penalty,
interest or cost for nonpayment is imposed, and furnish to Agent, upon request,
receipted bills of the appropriate taxing authority or other documentation
reasonably satisfactory to Agent evidencing the payment thereof.  If any
Borrower shall fail to pay any Taxes in accordance with this Section and is not
contesting or causing a contesting of such Taxes pursuant to a Permitted
Contest, or if there are insufficient funds in the applicable reserves or
escrows under Article 2 to pay any such Taxes, Agent shall have the right, but
shall not be obligated, to (for the account of all Lenders) pay such Taxes, and
Borrowers shall repay to Agent, on written demand, any amount paid by Agent,
with interest thereon from the date of the advance thereof to the date of
repayment, at the rate applicable during periods of Default hereunder, and such
amount shall constitute a portion of the Obligations.  No Borrower shall pay any
Taxes or other obligations in installments unless permitted by applicable Laws,
and shall, upon the written request of Agent, deliver copies of all notices and
bills relating to any Taxes or other charge covered by this Section to Agent..
 
(c) Upon completion of any Permitted Contest, Borrowers shall immediately pay
the amount due, if any, and deliver to Agent proof of the completion of the
contest and payment of the amount due, if any, following which Agent shall
return the security, if any, deposited with Agent pursuant to the definition of
Permitted Contest.
 
(d) Each Borrower will maintain (i) casualty insurance on all real and personal
property on an all risks basis (including the perils of flood, windstorm and
quake), covering the repair and replacement cost of all such property and
coverage for business interruption and rent loss and professional liability and
public liability insurance (including products/completed operations liability
coverage), and (ii) general and professional liability insurance, and (iii) such
other insurance coverage in such amounts and with respect to such risks as Agent
may request from time to time; provided, however, that, in no event shall such
insurance be in amounts or with coverage less than, or with carriers with
qualifications inferior to, any of the insurance or carriers in existence as of
the Closing Date (or required to be in existence after the Closing Date under a
Financing Document), as indicated on the insurance certificates attached hereto
as Schedule 4.4.  All such insurance shall be provided by insurers having an
A.M. Best policyholders rating reasonably acceptable to Agent.  Borrowers will
not knowingly bring or keep any article on the Project, or cause or allow any
condition to exist, if the presence of such article or the occurrence of such
condition could reasonably cause the invalidation of any insurance required by
this Section 4.4(d), or would otherwise be prohibited by the terms thereof.
 
(e) On or prior to the Closing Date, and at all times thereafter, each Borrower
will cause Agent to be named as an additional insured, assignee and loss payee
(which shall include, as applicable, identification as mortgagee), as
applicable, on each insurance policy required to be maintained pursuant to this
Section 4.4 pursuant to endorsements in form and content acceptable to
Agent.  Borrowers will deliver to Agent and the Lenders (i) on the Closing Date,
a certificate from Borrowers’ insurance broker dated such date showing the
amount of coverage as of such date, and that such policies will include
effective waivers (whether under the terms of any such policy or otherwise) by
the insurer of all claims for insurance premiums against all loss payees and
additional insureds and all rights of subrogation against all loss payees and
additional insureds, and that if all or any part of such policy is canceled,
terminated or expires, the insurer will forthwith give notice thereof to each
additional insured, assignee and loss payee and that no cancellation, reduction
in amount or material change in coverage thereof shall be effective until at
least thirty (30) days (ten (10) days if such cancellation is due to nonpayment)
after receipt by each additional insured, assignee and loss payee of written
notice thereof,
 

 
 
 

CHICAGO/#2321168.11
 
32

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

 

(ii) upon the request of any Lender through Agent from time to time full
information as to the insurance carried, (iii) within five (5) days of receipt
of notice from any insurer, a copy of any notice of cancellation, nonrenewal or
material change in coverage from that existing on the date of this Agreement,
(iv) forthwith, notice of any cancellation or nonrenewal of coverage by any
Borrower, and (v) not less than thirty (30) days prior to the expiration of any
policies of insurance, furnish to Agent, renewal insurance policies with
companies, coverage and in amounts required hereunder, except as otherwise
agreed to in writing between Borrower and Agent.
 
(f) In the event any Borrower fails to provide Agent with evidence of the
insurance coverage required by this Agreement, Agent may purchase insurance at
Borrowers’ expense to protect Agent’s interests in the Collateral.  This
insurance may, but need not, protect any Borrower’s interests.  The coverage
purchased by Agent may not pay any claim made by any Borrower or any claim that
is made against any Borrower in connection with the Collateral.  The applicable
Borrower may later cancel any insurance purchased by Agent, but only after
providing Agent with evidence that such Borrower has obtained insurance as
required by this Agreement.  If Agent purchases insurance for the Collateral, to
the fullest extent provided by law Borrowers will be responsible for the costs
of that insurance, including interest and other charges imposed by Agent in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance.  The costs of the insurance may be
added to the Obligations.  The costs of the insurance may be more than the cost
of insurance each Borrower is able to obtain on its own.
 
(g) If any insurance proceeds are paid by check, draft or other instrument
payable to any Borrower and Agent jointly, such Borrower authorizes Agent to
endorse such Borrower’s name thereon and do such other things as Agent may deem
advisable to reduce the same to cash.  Borrowers shall not carry separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section.  Borrowers shall promptly notify
Agent of any loss, damage, or destruction to any Collateral, whether or not
covered by insurance.  Except as otherwise provided in Section 9.3, Agent is
hereby authorized to collect all insurance proceeds in respect of Collateral
directly and to apply the same to the Obligations whether or not then due and
payable.  Agent is authorized and empowered, and each Borrower hereby
irrevocably appoints Agent as its (or their) attorney-in-fact (such appointment
is coupled with an interest), at Agent’s option, to make or file proofs of loss
or damage and to settle and adjust any claim under insurance policies which
insure against such risks, or to direct Borrowers, in writing, to agree with the
insurance carrier(s) on the amount to be paid in regard to such loss.
 
Section 4.5 Compliance with Laws and Material Contracts.  Each Borrower will
comply with the requirements of all applicable Laws and Material Contracts,
except to the extent that failure to so comply could not reasonably be expected
to (a) have a Material Adverse Effect, or (b) result in any Lien upon either a
material portion of the assets of any such Person in favor of any Governmental
Authority, or any portion of the Collateral.
 
Section 4.6 Inspection of Property, Books and Records.  Each Borrower will keep
proper books of record substantially in accordance with GAAP in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities; and will permit, at the sole cost of the
applicable Borrower as provided in Section 2.2(e), representatives of Agent and
of any Lender (but at such Lender’s expense unless such visit or inspection is
made concurrently with Agent) to visit and inspect any of their respective
properties, to monitor, examine or implement any health care quality assurance
programs, to examine and make abstracts or copies from any of their respective
books and records, to conduct a collateral audit and analysis of their
respective operations and the Collateral to verify the amount and age of the
Accounts, the identity and credit of the respective Account Debtors, to review
the billing practices of Borrower, and to discuss their respective affairs,
finances and accounts
 

 
 
 

CHICAGO/#2321168.11
 
33

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

 

with their respective officers, employees and independent public accountants as
often as may reasonably be desired (but subject to confidentiality laws with
respect to patient records).  In the absence of an Event of Default, Agent or
any Lender exercising any rights pursuant to this Section 4.6 shall give the
applicable Borrower commercially reasonable prior notice of such exercise.  No
notice shall be required during the existence and continuance of any Event of
Default.
 
Section 4.7 Use of Proceeds.  Borrowers shall use the proceeds of the Loan
solely for the refinancing on the Closing Date of Debt, the payment of
transaction fees incurred in connection with the Operative Documents and
establishing the reserves as set forth in this Agreement.  No portion of the
proceeds of the Loan will be used for family, personal, agricultural or
household use.
 
Section 4.8 Estoppel Certificates.  After written request by Agent, Borrowers,
within fifteen (15) days and at their expense, will furnish Agent with a
statement, duly acknowledged and certified, setting forth (a) the amount of the
original principal amount of the Notes, and the unpaid principal amount of the
Notes, (b) the rate of interest of the Notes, (c) the date payments of interest
and/or principal were last paid, (d) any offsets or defenses to the payment of
the Obligations, and if any are alleged, the nature thereof, (e) that the Notes
and this Agreement have not been modified or if modified, giving particulars of
such modification, and (f) that there has occurred and is then continuing no
Default or if such Default exists, the nature thereof, the period of time it has
existed, and the action being taken to remedy such Default.
 
Section 4.9 Notices of Litigation and Defaults.  Borrowers will give prompt
written notice to Agent (a) of any litigation or governmental proceedings
pending or threatened (in writing) against Borrowers or other Credit Party which
would reasonably be expected to have a Material Adverse Effect with respect to
Borrowers or any other Credit Party or which in any manner calls into question
the validity or enforceability of any Financing Document, (b) upon any Borrower
becoming aware of the existence of any Default or Event of Default, (c) if any
Credit Party is in breach or default under or with respect to any Material
Contract, or if any Credit Party is in breach or default under or with respect
to any other contract, agreement, lease or other instrument to which it is a
party or by which its property is bound or affected, which breach or default
could reasonably be expected to have a Material Adverse Effect, (d) of any
strikes or other labor disputes pending or, to any Borrower’s knowledge,
threatened against any Credit Party with respect to the Project, and (e) of all
returns, recoveries, disputes and claims that involve more than
$100,000.  Borrowers represent and warrant that Schedule 4.9 sets forth a
complete list of all matters existing as of the Closing Date for which notice
could be required under this Section and all litigation or governmental
proceedings pending or threatened (in writing) against Borrowers or other Credit
Party as of the Closing Date.
 
Section 4.10 Environmental Covenants.
 
(a) Each Borrower covenants and agrees that so long as such Borrower owns,
manages, is in possession of, or otherwise controls the operation of the
Projects:  (i) all uses and operations on or of the Projects, whether by such
Borrower or any other Person, shall be in compliance with all Environmental Laws
and permits issued pursuant thereto; (ii) there shall be no Releases of
Hazardous Materials in, on, under or from the Projects; (iii) there shall be no
Hazardous Materials in, on, or under the Projects, except those that are both
(A) in compliance with all Environmental Laws and with permits issued pursuant
thereto, if and to the extent required, and (B) (I) in amounts not in excess of
that necessary to operate the Projects for the purposes set forth herein or
(II) fully disclosed to and approved by Agent in writing; (iv) each Borrower
shall keep the Projects free and clear of all Environmental Liens; (v) each
Borrower shall, at its sole cost and expense, fully and expeditiously cooperate
in all activities pursuant to Subsection 4.10(c) below, including but not
limited to providing all relevant information and making knowledgeable persons
available for interviews; (vi) each Borrower shall, at its sole cost and
 

 
 
 

CHICAGO/#2321168.11
 
34

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

 

expense, perform any environmental site assessment or other investigation of
environmental conditions in connection with the Projects, pursuant to any
reasonable written request of Agent, upon Agent’s reasonable belief that any
Project is not in full compliance with all Environmental Laws, and share with
Agent the reports and other results thereof, and Agent and Lenders shall be
entitled to rely on such reports and other results thereof; (vii) each Borrower
shall, at its sole cost and expense, comply with all reasonable written requests
of Agent to (A) reasonably effectuate remediation of any Hazardous Materials in,
on, under or from the Projects; and (B) comply with any Environmental Law;
(viii) Borrower shall not allow any Operator or other user of the Projects to
violate any Environmental Law; and (ix) each Borrower shall immediately notify
Agent in writing after it has become aware of (A) any presence or Release or
threatened Release of Hazardous Materials in, on, under, from or migrating
towards the Projects; (B) any non-compliance with any Environmental Laws related
in any way to the Projects; (C) any actual or potential Environmental Lien
against the Projects; (D) any required or proposed remediation of environmental
conditions relating to the Projects; and (E) any written or oral notice or other
communication of which any Borrower becomes aware from any source whatsoever
(including but not limited to a Governmental Authority) relating in any way to
Hazardous Materials.  Any failure of any Borrower to perform its obligations
pursuant to this Subsection 4.10(a) shall constitute bad faith waste with
respect to the Projects.
 
(b) Agent and any other Person designated by Agent, including but not limited to
any representative of a Governmental Authority, and any environmental
consultant, and any receiver appointed by any court of competent jurisdiction,
shall have the right, but not the obligation, to enter upon the Projects at all
reasonable times to assess any and all aspects of the environmental condition of
the Projects and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be determined in
Agent’s sole discretion) and taking samples of soil, groundwater or other water,
air, or building materials, and conducting other invasive testing.  Each
Borrower shall cooperate with and provide access to Agent and any such person or
entity designated by Agent.
 
(c) Each Borrower shall establish and comply with that certain operations and
maintenance program prepared by, or if applicable, recommended and approved by
Agent’s environmental consultant with respect to the Projects, in form and
substance reasonably acceptable to Agent, prepared by an environmental
consultant reasonably acceptable to Agent, which program shall address any
asbestos-containing material or lead based paint that may now or in the future
be detected at or on the Projects.  Without limiting the generality of the
preceding sentence, Agent may require (i) periodic notices or reports to Agent
in form, substance and at such intervals as Agent may specify, (ii) an amendment
to such operations and maintenance program to address changing circumstances,
laws or other matters, (iii) at each Borrower’s sole expense, supplemental
examination of the Projects by consultants specified by Agent, (iv) access to
the Projects by Agent, its agents or servicer, to review and assess the
environmental condition of the Projects and each Borrower’s compliance with any
operations and maintenance program, and (v) variation of the operations and
maintenance program in response to the reports provided by any such consultants.
 
(d) If any Release or disposal of Hazardous Materials shall occur or shall have
occurred on any Project, Borrower will cause, or direct the applicable Credit
Party to cause, the prompt containment and removal of such Hazardous Materials
and the remediation of such Project as is necessary to comply with all
Environmental Laws and to preserve the value of such Project or other
assets.  Without limiting the generality of the foregoing, Borrower shall, and
shall cause each other Credit Party to, comply with each Environmental Law
requiring the performance at any Project by any Borrower or any other Credit
Party of activities in response to the Release or threatened Release of a
Hazardous Material at a Project.
 

 
 
 

CHICAGO/#2321168.11
 
35

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

 

 
(e) Borrowers will provide Agent within thirty (30) days after written demand
therefor with a bond, letter of credit or similar financial assurance evidencing
to the reasonable satisfaction of Agent that sufficient funds are available to
pay the cost of removing, treating and disposing of any Hazardous Materials or
Hazardous Materials Contamination and discharging any assessment which may be
established on the Projects as a result thereof, such demand to be made, if at
all, upon Agent’s reasonable business determination that the failure to remove,
treat or dispose of any Hazardous Materials or Hazardous Materials
Contamination, or the failure to discharge any such assessment could reasonably
be expected to have a Material Adverse Effect with respect to the Projects.
 
Section 4.11 Memory Care.  Subject to the time frames herein, the Credit Parties
may elect, in their sole discretion, to convert a portion of the Project
consisting of approximately 20 units to provide memory care services at the
Project (the “Memory Care Conversion”).  The election by Borrower to proceed
with the Memory Care Conversion shall be subject to, among other things, the
business judgment of the Credit Parties, including a commercially reasonable
rate of return, and the cost, timing and availability of all necessary Permits
and approvals.  If the Credit Parties elect to proceed the Credit Parties shall
notify Agent sixty (60) days before commencing the Memory Care Conversion, which
commencement shall occur by the date that is no later than the last day of
fifteenth (15th) full calendar month following the Closing Date and be completed
by the date that is no later than the last day of the twenty-fourth (24th) full
calendar month following the Closing Date but subject to the receipt of the
necessary Permits and licensing approvals.
 
Section 4.12 Intentionally Deleted.
 
Section 4.13 Further Assurances.
 
(a) Each Borrower will, at its own cost and expense, cause to be promptly and
duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as may from time to time be necessary or as Agent or
the Required Lenders may from time to time reasonably request in order to carry
out the intent and purposes of the Financing Documents and the transactions
contemplated thereby, including all such actions to establish, create, preserve,
protect and perfect a first priority Lien (subject only to Permitted Liens) in
favor of Agent for the benefit of the Lenders on the Collateral (including
Collateral acquired after the date hereof).
 
(b) Upon receipt of an affidavit of an officer of Agent or a Lender as to the
loss, theft, destruction or mutilation of any Note or any other Financing
Document which is not of public record, and, in the case of any such mutilation,
upon surrender and cancellation of such Note or other applicable Financing
Document, Borrowers will issue, in lieu thereof, a replacement Note or other
applicable Financing Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Financing Document in the same principal amount thereof
and otherwise of like tenor.
 
Section 4.14 Updates of Representations.  Borrowers shall deliver to Agent
within ten (10) Business Days of the written request of Agent (provided such
requests shall not be made more than twice in any calendar year so long as no
Event of Default is continuing) an Officer’s Certificate updating all of the
representations and warranties contained in this Agreement and the other
Financing Documents and certifying that all of the representations and
warranties contained in this Agreement and the other Financing Documents, as
updated pursuant to such Officer’s Certificate, are true, accurate and complete
as of the date of such Officer’s Certificate.
 

 
 
 

CHICAGO/#2321168.11
 
36

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

 

 
Section 4.15 Power of Attorney.  Each of the officers of Agent is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrowers (without requiring any of them to act as such) with full power of
substitution to do the following:  (a) endorse the name of Borrowers upon any
and all checks, drafts, money orders, and other instruments for the payment of
money that are payable to Borrowers and constitute collections on Borrowers’
Accounts; (b) so long as Agent has provided not less than three (3) Business
Days’ prior written notice to Borrower to perform the same and Borrower has
failed to take such action, execute in the name of Borrowers any schedules,
assignments, instruments, documents, and statements that Borrowers are obligated
to give Agent under this Agreement; (c) after the occurrence and during the
continuance of a Default, take any action Borrowers are required to take under
this Agreement; (d) so long as Agent has provided not less than five
(5) Business Days’ prior written notice to Borrower to perform the same and
Borrower has failed to take such action, do such other and further acts and
deeds in the name of Borrowers that Agent may deem necessary or desirable to
enforce any Account or other Collateral or perfect Agent’s security interest or
Lien in any Collateral; and (e) after the occurrence and during the continuance
of an Event of Default, do such other and further acts and deeds in the name of
Borrowers that Agent may deem necessary or desirable to enforce its rights with
regard to any Account or other Collateral.  This power of attorney shall be
irrevocable and coupled with an interest.
 
Section 4.16 Syndication.
 
(a) General.  Borrowers hereby acknowledge that Lenders may, with Agent’s prior
written consent (which may be given as to each instance or generally as to all
instances), in one or more transactions (i) sell, or otherwise transfer the Loan
or any portion thereof one or more times, (ii) sell participation interests in
the Loan one or more times, (iii) further divide or re-divide the Loan into two
or more separate notes or components which may take the form of
senior/junior/mezzanine notes or components or senior/subordinate notes or
components or multiple components of such division, and which may be secured by
some or all of the Collateral, or (iv) grant, pledge, assign a security interest
in or otherwise collaterally transfer all or any portion of its rights under
this Agreement and the Financing Documents to secure obligations of such Lender
to any other Person (the transactions referred to in clauses (i) through
(iv) above, each a “Secondary Market Transaction”, and collectively “Secondary
Market Transactions”).  With respect to any Secondary Market Transaction
described in clause (iii) above, such notes or note components may be assigned
different interest rates, so long as, at such time the weighted average of the
relevant interest rates equals the Libor Rate; provided, however, that Borrowers
recognize that, in the case of prepayments, the weighted average interest rate
of the Loan may increase because Agent shall have the right to apply principal
payments to one or more notes or components with lower rates of interest before
applying principal payments to one or more notes or components with higher rates
of interest.
 
(b) Borrower Cooperation.  Borrowers shall cooperate with Lenders and use
Borrowers’ commercially reasonable efforts to facilitate the consummation of
each Secondary Market Transaction including, without limitation,
by:  (i) amending or causing the amendment of any Financing Document, and
executing such additional documents, instruments and agreements as may be
reasonably required by Lenders in connection with the relevant Secondary Market
Transaction; (ii) promptly and reasonably providing such information (including,
without limitation, financial information) as may be requested in connection
with the preparation of a private placement memorandum, prospectus or a
registration statement required to privately place or publicly distribute the
securities in a manner which does not conflict with federal or state securities
laws; (iii) providing in connection with each of (A) a preliminary and a final
private placement memorandum or other offering documents or (B) a preliminary
and final prospectus, as applicable (each, a “Disclosure Document”), a
certificate certifying that
 

 
 
 

CHICAGO/#2321168.11
 
37

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

 

Borrowers have carefully examined those sections of such Disclosure Documents,
as applicable, pertaining to Borrowers, their Affiliates, the Loan, the Manager
and the Projects and that such sections (and any other sections reasonably
requested by a Lender) do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading;
(iv) causing to be rendered such opinion letters reasonably requested by the
Lender for the relevant Secondary Market Transaction; (v) making such
representations, warranties and covenants, as may be reasonably requested by a
Lender for the Secondary Market Transaction; and (vi) providing any other
information and materials reasonably required in the Secondary Market
Transaction.  Borrowers shall be responsible only for their own costs and
expenses (including attorneys’ fees) and shall not be responsible for any third
party costs and expenses incurred by Lenders in connection with any Secondary
Market Transaction.
 
ARTICLE 5 – NEGATIVE COVENANTS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
Section 5.1 Debt; Contingent Obligations.  No Borrower will, directly or
indirectly, create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to, any Debt, except for Permitted
Indebtedness.  No Borrower will, directly or indirectly, create, assume, incur
or suffer to exist any Contingent Obligations, except for Permitted Contingent
Obligations.  No Borrower will, directly or indirectly, make any loans or
advance any Debt to any Person (except to the extent that Borrowers joint and
several obligations hereunder would be deemed to be a loan or advance to the
other Borrower).
 
Section 5.2 Liens.  No Borrower will, directly or indirectly, create, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except for Permitted Liens.
 
Section 5.3 Distributions.  No Borrower will, directly or indirectly, declare,
order, pay, make or set apart any sum for any Distribution ; provided, however,
that the following Distributions may be paid, subject to the terms and
conditions below:
 
(a) upon the written request from Borrowers to Agent and approval of said
request by Agent, not to be unreasonably withheld, conditioned or delayed, Tax
Distributions (which may only be paid annually based on Borrowers’ annual
financial statements or, so long as no Event of Default is then outstanding, in
multiple installments, based on Borrowers’ good-faith and reasonable estimate of
income to be generated by Borrowers in such year) to allow Borrowers’
shareholders or members to meet their tax obligations on such income in a timely
manner, minus the amount of Net Tax Benefit realized by such shareholders or
members for any previous tax year, commencing from the tax year immediately
prior to the tax year including the Closing Date, but only to the extent such
Net Tax Benefit has not already been utilized to reduce, in any tax year during
which this Agreement is in effect, the amount of any Tax Distribution otherwise
permitted hereunder;
 
(b) management fees not to exceed five percent (5%) of Net Operating Income may
be paid to the Manager if, and only to the extent that at the time of such
payment:  (i) the Manager has entered into an agreement whereby it subordinates
its right to payment of management fees to Agent’s right to payments hereunder,
in an agreement acceptable to Agent, and (ii) no Default or Event of Default has
occurred and is continuing and no Default or Event of Default would result from
the making of such payment; and
 
(c) at any time, dividends or distributions may be paid to Borrower’s
shareholders or members in an amount not to exceed Borrowers’ Excess Cash Flow
(less any Tax Distributions made
 

 
 
 

CHICAGO/#2321168.11
 
38

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

 

pursuant to subsection (a) above), but only to the extent that at the time of
such proposed dividend or distribution, no Default or Event of Default has
occurred and is continuing and no Default or Event of Default would result from
the making of such dividends or distributions.
 
Section 5.4 Restrictive Agreements.  No Borrower will, directly or indirectly
enter into or assume any agreement (other than the Financing Documents)
prohibiting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired.
 
Section 5.5 Payments and Modifications of Subordinated Debt.  No Borrower will,
directly or indirectly, declare, pay, make or set aside any amount for payment
in respect of Subordinated Debt unless permitted pursuant to the applicable
Subordination Agreement.
 
Section 5.6 Consolidations and Mergers; Sales of Assets; Change in Control.
 
(a) No Borrower will, directly or indirectly consolidate or merge or amalgamate
with or into any other Person.
 
(b) No Borrower shall suffer or permit to occur any sale, transfer, lease (other
than a Lease approved by Agent), conveyance, alienation, pledge, assignment,
mortgage, encumbrance, hypothecation or other disposition of all or any portion
of a Project or any portion of any other Collateral for the Loan, except that
Borrower may consummate dispositions in the Ordinary Course of Business of FF&E
for cash and fair value that the applicable Borrower determines in good faith is
no longer used or useful in the Borrower’s business.
 
(c) No Borrower shall suffer or permit to occur (i) any Change in Control or
(ii) any other sale, transfer, conveyance, alienation, pledge, assignment,
mortgage, encumbrance, hypothecation or other disposition of any interest in any
Borrower.
 
(d) In addition to the prohibitions set forth in subsections (a) above, no
Borrower shall engage in or permit to occur any transfer as set forth in
subsections (b) and (c) above that would constitute or result in the occurrence
of one or more non-exempt prohibited transactions under ERISA or the Internal
Revenue Code.  Borrower agrees to unwind any such transaction upon notice from
Agent or, at Agent’s option, to assist Agent in obtaining such prohibited
transaction exemption(s) from the United States Pension and Welfare Benefits
Administration with respect to such transaction as are necessary to remedy such
prohibited transactions.
 
Section 5.7 Purchase of Assets and Investments.  No Borrower will, or will
permit any Subsidiary to, directly or indirectly (a) acquire or enter into any
agreement to acquire any assets other than in the Ordinary Course of Business;
(b) engage or enter into any agreement to engage in any joint venture or
partnership with any other Person; or (c) acquire or own or enter into any
agreement to acquire or own any investment in any Person.
 
Section 5.8 Transactions with Affiliates.  Except as otherwise disclosed on
Schedule 5.8, and except for transactions that are consented to by Agent in
advance of being entered into and which contain terms that are no less favorable
to the applicable Borrower or any Subsidiary, as the case may be, than those
which might be obtained from a third party not an Affiliate of any Credit Party,
no Borrower will, or will permit any Subsidiary to, directly or indirectly,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of any Borrower.
 

 
 
 

CHICAGO/#2321168.11
 
39

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

 

 
Section 5.9 Modification of Organizational Documents.  No Borrower will,
directly or indirectly, amend or otherwise modify any Organizational Documents
of such Person, except for such amendments or other modifications required
(a) under this Agreement, or (b) by applicable Law and fully disclosed to Agent.
 
Section 5.10 Modification of Certain Agreements.  No Borrower will, directly or
indirectly, amend or otherwise modify the Management Agreement or other Material
Contract, which amendment or modification in any case:  (a) is contrary to the
terms of this Agreement or any other Financing Document; (b) could reasonably be
expected to be adverse to the rights, interests or privileges of the Agent or
the Lenders or their ability to enforce the same; (c) results in the imposition
or expansion in any material respect of any obligation of or restriction or
burden on any Borrower; or (d) reduces in any material respect any rights or
benefits of any Borrower (it being understood and agreed that any such
determination shall be in the discretion of the Agent).  Each Borrower shall,
prior to entering into any amendment or other modification of any of the
foregoing documents, deliver to Agent reasonably in advance of the execution
thereof, any final or execution form copy of amendments or other modifications
to such documents, and, if approval of Required Lenders is required by the terms
of this Section 5.10 prior to the taking of any such action, such Borrower
agrees not to take any such action with respect to any such documents without
obtaining such approval from Required Lenders.
 
Section 5.11 Conduct of Business.  No Borrower will, directly or indirectly,
engage in any line of business other than the ownership of the Project owned by
such Borrower and business reasonably related thereto.
 
Section 5.12 Operating Leases.  Except as otherwise provided in the
Subordination and Attornment Agreement, no Borrower will lease any Project under
any Operating Lease without Agent’s consent (other than the Operating Lease
disclosed Schedule 5.8), which may be withheld in Agent’s sole discretion.
 
Section 5.13 Limitation on Sale and Leaseback Transactions.  No Borrower will,
or will permit any Subsidiary to, directly or indirectly, enter into any
arrangement with any Person whereby, in a substantially contemporaneous
transaction, any Borrower or any subsidiaries sells or transfers all or
substantially all of its right, title and interest in an asset and, in
connection therewith, acquires or leases back the right to use such asset.
 
Section 5.14 Deposit Accounts and Securities Accounts.  Schedule 5.14 lists all
of the Deposit Accounts and Securities Accounts of each Borrower as of the
Closing Date.  No Borrower will, directly or indirectly, establish any new bank
account, Deposit Account or Securities Account without prior written notice to
Agent and unless, if requested by Agent, Agent, such Borrower and the bank,
financial institution or securities intermediary at which the account is to be
opened enter into a control agreement regarding such account pursuant to which
such bank, financial institution or securities intermediary acknowledges the
security interest of Agent in such account, agrees to comply with instructions
originated by Agent directing disposition of the funds or investment property or
securities in the account without further consent from any Borrower, and agrees
to subordinate and limit any security interest the bank, financial institution
or securities intermediary may have in the account on terms satisfactory to
Agent.
 
Section 5.15 Compliance with Anti-Terrorism Laws.  Agent hereby notifies
Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s
policies and practices, Agent is required to obtain, verify and record certain
information and documentation that identifies Borrowers and
 

 
 
 

CHICAGO/#2321168.11
 
40

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

 

its principals, which information includes the name and address of each Borrower
and its principals and such other information that will allow Agent to identify
such party in accordance with Anti-Terrorism Laws.  No Borrower will, directly
or indirectly, knowingly enter into any Operative Documents or Material
Contracts with any Blocked Person or any Person listed on the OFAC Lists.  Each
Borrower shall immediately notify Agent if such Borrower has knowledge that any
Borrower, any additional Credit Party or any of their respective Affiliates or
agents acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement is or becomes a Blocked Person or (a) is
convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is
arraigned and held over on charges involving money laundering or predicate
crimes to money laundering.  No Borrower will, directly or indirectly,
(i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including, without limitation, the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.
 
ARTICLE 6 – FINANCIAL COVENANTS
 
Section 6.1 Additional Defined Terms.   The following additional definitions are
hereby appended to Section 1.1 of this Agreement:
 
(a) “Debt Yield Percentage” means the quotient of (i) annualized EBITDARM for
the Projects for the applicable measurement period divided by (ii) the
outstanding principal balance of the Loan, expressed as a percentage.  The
applicable measurement period shall be the three (3) month period immediately
preceding the date of calculation until and including March 31, 2013;
thereafter, the applicable measurement period shall be the six (6) month period
immediately preceding the date of calculation.
 
(b) “EBITDARM” mean Net Operating Income plus (i) rent and management fees and
(ii) replacement reserve (whether reserved or not) of $450.00 per bed or unit,
as applicable, per annum, each as deducted in the determination of Net Operating
Income for the applicable period.
 
(c) “Interest” means all interest and recurring charges or fees due and payable
by Borrowers under this Agreement.
 
(d) “Modified Debt Service Coverage Ratio” means the ratio of (i) EBITDARM for
the Projects based upon the three (3) month period ending on the date of
calculation, to (ii) Interest due and owing during such period, provided, Agent
may make pro forma adjustments to account for increases to the Base Rate or Base
LIBOR Rate, as applicable.
 
(e) “Net Operating Income” means Operating Revenue minus Operating Expenses.
 
(f) “Operating Expenses” means the sum of the following for any period, without
duplication, the expenses incurred in connection with owning and operating the
Projects, determined on an accrual basis consistent with industry standards for
such period (as determined in accordance with GAAP, and as reasonably adjusted
by Agent), including, without limitation: (i) recurring expenses to third
parties (e.g., real estate tax and insurance expenses or deposits, tenant
improvements, leasing commissions, carpeting replacement, appliance and drapery
replacement and such others as determined by Agent) which are not paid out of
the replacement reserve, including payments by Operators to the landlords under
the Operating Leases that are specifically designated as payment for such third
party
 

 
 
 

CHICAGO/#2321168.11
 
41

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

 

expenses, (ii) management fees (whether paid or not) in an amount equal to the
greater of actual fees accrued or five percent (5.0%) of effective gross income
for the Projects, (iii) a replacement reserve (whether reserved or not) of not
less than $450.00 per bed or unit, as applicable, per annum, as adjusted by
Agent in its reasonable discretion for projected capital expenditures, (iv) all
interest and fees obligations accruing under any Debt other than the Loan
(including FF&E, accounts receivable, or vehicle financing), and (v) any other
property operating expenses relating to the normal operation of the applicable
Projects, whether the expenses are the responsibility of Borrowers as landlords
or Operators as tenants (with the intent being that, without duplication, all
ordinary operating expenses for operating the Projects are deemed “Operating
Expenses,” whether the landlord or the tenant is obligated to pay such
expenses).  “Operating Expenses” shall specifically exclude income taxes,
depreciation, amortization and base rents paid by Operators to Borrowers (to the
extent such base rents do not include any payment for taxes, insurance or other
operating expenses).
 
(g) “Operating Revenues” means, for any period of determination, the aggregate
sum of all amounts collected from the operation of the Projects for the period,
with a vacancy factor equal to the greater of actual vacancy or five percent
(5.0%), (i) excluding any revenues as may be reasonably determined by Agent
(x) to be non-recurring or extraordinary, or (y) to be of a type, nature or
amount that would not customarily be generated at a Project of the type and
nature of the Projects and (ii) net of any applicable contractual allowances or
offsets.
 
Section 6.2 Modified Debt Service Coverage Ratio.  Beginning with the calendar
quarter ending September 30, 2012 and calculated for each calendar quarter
thereafter for so long as any Credit Exposure exists, the Modified Debt Service
Coverage Ratio shall be not less than 1.10 to 1.00.
 
Section 6.3 Debt Yield Percentage.  For the calendar quarter identified below,
the Debt Yield Percentage shall be not less than the minimum percentages set
forth below:
 
Calendar Quarter Ending
Minimum Debt Yield Percentage
September 30, 2012 through June 30, 2013
7.0%
September 30, 2014 and the last day of each calendar quarter thereafter
8.0%

Section 6.4 Evidence of Compliance.  Borrowers shall furnish to Agent evidence
of compliance with the financial covenants in this Article 6 by submitting to
Agent a Compliance Certificate.
 
Section 6.5 Modifications to Covenants.  Notwithstanding the foregoing covenants
contained in this Article 6, Agent may in its sole discretion for any quarter
(a) replace any ratio set forth in this Article 6 with a less-restrictive ratio,
(b) replace any percentage amount set forth in this Article 6 with a
less-restrictive percentage amount, and/or (c) modify any of the definitions set
forth in this Article 6 to make the terms thereof more favorable to Borrower, in
each case as Agent may, in its sole discretion, from time to time specify in
writing to Borrower.
 
Section 6.6 Financial Covenant Default.  In the event that Borrowers fail to
satisfy the covenant in Section 6.3, Borrower shall have the option no more than
twice in any twelve (12) month period to pay to Agent by no later than five (5)
Business Days after the timely delivery of the Compliance Certificate required
under this Agreement for the measurement period related to such failure, an
amount
 

 
 
 

CHICAGO/#2321168.11
 
42

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

 

equal to the Covenant Prepayment (as defined below) as a mandatory prepayment
for the account of all Lenders.  The “Covenant Prepayment” shall be an amount
determined by Agent in its sole discretion, but which will not exceed an amount
which, if applied against the outstanding principal balance of the Loan, would
be sufficient to satisfy the covenant in Section 6.3 as of the last calculation
date, calculating the outstanding principal balance of the Loan after giving
effect to such mandatory prepayment actually made.  A default under Section 6.3
shall be deemed an Event of Default under this Agreement only if Borrower fails
to make any required prepayment of the Loan pursuant to the terms and conditions
of this Section 6.6 together with the proportionate amount of any applicable
fees owing with respect thereto.  Agent shall have the right to specify in
writing an extended payment period for such mandatory prepayment, but no such
extended payment period shall extend beyond the Commitment Expiry Date.
 
ARTICLE 7 – CONDITIONS
 
Section 7.1 Conditions to Closing.  The obligation of each Lender to make the
initial advance in respect of the Loan shall be subject to the receipt by Agent
of each agreement, document and instrument set forth on the closing checklist
prepared by Agent or its counsel, each in form and substance satisfactory to
Agent, and such other closing deliverables reasonably requested by Agent and
Lenders, and to the satisfaction of the following conditions precedent, each to
the satisfaction of Agent and Lenders and their respective counsel in their sole
discretion:
 
(a) evidence of the consummation of the transactions (other than the funding of
the Loan) contemplated by the Operative Documents, including without limitation
the funding of any and all investments contemplated by the Operative Documents;
 
(b) the payment of all fees, expenses and other amounts due and payable under
each Financing Document;
 
(c) Agent shall have received general background verifications of the Credit
Parties along with any principals, officers and directors of such Credit
Parties, in form and substance acceptable to Agent; and
 
(d) the absence, since the date of the most recent financial statements
delivered by Borrowers to Agent, of any material adverse change in any aspect of
the business, operations, properties, prospects or condition (financial or
otherwise) of any Credit Party or any Project, or any event or condition which
could reasonably be expected to result in such a material adverse change;
 
(e) the Projects have a Net Operating Income of $600,000 ending as of February
29, 2012 determined on an annualized basis.
 
Each Lender, by delivering its signature page to this Agreement, shall be deemed
to have acknowledged receipt of, and consented to and approved, each Financing
Document, each additional Operative Document and each other document, agreement
and/or instrument required to be approved by Agent, Required Lenders or Lenders,
as applicable, on the Closing Date.
 
Section 7.2 Searches.  Before the Closing Date, and thereafter (as and when
determined by Agent in its discretion), Agent shall have the right to perform,
all at Borrowers’ expense, the searches described in clauses (a), (b), (c) and
(d) below against Borrowers and any other Credit Party, the results of which are
to be consistent with Borrowers’ representations and warranties under this
Agreement and the satisfactory results of which shall be a condition precedent
to all advances of Loan proceeds:  (a) UCC searches with the Secretary of State
and local filing offices of each jurisdiction where the applicable Person
maintains its executive offices, a place of business, or assets and the
jurisdiction in which the
 

 
 
 

CHICAGO/#2321168.11
 
43

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

 

applicable Person is organized; (b) judgment, pending litigation, federal tax
lien, personal property tax lien, and corporate and partnership tax lien
searches, in each jurisdiction searched under clause (a) above; (c) real
property title and lien searches in each jurisdiction in which any real property
Collateral is located; and (d) searches of applicable corporate, limited
liability company, partnership and related records to confirm the continued
existence, organization and good standing of the applicable Person and the exact
legal name under which such Person is organized.  Notwithstanding anything to
the contrary contained herein, Borrowers shall only be responsible to pay for
the costs of the searches described in clauses (a), (b), (c) and (d) above one
time per calendar year (but excluding any searches performed on or before the
Closing Date) so long as no Event of Default has occurred and is continuing.
 
Section 7.3 Post Closing Requirements.  Borrowers shall complete each of the
post closing obligations and/or provide to Agent each of the documents,
instruments, agreements and information listed on Schedule 7.3 attached hereto
on or before the date set forth for each such item thereon, each of which shall
be completed or provided in form and substance reasonably satisfactory to Agent.
 
ARTICLE 8 – REGULATORY MATTERS
 
Section 8.1 Representations and Warranties.  To induce Agent and Lenders to
enter into this Agreement and to make the Loan and other credit accommodations
contemplated hereby, Borrowers hereby represent and warrant that, except as
disclosed in Schedule 8.1, the following statements are true, complete and
correct as of the date hereof, and Borrowers hereby covenant and agree to notify
Agent within five (5) Business Days (but in any event prior to Borrowers
submitting any requests for advances of reserves or escrows) following the
occurrence of any facts, events or circumstances, whether threatened, existing
or pending, that would make any of the following representations and warranties
untrue, incomplete or incorrect (together with such supporting data and
information as shall be necessary to fully explain to Agent the scope and nature
of the fact, event or circumstance), and shall provide to Agent within three
(3) Business Days of Agent’s request, such additional information as Agent shall
request regarding such disclosure:
 
(a) Healthcare Permits.  Borrowers have (i) each Healthcare Permit and other
rights from, and have made all declarations and filings with, all applicable
Governmental Authorities, all self regulatory authorities and all courts and
other tribunals necessary to engage in the ownership, management and operation
of the Projects or the assets of any Borrower, and (ii) no knowledge that any
Governmental Authority is considering limiting, suspending or revoking any such
Healthcare Permit.  All such Healthcare Permits are valid and in full force and
effect and Borrowers are in material compliance with the terms and conditions of
all such Healthcare Permits, except where failure to be in such compliance or
for a Healthcare Permit to be valid and in full force and effect would not have
a Material Adverse Effect.
 
(b) Specific Licensing.  Each Project is duly licensed as an assisted living
facility under the applicable laws of the state where the Project is
located.  The licensed bed or unit capacity of each Project is shown on
Schedule 8.1.  Borrowers have not granted to any third party the right to reduce
the number of licensed beds or units in the Projects or the right to apply for
approval to move any and all of the licensed beds or units in the Projects to
any other location and there are no proceedings or contemplated to reduce the
number of licensed beds in the Projects.
 
(c) Operating Leases.  If required under applicable Healthcare Laws, the
Operating Lease has been approved by all necessary Governmental
Authorities.  The rentals provided for under the Operating Lease comply with all
applicable Healthcare Laws and do not exceed the sums permitted to be paid under
applicable Healthcare Laws.
 

 
 
 

CHICAGO/#2321168.11
 
44

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

 

 
(d) Resident Agreements.  The Resident Agreements comply with all applicable
Laws, including Healthcare Laws.  Without the prior written consent of Agent,
Borrowers shall not, and shall not permit the Operator to:  (i) materially
modify the form of Resident Agreement previously approved by Agent other than
modifications required to comply with applicable laws; (ii) accept any payment
under any Resident Agreement more than one month in advance of its due date or
in violation of the cash management or lockbox provisions of this Agreement; or
(iv) enter into any Resident Agreement for a term of more than one (1) year, or
upon rates other than market rates or upon a form that fails to comply with
applicable Laws.
 
(e) Accreditation.  Borrowers have received and maintain accreditation in good
standing and without impairment by all applicable accrediting organizations, to
the extent required by law (including any equivalent regulation) or the terms of
any Operating Lease pertaining to the Project.
 
(f) Participation Agreements/Provider Status/Cost Reports.
 
(i) There is no investigation, audit, claim review, or other action pending or,
to the knowledge of any Borrower, threatened which could result in a revocation,
suspension, termination, probation, restriction, limitation, or non-renewal of
any Third Party Payor participation agreement or provider number or other
Healthcare Permit or result in a Borrower’s exclusion from any Third Party Payor
Program, nor has any Third Party Payor Program made any decision not to renew
any participation agreement or provider agreement or other Healthcare Permit
related to any Project, nor have the Borrowers made any decision not to renew
any participation agreement or provider agreement or other Healthcare Permit,
nor is there any action pending or threatened to impose material intermediate or
alternative sanctions with respect to any Project.
 
(ii) The Borrowers, and, to the knowledge of the Borrowers, their contractors,
have properly and legally billed all intermediaries and Third Party Payors for
services rendered with respect to the Projects and have maintained their records
to reflect such billing practices.  No funds relating to Borrowers are now, or,
to the knowledge of Borrowers will be, withheld by any Third Party Payor.
 
(iii) Borrowers have the requisite participation agreement or provider number or
other Healthcare Permit to bill the Medicare program and the respective Medicaid
programs in the state or states in which such Borrowers operate (to the extent
such Borrower participates in the Medicare or Medicaid program in such state or
states) and all other Third Party Payor Programs (including, without limitation,
Medicare) which have historically accounted for any portion of the revenues of
such Project.
 
(g) All Medicare, Medicaid, and private insurance cost reports and financial
reports submitted by the Borrowers are and will be materially accurate and
complete and have not been and will not be misleading in any material
respects.  No cost reports for the Projects remain “open” or unsettled and there
are no current, pending or outstanding Medicare, Medicaid or other Third Party
Payor Program reimbursement audits or appeals pending with respect to the
Projects or the Borrowers.
 
(h) No Violation of Healthcare Laws.
 

 
 
 

CHICAGO/#2321168.11
 
45

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

 

 
(i) None of the Projects, the Borrowers or any Manager are in violation of any
Healthcare Laws, except where any such violation would not have a Material
Adverse Effect.
 
(ii) Borrowers are HIPAA Compliant.
 
(i) Proceedings.  No Borrower nor any Project is subject to any proceeding, suit
or investigation by any federal, state or local government or quasi-governmental
body, agency, board or authority or any other administrative or investigative
body (including the Office of the Inspector General of the United States
Department of Health and Human Services):  (i) which may result in the
imposition of a fine, alternative, interim or final sanction, a lower
reimbursement rate for services rendered to eligible patients which has not been
provided for on their respective financial statements, or which would have a
Material Adverse Effect on any Borrower or the operation of any individual
Project; (ii) which could result in the revocation, transfer, surrender,
suspension or other impairment of the operating certificate, provider agreement
or Healthcare Permits of any Project; (iii) which pertains to or requests any
voluntary disclosure pertaining to a potential overpayment matter involving the
submission of claims to such payor by a Borrower; or (iv) which pertains to any
state or federal Medicare or Medicaid cost reports or claims filed by any
Borrower (including, without limitation, any reimbursement audits), or any
disallowance by any commission, board or agency in connection with any audit of
such cost reports.
 
(j) Ancillary Laws.  Borrowers have received no notice, and are not aware, of
any violation of applicable antitrust laws, employment or landlord-tenant laws
of any federal, state or local government or quasi-governmental body, agency,
board or other authority with respect to the Projects or the Borrowers.
 
(k) Hill-Burton.  No Borrower is or will be a participant in any federal program
whereby any federal, state or local government or quasi-governmental body,
agency, board or other authority may have the right to recover funds by reason
of the advance of federal funds, including, without limitation, those authorized
under the Hill-Burton Act (42 U.S.C. 291, et seq.).
 
(l) Fraud and Abuse.
 
(i) No Borrower or Manager has, or to its knowledge has been threatened to have,
and no owner, officer, manager, employee or Person with a “direct or indirect
ownership interest” (as that phrase is defined in 42 C.F.R. §420.201) in Manager
or any Borrower has, engaged in any of the following:  (A) knowingly and
willfully making or causing to be made a false statement or representation of a
material fact in any application for any benefit or payment under any Healthcare
Laws; (B) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment under any Healthcare Laws; (C) failing to disclose
knowledge by a claimant of the occurrence of any event affecting the initial or
continued right to any benefit or payment under any Healthcare Laws on its own
behalf or on behalf of another, with intent to secure such benefit or payment
fraudulently; (D) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration
(I) in return for referring an individual to a Person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by any Healthcare Laws, or (II) in return for
purchasing, leasing or ordering or arranging for or recommending the purchasing,
leasing or ordering of any good, facility, service, or item for which payment
may be made in whole or in part by any Healthcare
 

 
 
 

CHICAGO/#2321168.11
 
46

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

 

Laws; (E) presenting or causing to be presented a claim for reimbursement for
services that is for an item or services that was known or should have been
known to be (I) not provided as claimed, or (II) false or fraudulent; or
(F) knowingly and willfully making or causing to be made or inducing or seeking
to induce the making of any false statement or representation (or omitting to
state a fact required to be stated therein or necessary to make the statements
contained therein not misleading) of a material fact with respect to (I) a
facility in order that the facility may qualify for Governmental Authority
certification, or (II) information required to be provided under 42 U.S.C. §
1320a-3.
 
(ii) No Borrower or Manager has been, or to its knowledge has been threatened to
be, and no owner, officer, manager, employee or Person with a “direct or
indirect ownership interest” (as that phrase is defined in 42 C.F.R. §420.201)
in Manager or any Borrower:  (A) has had a civil monetary penalty assessed
against him or her pursuant to 42 U.S.C. §1320a-7a or is the subject of a
proceeding seeking to assess such penalty; (B) has been excluded from
participation in a Federal Health Care Program (as that term is defined in 42
U.S.C. §1320a-7b) or is the subject of a proceeding seeking to assess such
penalty, or has been “suspended” or “debarred” from selling products to the U.S.
government or its agencies pursuant to the Federal Acquisition Regulation,
relating to debarment and suspension applicable to federal government agencies
generally (48 C.F.R. Subpart 9.4), or other applicable laws or regulations;
(C) has been convicted (as that term is defined in 42 C.F.R. §1001.2) of any of
those offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C. §§669, 1035, 1347,
1518 or is the subject of a proceeding seeking to assess such penalty; (D) has
been involved or named in a U.S. Attorney complaint made or any other action
taken pursuant to the False Claims Act under 31 U.S.C. §§3729-3731 or qui tam
action brought pursuant to 31 U.S.C. §3729 et seq.; (E) has been made a party to
any other action by any governmental authority that may prohibit it from selling
products to any governmental or other purchaser pursuant to any law; or (F) was
or has become subject to any federal, state, local governmental or private payor
civil or criminal investigations or inquiries, proceedings, validation review,
program integrity review or statement of charges involving and/or related to its
compliance with Healthcare Laws or involving or threatening its participation in
Medicare, Medicaid or other Third Party Payor Programs or its billing practices
with respect thereto.
 
Section 8.2 Licensed Facilities.
 
(a) Manager.  Borrowers shall, and shall cause each Operator to, cause the
Projects at all times to be managed by the Principal (the “Manager”) pursuant to
management/operating agreements approved by Agent in writing and that comply
with all applicable Healthcare Laws (the “Management Agreements”).  In addition
to (but not in limitation of) the covenants set forth in Section 5.10, Borrowers
shall not (i) change the Manager of any Project or make any modification,
amendment, termination or cancellation of the Management Agreements or
agreements with brokers, (ii) enter into any other agreement relating to the
management or operation of any Project with Manager or any other Person,
(iii) consent to the assignment by Manager of its interest under the Management
Agreements, or (iv) waive or release any of its rights and remedies under the
Management Agreements, in each case, without the prior written consent of Agent
given or withheld in Agent’s sole and absolute discretion.  Any substitute
property manager shall be required to enter into an assignment and subordination
of management or operating agreement in form and substance reasonably
satisfactory to Agent.  Such restrictions and approval rights are solely for the
purposes of assuring that the Projects are managed and operated in a first-class
manner consistent with Healthcare Laws and the preservation and protection of
the Projects as security for the Obligations and shall not place responsibility
for the control, care, management or repair of the Projects upon Agent, or make
Agent responsible or liable for any negligence in the management, operation,
upkeep, repair or control of the Projects.
 

 
 
 

CHICAGO/#2321168.11
 
47

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

 

 
(b) Transfer of Healthcare Permits and Operations.  Upon written notice from
Agent to Borrowers following the occurrence of an Event of Default that is
continuing hereunder, the following provisions shall be effective:
 
(i) Borrower shall execute, deliver and file all documents and statements
requested by Agent to effectuate a transfer of the Healthcare Permits for the
Project to a replacement operator designated by Agent (“Replacement Operator”),
subject to required approval of any Governmental Authority.  Borrower further
shall provide to Agent all information and records requested by Agent in
connection with the transfer of the Healthcare Permits and provided, that
Replacement Operator shall not be permitted to operate the Project under
Healthcare Permits then held by the Operator.  Borrowers shall, or shall cause
the Operator to, provide to Agent all information and records requested by Agent
in connection with the transfer of the Healthcare Permits.
 
(ii) In order to facilitate an efficient transfer of the operations of the
Project, Borrower shall, if and to the extent requested by Agent, (A) deliver to
Agent copies of all Healthcare Permits and the most recent reports and notices
pertaining to such Project required to be delivered under Section 4.1 or Section
4.9; (B) continue and maintain the operation of such Project in the Ordinary
Course of Business, including, without limitation, the retention of all
residents at the Project to the fullest extent possible until the transfer of
the operations of such Project to the Replacement Operator is completed;
(C) enter into such operation transfer agreements, management agreements, and
other agreements as may be requested by Agent until the transfer of the
operations of such Project to the Replacement Operator is completed; and
(D) provide continued access to Agent and its agents to show such Project to
potential Replacement Operators.  Borrower hereby consents to the disclosure by
Agent to potential Replacement Operators of Borrower’s financial statements,
licensure reports and surveys, financial and property due diligence materials
and other documents, materials and information relating to the Project.
 
Section 8.3 Healthcare Operations.
 
(a) Borrower will timely file or caused to be timely filed (after giving effect
to any extension duly obtained), all notifications, reports, submissions, Permit
renewals, cost reports and other reports of every kind whatsoever required by
applicable Healthcare Laws (which reports will be materially accurate and
complete in all respects and not misleading in any respect and shall not remain
open or unsettled).
 
(b) Borrower will maintain in full force and effect, and free from restrictions,
probations, conditions or known conflicts which would materially impair the use
or operation of any Project for its current use, all Healthcare Permits
necessary under applicable Healthcare Laws to carry on the business of Borrowers
as it is conducted on the Closing Date.
 
(c) Borrower will not suffer or permit to occur any of the following:
 
(i) any transfer of a Healthcare Permit or rights thereunder to any Person
(other than Borrowers or Agent) or to any location other than a Project approved
by Agent in advance in writing;
 

 
 
 

CHICAGO/#2321168.11
 
48

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

 

 
(ii) any pledge or hypothecation of any Healthcare Permit as collateral security
for any indebtedness other than indebtedness to Agent;
 
(iii) any rescission, withdrawal, revocation, amendment or modification of or
other alteration to the nature, tenor or scope of any Healthcare Permit without
Agent’s prior written consent, including, without limitation, (A) any change to
the authorized units/beds capacity of any Project and/or the number of
units/beds approved by the applicable Governmental Authority, and (B) any
transfer all or any part of any Project’s authorized units or beds to another
site or location;
 
(iv) any voluntary transfer of any resident of any Project to any other
facility, unless such transfer is at the request of the resident (without
economic incentives being given to the resident by an Affiliate of any Borrower)
or its payor or is for reasons relating to non-payment or the health, required
level of medical care or safety of the resident to be transferred;
 
(v) without Agent’s prior written consent, the provision by any Borrower of
additional regulated services at any Project, including, without limitation,
medical services; or
 
(vi) any fact, event or circumstance for which notice to Agent is required under
Section 8.1.
 
(d) Borrower will maintain a corporate health care regulatory compliance program
(“CCP”) which includes at least the following components and allows Agent and/or
any outside consultants from time to time to review such CCP:  (i) standards of
conduct and procedures that describe compliance policies regarding laws with an
emphasis on prevention of fraud and abuse; (ii) specific officer within
high-level personnel identified as having overall responsibility for compliance
with such standards and procedures; (iii) training and education programs which
effectively communicate the compliance standards and procedures to employees and
agents, including, without limitation, fraud and abuse laws and illegal billing
practices; (iv) auditing and monitoring systems and reasonable steps for
achieving compliance with such standards and procedures including, without
limitation, publicizing a report system to allow employees and other agents to
anonymously report criminal or suspect conduct and potential compliance
problems; (v) disciplinary guidelines and consistent enforcement of compliance
policies including, without limitation, discipline of individuals responsible
for the failure to detect violations of the CCP; and (vi) mechanisms to
immediately respond to detected violations of the CCP.
 
(e) Borrower will at all times be, and cause all Managers to be, HIPAA
Compliant.
 
(f) If any Project is currently accredited by JCAHO, Borrower will (i) maintain
such accreditation in good standing and without limitation or impairment,
(ii) promptly submit to JCAHO a plan of correction for any deficiencies listed
on any JCAHO accreditation survey report, and (iii) cure all such deficiencies
within such time frame as is necessary to preserve and maintain in good standing
and without limitation or impairment of such JCAHO accreditation.
 
Section 8.4 Third Party Payor Programs.  Neither the Projects, nor any Borrower,
shall, other than in the Ordinary Course of Business, change the terms of any
Third Party Payor Programs or its normal billing payment and reimbursement
policies and procedures with respect thereto (including without limitation the
amount and timing of finance charges, fees and write-offs).  Borrowers will
(a) maintain in full force and effect, and free from restrictions, probations,
conditions or known conflicts
 

 
 
 

CHICAGO/#2321168.11
 
49

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

 

which would materially impair the use or operation of any Project for its
current use, all Healthcare Permits necessary under Healthcare Laws to continue
to receive reimbursement under all Third Party Payor Programs in which any
Borrower or any Project participates as of the date of this Agreement, and
(b) provide to Agent upon request, an accurate, complete and current list of all
participation agreements with Third Party Payors with respect to the business of
Borrowers.  Borrowers shall at all times comply with all requirements,
contracts, conditions and stipulations applicable to Borrowers in order to
maintain in good standing and without default or limitation all such
participation agreements.
 
Section 8.5 Cures.  If there shall occur any fact, event or circumstance for
which Borrowers are required to give Agent notice under Section 8.1 above after
the Closing Date, Borrowers shall take such action as is necessary to validly
challenge or otherwise appropriately respond to such fact, event or circumstance
within any timeframe required by applicable Healthcare Laws, and shall
thereafter diligently pursue the same to a favorable conclusion, all to the
effect that the fact, event or circumstance giving rise to Borrowers’ notice
obligation under Section 8.1 shall be dismissed, rescinded, eliminated and
otherwise cease to exist on that date which is the earlier to occur of (a) sixty
(60) days after the date any Borrower or any of its Affiliates became aware of
such fact, event or circumstance, or (b) the expiration of any cure period given
under applicable Healthcare Laws; provided, however, that Borrowers will not
permit to exist or occur any fact, event or circumstance which could cause any
representation or warranty in the following subsections of Section 8.1 to be
untrue, incomplete or incorrect or which could trigger a disclosure obligation
under such section.
 
ARTICLE 9 – REAL PROPERTY MATTERS
 
Each Borrower agrees that, so long as any Credit Exposure exists:
 
Section 9.1 Operating Leases.
 
(a) Without the prior written consent of Agent, Borrowers shall not: (i) enter
into any Leases other than the Operating Leases and the Resident Agreements;
(ii) modify, amend, renew, surrender, terminate, consent to a sublease of,
consent to a transfer of, abate rent or other payments due under or otherwise
grant any financial or other concession under any Lease except for immaterial,
non-monetary modifications; (iii) accept any rental payment under any Leases
more than one month in advance of its due date; or (iv) enter into any ground
lease of any Project.
 
(b) Borrowers shall, and shall cause Operator to provide Agent with a copy of
all Leases (excluding Resident Agreements) no less than ten (10) days prior to
execution of such Leases and such Leases shall be on the form of lease
reasonably approved by Agent (which form shall include an automatic attornment
provision whereby, in the event of a foreclosure, the tenant automatically shall
recognize the successor owner as landlord and such tenant shall have no right to
terminate its lease in the event of such foreclosure).
 
(c) Any Operating Lease shall at all times be in form and substance reasonably
satisfactory to Agent; provided that Lender acknowledge and agrees that the
Operating Lease in effect as of the date hereof is approved by Agent.  The
Operating Lease shall at all times require the tenant thereunder to furnish to
Borrowers such information as Borrowers shall require to fulfill their
obligations to Agent under this Agreement.
 
(d) Borrowers shall not suffer or knowingly permit any breach or default to
occur in any of Borrowers’ obligations under any of the Leases nor suffer or
knowingly permit the same to terminate by reason of any failure of Borrowers to
meet any requirement of any Lease.  Borrowers shall notify Agent promptly in
writing in the event an Operator commits a default under an Operating Lease.
 

 
 
 

CHICAGO/#2321168.11
 
50

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

 

Borrowers shall notify Agent promptly in writing in the event a tenant other
than an Operator commits a material default under a Lease.
 
(e) Borrowers shall not suffer or knowingly permit any breach or default by an
Operator to occur in any of the Operator’s obligations under any Resident
Agreement nor suffer or permit the same to terminate by reason of any failure of
the Operator to meet any requirement of any Resident Agreement.
 
(f) If the Operator for a Project is a Person separate and distinct from the
Borrowers, then the Operator’s occupancy of the Project shall at all times be
pursuant to the Operating Leases approved by Agent.  Each such Operating Lease
shall provide Agent the right to terminate the occupancy rights of the Operator
upon Agent (or its designee) or any receiver taking possession of the applicable
Project or acquisition of the applicable Project through foreclosure, a deed in
lieu of foreclosure, UCC sale or otherwise.  In the event a Operator loses its
license to operate a Project, Borrowers shall act in good faith to promptly
replace such Operator or assist such Operator to reinstate such license in
accordance with the terms of the applicable Project Operating Lease.
 
Section 9.2 Project Use and Operation.
 
(a) Without the prior written consent of Agent in each instance, which consent
shall not be unreasonably withheld or delayed, Borrowers shall not demolish,
remove, construct, or, except as otherwise expressly provided herein, restore,
or alter the Projects or any portion thereof; nor consent to or permit any such
demolition, removal, construction, restoration, addition or alteration which
would diminish the value of the Projects; provided, however, that Borrower shall
be permitted to perform non-structural alterations to the Project which are
cosmetic in nature and the cost of which does not exceed $50,000.00 per calendar
year.  No excavation, construction, earth work, site work or any other
mechanic’s lienable work shall be done to or for the benefit of a Project,
without Agent’s approval, except for normal repair and maintenance in the
Ordinary Course of Business.  Borrowers shall, at their expense, (i) take good
care of the Projects including grounds generally, and utility systems and
sidewalks, roads, alleys, and curbs therein, and shall keep the same in good,
safe and insurable condition and in compliance with all applicable Laws,
(ii) promptly make all repairs to the Projects, above grade and below grade,
interior and exterior, structural and nonstructural, ordinary and extraordinary,
unforeseen and foreseen, and maintain the Projects in a manner consistent with
their quality and use as required hereby, and (iii) not commit or suffer to be
committed any waste of the Projects or do or suffer to be done anything which
will increase the risk of fire or other hazard to the Projects or impair the
value thereof.  Borrowers shall keep the sidewalks, vaults, gutters and curbs
comprising, or adjacent to, the Projects, clean and free from dirt, snow, ice,
rubbish and obstructions.
 
(b) Unless required by applicable Law, Borrowers shall not permit or engage in
changes in the use of any Project (including any change from residential to
non-residential use, or from non-residential use to residential use) from the
use at the time this Agreement was executed without Agent’s prior written
consent.  Borrowers shall not request and shall not initiate or acquiesce in a
change in the plat of subdivision, or zoning classification or use of any
Project, or grant any encumbrances or easements burdening any Project, without
in each case obtaining Agent’s prior written consent.  Borrowers shall not
desert or abandon the Projects or cause or permit the use or occupancy of any
part of the Projects to be discontinued if such discontinuance or use change
would violate any zoning or other law, ordinance or regulation.
 
(c) Borrowers shall not, and neither shall permit, the Projects or any portion
thereof to be converted or take any preliminary actions which could lead to a
conversion to condominium or cooperative form or ownership.
 

 
 
 

CHICAGO/#2321168.11
 
51

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

 

 
(d) All of Borrowers’ FF&E shall always be located at such Project and shall be
kept free and clear of all Liens other than the Permitted Liens.  Borrowers
shall not, without the prior written consent of Agent, remove or permit to be
removed from any Project any of the FF&E except to repair or replace the same.
 
(e) Borrowers shall not consent to or initiate the joint assessment of any
Project (i) with any other real property constituting a separate tax lot and
Borrowers represent and covenant that each Project is are and shall remain a
separate tax lot, or (ii) with any portion of the Projects which may be deemed
to constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the Project as a single lien.
 
Section 9.3 Casualty Proceeds.
 
(a) Borrowers shall notify Agent promptly of the commencement or threat of any
Taking of one or more of the Projects or any portion thereof or of the
occurrence of any casualty with respect to any Project.
 
(b) Subject to the provisions of Section 9.3(d) and 9.4 below, Agent may elect
to collect, retain and apply against the Obligations of Borrowers under this
Agreement or any of the other Financing Documents all proceeds of insurance
resulting from any loss at any Project or of any Taking of all or any portion of
a Project (individually and collectively referred to as “Casualty Proceeds”)
after deduction of all expenses of collection and settlement, including
attorneys’ and adjusters’ fees and charges.  If any insurance proceeds are paid
by check, draft or other instrument payable to any Borrower and Agent jointly,
such Borrower authorizes Agent to endorse such Borrower’s name thereon and do
such other things as Agent may deem advisable to reduce the same to cash.  Agent
is authorized and empowered, and each Borrower hereby irrevocably appoints Agent
as its (or their) attorney-in-fact (such appointment is coupled with an
interest), at Agent’s option, to make or file proofs of loss or damage and to
settle and adjust any claim under insurance policies which insure against such
risks, or to direct Borrowers, in writing, to agree with the insurance
carrier(s) on the amount to be paid in regard to such loss.  Any Casualty
Proceeds remaining after repayment of the Obligations shall be paid by Agent to
Borrowers.
 
(c) Notwithstanding anything in Section 9.3(b) to the contrary, in the event of
any casualty to any Project, Agent agrees to make available the Casualty
Proceeds to restoration of the Project if (i) no Event of Default exists or
would likely occur during the restoration period, (ii) all Casualty Proceeds are
deposited with Agent, (iii) in Agent’s reasonable judgment, the amount of
Casualty Proceeds available for restoration of the Project is sufficient to pay
the full and complete costs of such restoration, and that Borrower is likely to
achieve the levels of Net Operating Income that existed prior to the casualty
for the affected Project within twelve (12) months following the substantial
completion of the restoration of the Project, (iv) no Operating Lease pertaining
to the affected Project is or will be terminated as a result of such casualty,
and each Operator under an applicable Operating Lease for the affected Project
shall have reaffirmed its Operating Lease and continuing obligation to pay rent
in accordance with the terms of the Operating Lease, without offset or
recoupment, upon restoration of the Project (and during the restoration if so
required under the Operating Lease), (v) the Net Operating Income from the
affected Project (taking into account the effect of business interruption or
rent loss insurance) will not decrease more than thirty five percent (35%) as a
result of such casualty, (vi) the Net Operating Income from all Projects, if
applicable (taking into account the effect of business interruption or rent loss
insurance), will not decrease more than twenty percent (20%) as a result of such
casualty, (vii) in Agent’s sole
 

 
 
 

CHICAGO/#2321168.11
 
52

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

 

determination, the Obligations will not exceed seventy-five percent (75%) of the
fair market value of the Project after completion of restoration but prior to
any re-tenanting, (viii) in Agent’s reasonable determination, the affected
Project can be restored to an architecturally and economically viable project in
compliance with applicable Laws, (ix) each Guarantor, if any, reaffirms any
Guarantee and any other Financing Document to which it is a party, in writing,
(x) in Agent’s reasonable determination, such restoration is likely to be
completed not later than twelve (12) months prior to the Termination Date, and
(xi) the Borrowers provide Agent an updated insurance certificate indicating
that all required insurance  hereunder in respect of the Projects, including
business interruption insurance, has been extended to a date that is no less
than twelve (12) months from the date such restoration is completed.
 
(d) Notwithstanding the foregoing, if the damage to the Project does not exceed
$250,000, and so long as no Default has occurred and is continuing, Borrowers
shall be entitled to receive the Casualty Proceeds attributable thereto,
provided, however, that Borrowers shall use the Casualty Proceeds to restore or
rebuild the Project to its condition prior to such casualty or Taking.
 
Section 9.4 Borrowers’ Obligation to Rebuild and Use of Casualty Proceeds.
 
(a) In case Agent does not elect to apply or does not have the right to apply
the Casualty Proceeds to the Obligations, as provided in Section 9.3 above,
Borrowers shall:
 
(i) Proceed with diligence to make settlement with insurers or the appropriate
governmental authorities and cause the Casualty Proceeds to be deposited with
Agent;
 
(ii) In the event of any delay in making settlement with insurers or the
appropriate governmental authorities or effecting collection of the Casualty
Proceeds, deposit with Agent the full amount required to complete construction
as aforesaid;
 
(iii) In the event the Casualty Proceeds are insufficient to assure Agent that
the all contemplated repairs or construction will be completed, promptly deposit
with Agent any amount necessary to assure that such contemplated repairs or
construction will be completed; and
 
(iv) Promptly proceed with the assumption of construction of the Project,
including the repair of all damage resulting from such casualty, Taking or other
cause and restoration to its former condition.
 
(b) Any request by Borrowers for a disbursement by Agent of Casualty Proceeds
and funds deposited by Borrowers shall be subject to reasonable construction
loan type draw requirements as reasonably determined by Agent.
 
(c) Notwithstanding anything to the contrary, if the damage to the Projects does
not exceed $250,000.00 and so long as no Default has occurred and is continuing,
Borrowers may settle and adjust any claim without the consent of Agent and agree
with the insurance company or companies (or Governmental Authority, in the case
of a Taking) on the amount to be paid upon the loss, provided, however, that
such adjustment is carried out in a competent and timely manner.  Any monies
collected under this subsection (c) shall be applied in accordance with
Section 11.6 below.
 
(d) If the damage to the Projects exceeds $250,000.00, then Agent may elect to
file the respective proof of loss, settle and adjust any claim without the
consent of Borrowers and agree with the insurance company on the amount of the
Casualty Proceeds in the place and stead of Borrowers and
 

 
 
 

CHICAGO/#2321168.11
 
53

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

 

without the consent of Borrowers; provided, however, that so long as no Default
exists, Agent agrees to work with Borrowers and to keep Borrowers fully apprised
of any and all action Agent takes to settle or adjust any claim.  Borrowers
hereby release Agent from any and all liability with respect to the settlement
and adjustment by Agent of any claims in respect of any casualty.
 
Section 9.5 Tax Reduction Proceedings.  During the occurrence and continuation
of an Event of Default, Borrowers shall be deemed to have appointed Agent as
their attorney-in-fact to seek a reduction or reductions in the assessed
valuation of the Projects for real property tax purposes or for any other
purpose and to prosecute any action or proceeding in connection therewith.  This
power, being coupled with an interest, shall be irrevocable for so long as any
part of the Obligations remains unpaid and any Event of Default shall be
continuing.
 
Section 9.6 Commingling; FIRPTA.  No Borrower has commingled the funds related
to the Projects with funds from any other property.  Neither Borrowers nor any
partner, stockholder, member or other principal in Borrowers is or will be, and
no legal or beneficial interest of a partner, stockholder, member or other
principal in Borrowers is or will be held, directly or indirectly, by a “foreign
corporation”, “foreign partnership”, “foreign trust”, “foreign estate”, “foreign
person”, “affiliate” of a “foreign person” or a “United States intermediary” of
a “foreign person” within the meaning of the Internal Revenue Code Sections 897,
1445 or 7701, the Foreign Investments in Real Property Tax Act of 1980, the
International Foreign Investment Survey Act of 1976, the Agricultural Foreign
Investment Disclosure Act of 1978, or the regulations promulgated pursuant to
such Acts or any amendments to such Acts.
 
Section 9.7 Representations and Warranties.  To induce Agent and Lenders to
enter into this Agreement and to make the Loan and other credit accommodations
contemplated hereby, each Borrower hereby represents and warrants to Agent and
each Lender the following with respect to each individual Project, standing
alone and without reliance upon any other Project:
 
(a) Except as disclosed to Agent in writing, (i) no condemnation of any portion
of any Project, has commenced or, to any Borrower’s knowledge, is contemplated
by any Governmental Authority, (ii) except as disclosed to Agent in writing, no
condemnation or relocation of any roadways abutting any Project has commenced
or, to any Borrower’s knowledge, is contemplated by any Governmental Authority,
and (iii) no proceeding to deny access to any Project from any point or planned
point of access to any Project, has commenced or, to any Borrower’s knowledge,
is contemplated by any Governmental Authority.
 
(b) The use of any Project as an assisted living facility and the contemplated
accessory uses do not violate, in any material respects, (i) any Laws (including
subdivision, zoning and building Laws and Environmental Laws), or (ii) any
building permits, covenants, conditions and restrictions of record, or
agreements affecting any Project or any part thereof.  Neither the zoning
authorizations, subdivision approvals or variances nor any other right to
construct or to use any Project is to any extent dependent upon or related to
any real estate other than the real property constituting the
Collateral.  Except as disclosed to Agent on the land title surveys delivered to
Agent prior to the Closing Date, no building or other improvement encroaches
upon any property line, building line, set back line, side yard line or any
recorded or visible easement (or other easement of which Borrowers are aware or
has reason to believe may exist) with respect to any Project.  No Project is
situated in an area designated as having special flood hazards as defined by the
Flood Disaster Protection Act of 1973, as amended, or designated as a wetland by
any governmental entity having jurisdiction over the Project.  All Permits
required for the use and occupancy of the Project have been obtained.  All Laws
relating to the construction of and operation of the Projects have been complied
with in all material respects and all permits and licenses required for the
construction of and operation of the Project have been obtained.  The
 

 
 
 

CHICAGO/#2321168.11
 
54

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

 

Project is accessible through fully improved and dedicated roads, accepted for
maintenance and public use by public authority having jurisdiction.  The Project
has adequate water, gas and electrical supply, storm and sanitary sewerage
facilities, telephone facilities, other required public utilities, fire and
police protection, and means of access between the Project and public highways;
none of the foregoing will be foreseeably delayed or impeded by virtue of any
requirements under any applicable Laws.  The Project includes all property and
rights that may be reasonably necessary or desirable to promote the present uses
and enjoyment thereof.  To the best of each Borrower’s knowledge, there are no,
nor are there any alleged or asserted, violations of law, regulations,
ordinances, codes, permits, licenses, declarations, covenants, conditions or
restrictions of record, or other agreements relating to any Project, or the
improvements thereto, or any part thereof.  Final certificates of occupancy or
non-residential use permits have been obtained for all improvements on the
Project.  The parcels of land comprising the Project are contiguous, subdivided
parcels and are in full compliance with applicable subdivision ordinances.  No
subdivision or resubdivision of such parcels is required to:  (y) convey,
transfer, assign or lease such parcels, either individually or as a whole; or
(z) rebuild after a casualty all or any portion of the improvements on the
Project to current size and configuration.
 
(c) The Project is taxed separately without regard to any other property and for
all purposes the Project may be mortgaged, conveyed and otherwise dealt with as
an independent parcel.  There are no unpaid or outstanding real estate or other
taxes or assessments on or against any Project or any part thereof, except
general real estate taxes for fiscal year 2012 not yet due or payable.  To each
Borrower’s knowledge, there is no pending or contemplated action pursuant to
which any special assessment may be levied against any portion of any Project.
 
(d) There has been no damage or destruction of any part of any Project by fire
or other casualty that has not been repaired.  There are presently no existing
defects in any Project and no repairs or alterations thereof are reasonably
necessary or appropriate.
 
(e) Except for the Operating Leases which have been provided to and approved by
Agent in writing, neither Borrower nor any Operator has entered into any
non-residential Leases that are currently in effect other than as set forth on
the rent roll delivered by Borrower to Agent prior to the closing of the Loan,
which Borrower certifies is true and correct in all material respects.  True,
correct and complete copies of the form of Lease, Resident Agreement and other
lease or care documents and all non-residential Leases, as amended, as in effect
with respect to Borrower’s or Operator’s operation of the Project, have been
delivered to Agent.  All Leases are in full force and effect.  Neither Borrower
nor, to Borrower’s knowledge, any tenant is in default under any
Lease.  Borrower has disclosed to Agent in writing any material default by any
tenant under any Lease and no notice of termination has been issued under any
Lease.  All rents or other payments required of the tenant under the Lease due
to date have been collected and have been collected no more than one (1) month
in advance, and no tenant has been granted any rent concession or inducement
whatsoever except as reflected on the rent roll previously delivered to Agent.
 
(f) Each Project has in place an approved, automatic sprinkler system as
described in 42 C.F.R. 483.70.
 
ARTICLE 10 – SECURITY AGREEMENT
 
Section 10.1 Grant of Security Interest.  As security for the payment and
performance of the Obligations, and without limiting any other grant of a Lien
and security interest in any Security Document, Borrowers hereby assign and
grant to Agent, for the benefit of itself and for the Lenders, a continuing
first priority Lien on and security interest in, upon, and to all right, title
and interest in and to any and all property and interests in property of
Borrowers whether now owned or hereafter created,
 

 
 
 

CHICAGO/#2321168.11
 
55

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

 

acquired or arising including all of the following properties and interests in
properties (the “Personal Property”; unless otherwise defined in this Agreement,
all terms used in this Article 10 shall have the meanings given them in
Article 9 of the UCC):
 
(a) all of Borrowers’ Accounts (including all healthcare insurance receivables),
and all of Borrowers’ money, contract rights, chattel paper, documents, deposit
accounts, securities, Securities Accounts, investment property and instruments
with respect thereto, and all of Borrowers’ rights, remedies, security, Liens
and supporting obligations, in, to and in respect of the foregoing;
 
(b) to the extent not listed above, all of Borrowers’ money, securities,
investment property, deposit accounts, instruments, general intangibles,
intellectual property, healthcare insurance receivables, inventory and other
property and the proceeds thereof;
 
(c) all of Borrowers’ letter-of-credit rights and commercial tort claims;
 
(d) all of Borrowers’ now owned or hereafter acquired machinery, equipment,
computer equipment, tools, tooling, furniture, fixtures, goods, supplies,
materials, work in process, whether now owned or hereafter acquired, together
with all additions, parts, fittings, accessories, special tools, attachments,
and accessions now and hereafter affixed thereto and/or used in connection
therewith, all replacements thereof and substitutions therefor, and all cash and
non-cash proceeds and products thereof and all present and future warranties,
manuals and other written materials relating thereto;
 
(e) all of Borrowers’ now owned or hereafter acquired goods of any kind and any
and all tangible and intangible books and records of Borrowers relating to
Borrowers, their businesses, their financial condition, records and statements,
the Projects and/or the Collateral;
 
(f) to the extent not listed above as original collateral, the proceeds
(including, without limitation, insurance proceeds) and products of any or all
of the foregoing, and all accessions to, substitutions for or replacements of
and rents and profits from any or all of the foregoing; and
 
(g) to the extent not listed above, all of Borrower’s rights as a secured party
in and to the property of Operator to which Operator granted a security interest
in favor of Borrowers under an Operating Lease.
 
Section 10.2 Representations Regarding Security Interest.  Pursuant to the Liens
created pursuant to Section 10.1 above and pursuant to all of the other Security
Documents (if any) (including, without limitation, any and all UCC financing
statements being filed by Agent), and assuming that any such Security Document
that is intended to be filed with any governmental public recording office has
been so filed, Agent has been granted and has a valid and perfected first
priority security interest and Lien in the Collateral, including the Personal
Property (subject only to any Permitted Liens under the terms of this Agreement
and the other Financing Documents) securing the payment of the Obligations, and
such security interests and Liens are entitled to all of the rights, priorities
and benefits afforded by the UCC or other applicable Laws as enacted in any
relevant jurisdiction which relate to perfected security interests.  To
Borrower’s knowledge, no authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority or consent of any other
Person is required for (a) the grant by each Borrower to Agent of the security
interests and Liens in the Collateral, including the Personal Property, provided
for under this Agreement and the other Security Documents (if any), or (b) the
exercise by Agent of its rights and remedies with respect to the Collateral,
including the Personal Property, provided for under this Agreement and the other
Security Documents or under any applicable Law, including the UCC.
 

 
 
 

CHICAGO/#2321168.11
 
56

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

 

 
Section 10.3 Financing Statements.  Each Borrower hereby authorizes Agent to
file without the signature of such Borrower one or more UCC financing statements
relating to all or any part of the Collateral, which financing statements may
list Agent as the “secured party” and such Borrower as the “debtor” and which
describe and indicate the collateral covered thereby as all or any part of the
Collateral under the Financing Documents (including an indication of the
collateral covered by any such financing statement as “all assets” of such
Borrower now owned or hereafter acquired), in such jurisdictions as Agent from
time to time determine are appropriate, and to file without the signature of
such Borrower any continuations of or amendments to any such financing
statements, in any such case in order for Agent to perfect, preserve or protect
the Liens, rights and remedies of Agent with respect to the Collateral.
 
ARTICLE 11 – EVENTS OF DEFAULT
 
Section 11.1 Events of Default.  For purposes of the Financing Documents, the
occurrence of any of the following conditions and/or events, whether voluntary
or involuntary, by operation of law or otherwise, shall constitute an “Event of
Default”:
 
(a) any Borrower shall fail to pay when due any principal, interest, premium or
fee under any Financing Document or any other amount payable under any Financing
Document, or there shall occur any default in the performance of or compliance
with any of the following sections of this Agreement:  Sections 4.1, 4.4(d) and
4.6, Article 5, and Article 6;
 
(b) any Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 11.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied by the Credit Party or waived by Agent within fifteen
(15) days after the earlier of (i) receipt by Borrower Representative of notice
from Agent or Required Lenders of such default, or (ii) actual knowledge of any
Borrower or any other Credit Party of such default;
 
(c) any representation, warranty, certification or statement made by any Credit
Party or any other Person in any Financing Document or in any certificate,
financial statement or other document delivered pursuant to any Financing
Document is incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms already
qualified as to materiality) when made (or deemed made);
 
(d) (i) failure of any Borrower to pay when due or within any applicable grace
period any principal, interest or other amount on Debt (other than the Loan) or
in respect of any Swap Contract, or the occurrence of any breach, default,
condition or event with respect to any Debt (other than the Loan) or in respect
of any Swap Contract, if the effect of such failure or occurrence is to cause or
to permit the holder or holders of any such Debt, or the counterparty under any
such Swap Contract, to cause, Debt or other liabilities having an individual
principal amount in excess of $50,000 or having an aggregate principal amount in
excess of $50,000 to become or be declared due prior to its stated maturity; or
(ii) the occurrence of any breach or default under any terms or provisions of
any Subordinated Debt Document or under any agreement subordinating the
Subordinated Debt to all or any portion of the Obligations or the occurrence of
any event requiring the prepayment of any Subordinated Debt;
 
(e) any Credit Party shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee,
 

 
 
 

CHICAGO/#2321168.11
 
57

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

 

receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
 
(f) an involuntary case or other proceeding shall be commenced against any
Credit Party seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of forty-five (45) days; or an order for
relief shall be entered against any Credit Party under applicable federal
bankruptcy, insolvency or other similar law in respect of (i) bankruptcy,
liquidation, winding-up, dissolution or suspension of general operations,
(ii) composition, rescheduling, reorganization, arrangement or readjustment of,
or other relief from, or stay of proceedings to enforce, some or all of the
debts or obligations, or (iii) possession, foreclosure, seizure or retention,
sale or other disposition of, or other proceedings to enforce security over, all
or any substantial part of the assets of such Credit Party;
 
(g) intentionally deleted;
 
(h) one or more judgments or orders for the payment of money (not paid or fully
covered by insurance maintained in accordance with the requirements of this
Agreement and as to which the relevant insurance company has acknowledged
coverage) aggregating in excess of $50,000 shall be rendered against any or all
Borrowers and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgments or orders, or (ii) there shall be any
period of twenty (20) consecutive days during which a stay of enforcement of any
such judgments or orders, by reason of a pending appeal, bond or otherwise,
shall not be in effect;
 
(i) any Lien created by any of the Security Documents shall at any time fail to
constitute a valid and perfected Lien on all of the Collateral purported to be
secured thereby, subject to no prior or equal Lien except Permitted Liens;
 
(j) the institution by any Governmental Authority of felony criminal proceedings
against any Credit Party;
 
(k) a default or event of default occurs and is continuing under any Guarantee
of any portion of the Obligations;
 
(l) any Borrower makes any payment on account of any Debt that has been
subordinated to any of the Obligations, other than payments specifically
permitted by the terms of such subordination;
 
(m) the occurrence of any fact, event or circumstance that could reasonably be
expected to result in a Material Adverse Effect, if such default shall have
continued unremedied for a period of ten (10) days after written notice from
Agent;
 
(n) intentionally deleted;
 
(o) there shall occur any default or event of default under any of any Operating
Lease or other Operative Document and such default remains uncured beyond any
applicable cure periods;
 

 
 
 

CHICAGO/#2321168.11
 
58

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

 

 
(p) there shall occur any Change in Control of Borrower;
 
(q) any failure of any Credit Party to strictly comply with any of provisions of
any Financing Document pertaining to Hazardous Materials, Environmental Laws or
Environmental Liabilities; or
 
(r) the introduction of, or any change in, any law or regulation governing or
affecting the healthcare industry, including, without limitation, any Healthcare
Laws, which could reasonably be expected to have a Material Adverse Effect with
respect to the Project.
 
Notwithstanding the foregoing, if a Credit Party fails to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period and
Agent has given to Borrower Representative in connection with each such failure
any notice to which Borrowers would be entitled under this Section before such
failure could become an Event of Default, then all subsequent failures by a
Credit Party to comply with such provision of this Agreement shall effect an
immediate Event of Default (without the expiration of any applicable cure
period) with respect to all subsequent failures by a Credit Party to comply with
such provision of this Agreement, and Agent thereupon may exercise any remedy
set forth in this Article 11 without affording Borrowers any opportunity to cure
such Event of Default.
 
All cure periods provided for in this Section 11.1 shall run concurrently with
any cure period provided for in any applicable Financing Documents under which
the default occurred.
 
Section 11.2 Acceleration and Suspension or Termination of Loan
Commitment.  Upon the occurrence and during the continuance of an Event of
Default, Agent may, and shall if requested by Required Lenders, (a) by notice to
Borrower Representative suspend or terminate the Loan Commitment and the
obligations of Agent and the Lenders with respect thereto, in whole or in part
(and, if in part, such reduction shall be pro rata among the Lenders having a
Loan Commitment Percentage), and/or (b) by notice to Borrower Representative
declare the Obligations to be, and the Obligations shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Borrower and Borrowers will
pay the same; provided, however, that in the case of any of the Events of
Default specified in Section 11.1(e) or 11.1(f) above, without any notice to any
Borrower or any other act by Agent or the Lenders, the Loan Commitment and the
obligations of Agent and the Lenders with respect thereto shall thereupon
immediately and automatically terminate and all of the Obligations shall become
immediately and automatically due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Borrower and Borrowers will pay the same.
 
Section 11.3 UCC Remedies.  Upon the occurrence of and during the continuance of
an Event of Default under this Agreement or the other Financing Documents,
Agent, in addition to all other rights, options, and remedies granted to Agent
under this Agreement or at law or in equity, may exercise, either directly or
through one or more assignees or designees, all rights and remedies granted to
it under all Financing Documents and under the UCC in effect in the applicable
jurisdiction(s) and under any other applicable law.  Without restricting the
generality of the foregoing and for the purposes aforesaid, each Borrower hereby
appoints and constitutes Agent its lawful attorney-in-fact with full power of
substitution in the Collateral to use unadvanced funds remaining under this
Agreement or which may be reserved, escrowed or set aside for any purposes
hereunder at any time, or to advance funds in excess of the face amount of the
Notes, to pay, settle or compromise all existing bills and claims, which may be
liens or security interests, or to avoid such bills and claims becoming liens
against the Collateral; to execute all applications and certificates in the name
of such Borrower and to prosecute and defend all actions or
 

 
 
 

CHICAGO/#2321168.11
 
59

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

 

proceedings in connection with the Collateral; and to do any and every act which
such Borrower might do in its own behalf; it being understood and agreed that
this power of attorney shall be a power coupled with an interest and cannot be
revoked.
 
Section 11.4 Default Rate of Interest.  At the election of Agent or Required
Lenders, after the occurrence of an Event of Default and for so long as it
continues, the Loan and other Obligations shall bear interest at rates that are
five percent (5.0%) per annum in excess of the rates otherwise payable under
this Agreement.
 
Section 11.5 Setoff Rights.  During the continuance of any Event of Default,
each Lender is hereby authorized by each Borrower at any time or from time to
time, with reasonably prompt subsequent notice to such Borrower (any prior or
contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances held by such Lender or any of
such Lender’s Affiliates at any of its offices for the account of such Borrower
(regardless of whether such balances are then due to such Borrower), and
(b) other property at any time held or owing by such Lender to or for the credit
or for the account of such Borrower, against and on account of any of the
Obligations; except that no Lender shall exercise any such right without the
prior written consent of Agent and unless the identity of such Lender is made
known to Borrower prior to such setoff.  Any Lender exercising a right to set
off shall purchase for cash (and the other Lenders shall sell) interests in each
of such other Lender’s Pro Rata Share of the Obligations as would be necessary
to cause all Lenders to share the amount so set off with each other Lender in
accordance with their respective Pro Rata Share of the Obligations.  Each
Borrower agrees, to the fullest extent permitted by law, that any Lender and any
of such Lender’s Affiliates may exercise its right to set off with respect to
the Obligations as provided in this Section 11.5.
 
Section 11.6 Application of Proceeds.  Notwithstanding anything to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, (a) each Borrower irrevocably waives the right to direct
the application of any and all payments at any time or times thereafter received
by Agent from or on behalf of such Borrower or any other Guarantor of all or any
part of the Obligations, and, as between Borrowers on the one hand and Agent and
Lenders on the other, Agent shall have the continuing and exclusive right to
apply and to reapply any and all payments received against the Obligations in
such manner as Agent may deem advisable notwithstanding any previous application
by Agent and (b) the proceeds of any sale of, or other realization upon, all or
any part of the Collateral shall be applied:  first, to all fees, costs,
indemnities, liabilities, obligations and expenses incurred by or owing to Agent
with respect to this Agreement, the other Financing Documents or the Collateral;
second, to all fees, costs, indemnities, liabilities, obligations and expenses
incurred by or owing to any Lender with respect to this Agreement, the other
Financing Documents or the Collateral; third, to accrued and unpaid interest on
the Obligations (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts); fourth, to the principal
amount of the Obligations outstanding; and fifth, to any other indebtedness or
obligations of Borrowers owing to Agent or any Lender under the Financing
Documents.  Any balance remaining shall be delivered to Borrowers or to whomever
may be lawfully entitled to receive such balance or as a court of competent
jurisdiction may direct.  In carrying out the foregoing, (y) amounts received
shall be applied in the numerical order provided until exhausted prior to the
application to the next succeeding category, and (z) each of the Persons
entitled to receive a payment in any particular category shall receive an amount
equal to its Pro Rata Share of amounts available to be applied pursuant thereto
for such category.
 
Section 11.7 Waivers.
 
(a) Except as otherwise provided for in this Agreement and to the fullest extent
permitted by applicable law, each Borrower waives:  (i) presentment, demand and
protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release,
 

 
 
 

CHICAGO/#2321168.11
 
60

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

 

compromise, settlement, extension or renewal of any or all Financing Documents,
the Notes or any other notes, commercial paper, accounts, contracts, documents,
instruments, chattel paper and Guarantees at any time held by Lenders on which
any Borrower may in any way be liable, and hereby ratifies and confirms whatever
Lenders may do in this regard; (ii) all rights to notice and a hearing prior to
Agent’s or any Lender’s taking possession or control of, or to Agent’s or any
Lender’s replevy, attachment or levy upon, any Collateral or any bond or
security which might be required by any court prior to allowing Agent or any
Lender to exercise any of its remedies; and (iii) the benefit of all valuation,
appraisal and exemption Laws.  Each Borrower acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Financing Documents and the transactions evidenced hereby and thereby.
 
(b) Each Borrower for itself and all its successors and assigns, (i) agrees that
its liability shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver, or modification granted or consented to by Lender;
(ii) consents to any indulgences and all extensions of time, renewals, waivers,
or modifications that may be granted by Agent or any Lender with respect to the
payment or other provisions of the Financing Documents, and to any substitution,
exchange or release of the Collateral, or any part thereof, with or without
substitution, and agrees to the addition or release of any Borrower, endorsers,
guarantors, or sureties, or whether primarily or secondarily liable, without
notice to any other Borrower and without affecting its liability hereunder;
(iii) agrees that its liability shall be unconditional and without regard to the
liability of any other Borrower, Agent or any Lender for any tax on the
indebtedness; and (iv) to the fullest extent permitted by law, expressly waives
the benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing.
 
(c) To the extent that Agent or any Lender may have acquiesced in any
noncompliance with any requirements or conditions precedent to the closing of
the Loan or to any subsequent disbursement of Loan proceeds, such acquiescence
shall not be deemed to constitute a waiver by Agent or any Lender of such
requirements with respect to any future disbursements of Loan proceeds and Agent
may at any time after such acquiescence require Borrowers to comply with all
such requirements.  Any forbearance by Agent or Lender in exercising any right
or remedy under any of the Financing Documents, or otherwise afforded by
applicable law, including any failure to accelerate the maturity date of the
Loan, shall not be a waiver of or preclude the exercise of any right or remedy
nor shall it serve as a novation of the Notes or as a reinstatement of the Loan
or a waiver of such right of acceleration or the right to insist upon strict
compliance of the terms of the Financing Documents.  Agent’s or any Lender’s
acceptance of payment of any sum secured by any of the Financing Documents after
the due date of such payment shall not be a waiver of Agent’s and such Lender’s
right to either require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment.  The procurement of
insurance or the payment of taxes or other Liens or charges by Agent as the
result of an Event of Default shall not be a waiver of Agent’s right to
accelerate the maturity of the Loan, nor shall Agent’s receipt of any
condemnation awards, insurance proceeds, or damages under this Agreement operate
to cure or waive any Credit Party’s default in payment of sums secured by any of
the Financing Documents.
 
(d) Without limiting the generality of anything contained in this Agreement or
the other Financing Documents, each Borrower agrees that if an Event of Default
is continuing (i) Agent and Lenders are not subject to any “one action” or
“election of remedies” law or rule, and (ii) all Liens and other rights,
remedies or privileges provided to Agent or Lenders shall remain in full force
and effect until Agent or Lenders have exhausted all remedies against the
Collateral and any other properties owned by Borrowers and the Financing
Documents and other security instruments or agreements securing the Loan have
been foreclosed, sold and/or otherwise realized upon in satisfaction of
Borrowers’ obligations under the Financing Documents.
 

 
 
 

CHICAGO/#2321168.11
 
61

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

 

 
(e) Nothing contained herein or in any other Financing Document shall be
construed as requiring Agent or any Lender to resort to any part of the
Collateral for the satisfaction of any of Borrowers’ obligations under the
Financing Documents in preference or priority to any other Collateral, and Agent
may seek satisfaction out of all of the Collateral or any part thereof, in its
absolute discretion in respect of Borrowers’ obligations under the Financing
Documents.  In addition, Agent shall have the right from time to time to
partially foreclose upon any Collateral in any manner and for any amounts
secured by the Financing Documents then due and payable as determined by Agent
in its sole discretion, including, without limitation, the following
circumstances:  (i) in the event any Borrower defaults beyond any applicable
grace period in the payment of one or more scheduled payments of principal
and/or interest, Agent may foreclose upon all or any part of the Collateral to
recover such delinquent payments, or (ii) in the event Agent elects to
accelerate less than the entire outstanding principal balance of the Loan, Agent
may foreclose all or any part of the Collateral to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by one or more of the Financing Documents as Agent may
elect.  Notwithstanding one or more partial foreclosures, any unforeclosed
Collateral shall remain subject to the Financing Documents to secure payment of
sums secured by the Financing Documents and not previously recovered.
 
(f) To the fullest extent permitted by law, each Borrower, for itself and its
successors and assigns, waives in the event of foreclosure of any or all of the
Collateral any equitable right otherwise available to any Credit Party which
would require the separate sale of the any of the Collateral or require Agent or
Lenders to exhaust their remedies against any part of the Collateral before
proceeding against any other part of the Collateral; and further in the event of
such foreclosure each Borrower does hereby expressly consent to and authorize,
at the option of Agent, the foreclosure and sale either separately or together
of each part of the Collateral.
 
Section 11.8 Injunctive Relief.  The parties acknowledge and agree that, in the
event of a breach or threatened breach of any Credit Party’s obligations under
any Financing Documents, Agent and Lenders may have no adequate remedy in money
damages and, accordingly, shall be entitled to an injunction (including without
limitation, a temporary restraining order, preliminary injunction, writ of
attachment, or order compelling an audit) against such breach or threatened
breach, including, without limitation, maintaining any cash management and
collection procedure described herein.  However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedies in the event of a
breach or threatened breach of any provision of this Agreement.  Each Credit
Party waives, to the fullest extent permitted by law, the requirement of the
posting of any bond in connection with such injunctive relief.  By joining in
the Financing Documents as a Credit Party, each Credit Party specifically joins
in this Section as if this Section were a part of each Financing Documents
executed by such Credit Party.
 
Section 11.9 Marshalling; Payments Set Aside.  Neither Agent nor any Lender
shall be under any obligation to marshal any assets in payment of any or all of
the Obligations.  To the extent that Borrower makes any payment or Agent
enforces its Liens or Agent or any Lender exercises its right of set-off, and
such payment or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefore, shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or set-off had not
occurred.
 

 
 
 

CHICAGO/#2321168.11
 
62

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

 

 
ARTICLE 12 – [RESERVED]
 
ARTICLE 13 – AGENT
 
Section 13.1 Appointment and Authorization.  Each Lender hereby irrevocably
appoints and authorizes Agent to enter into each of the Financing Documents to
which it is a party (other than this Agreement) on its behalf and to take such
actions as Agent on its behalf and to exercise such powers under the Financing
Documents as are delegated to Agent by the terms thereof, together with all such
powers as are reasonably incidental thereto.  Subject to the terms of
Section 13.16 and to the terms of the other Financing Documents, Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders.  The provisions
of this Article 13 are solely for the benefit of Agent and Lenders and neither
any Borrower nor any other Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof.  In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Borrower or any other Credit
Party.  Agent may perform any of its duties hereunder, or under the Financing
Documents, by or through its agents or employees.
 
Section 13.2 Agent and Affiliates.  Agent shall have the same rights and powers
under the Financing Documents as any other Lender and may exercise or refrain
from exercising the same as though it were not Agent, and Agent and its
Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Agent hereunder.
 
Section 13.3 Action by Agent.  The duties of Agent shall be mechanical and
administrative in nature.  Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender.  Nothing in this Agreement or
any of the Financing Documents is intended to or shall be construed to impose
upon Agent any obligations in respect of this Agreement or any of the Financing
Documents except as expressly set forth herein or therein.
 
Section 13.4 Consultation with Experts.  Agent may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
 
Section 13.5 Liability of Agent.  Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action taken
or not taken by it in connection with the Financing Documents, except that Agent
shall be liable with respect to its specific duties set forth hereunder but only
to the extent of its own gross negligence or willful misconduct in the discharge
thereof as determined by a final non-appealable judgment of a court of competent
jurisdiction.  Neither Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (a) any statement, warranty or representation made in connection with
any Financing Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements specified in any Financing
Document; (c) the satisfaction of any condition specified in any Financing
Document; (d) the validity, effectiveness, sufficiency or genuineness of any
Financing Document, any Lien purported to be created or perfected thereby or any
other instrument or writing furnished in connection therewith; (e) the existence
or non-existence of any Default or Event of Default; or (f) the financial
condition of any Credit Party.  Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile or electronic transmission or
similar writing) believed by it to be genuine or to be signed
 

 
 
 

CHICAGO/#2321168.11
 
63

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

 

by the proper party or parties.  Agent shall not be liable for any apportionment
or distribution of payments made by it in good faith and if any such
apportionment or distribution is subsequently determined to have been made in
error the sole recourse of any Lender to whom payment was due but not made,
shall be to recover from other Lenders any payment in excess of the amount to
which they are determined to be entitled (and such other Lenders hereby agree to
return to such Lender any such erroneous payments received by them).
 
Section 13.6 Indemnification.  Each Lender shall, in accordance with its Pro
Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon
demand against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from Agent’s
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction) that Agent may suffer or incur in
connection with the Financing Documents or any action taken or omitted by Agent
hereunder or thereunder.  If any indemnity furnished to Agent for any purpose
shall, in the opinion of Agent, be insufficient or become impaired, Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against even if so directed by Required Lenders until such
additional indemnity is furnished.
 
Section 13.7 Right to Request and Act on Instructions.  Agent may at any time
request instructions from Lenders with respect to any actions or approvals which
by the terms of this Agreement or of any of the Financing Documents Agent is
permitted or desires to take or to grant, and if such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking any action
or to withhold any approval and shall not be under any liability whatsoever to
any Person for refraining from any action or withholding any approval under any
of the Financing Documents until it shall have received such instructions from
Required Lenders or all or such other portion of the Lenders as shall be
prescribed by this Agreement.  Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Financing
Documents in accordance with the instructions of Required Lenders (or all or
such other portion of the Lenders as shall be prescribed by this Agreement) and,
notwithstanding the instructions of Required Lenders (or such other applicable
portion of the Lenders), Agent shall have no obligation to take any action if it
believes, in good faith, that such action would violate applicable Law or
exposes Agent to any liability for which it has not received satisfactory
indemnification in accordance with the provisions of Section 13.6.
 
Section 13.8 Credit Decision.  Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.
 
Section 13.9 Collateral Matters.  Lenders irrevocably authorize Agent, at its
option and in its discretion, to (a) release any Lien granted to or held by
Agent under any Security Document (i) upon termination of the Loan Commitment
and payment in full of all Obligations; or (ii) constituting property sold or
disposed of as part of or in connection with any disposition permitted under any
Financing Document (it being understood and agreed that Agent may conclusively
rely without further inquiry on a certificate of a Responsible Officer as to the
sale or other disposition of property being made in full compliance with the
provisions of the Financing Documents); and (b) release or subordinate any Lien
granted to or held by Agent under any Security Document constituting personal
property described herein (it being understood and agreed that Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the identification of any personal property described
herein).  Upon request
 

 
 
 

CHICAGO/#2321168.11
 
64

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

 

by Agent at any time, Lenders will confirm Agent’s authority to release and/or
subordinate particular types or items of Collateral pursuant to this
Section 13.9.
 
Section 13.10 Agency for Perfection.  Agent and each Lender hereby appoint each
other Lender as agent for the purpose of perfecting Agent’s security interest in
assets which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or control.  Should any Lender
(other than Agent) obtain possession or control of any such assets, such Lender
shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall
deliver such assets to Agent or in accordance with Agent’s instructions or
transfer control to Agent in accordance with Agent’s instructions.  Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral for the Loan
unless instructed to do so by Agent (or consented to by Agent, as provided in
Section 11.5), it being understood and agreed that such rights and remedies may
be exercised only by Agent.
 
Section 13.11 Notice of Default.  Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default except with respect
to defaults in the payment of principal, interest and fees required to be paid
to Agent for the account of Lenders, unless Agent shall have received written
notice from a Lender or a Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a “notice of
default”.  Agent will notify each Lender of its receipt of any such
notice.  Agent shall take such action with respect to such Default or Event of
Default as may be requested by Required Lenders (or all or such other portion of
the Lenders as shall be prescribed by this Agreement) in accordance with the
terms hereof.  Unless and until Agent has received any such request, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interests of Lenders.
 
Section 13.12 Assignment by Agent; Resignation of Agent; Successor Agent.
 
(a) Agent may at any time assign its rights, powers, privileges and duties
hereunder to (i) another Lender or (ii) any Person to whom Agent, in its
capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) 50% or more of its Loan, in each case
without the consent of the Lenders or Borrowers.  Following any such assignment,
Agent shall give notice to the Lenders and Borrowers.  An assignment by Agent
pursuant to this subsection (a) shall not be deemed a resignation by Agent for
purposes of subsection (b) below.
 
(b) Without limiting the rights of Agent to designate an assignee pursuant to
subsection (a) above, Agent may at any time give notice of its resignation to
the Lenders and Borrowers.  Upon receipt of any such notice of resignation,
Required Lenders shall have the right to appoint a successor Agent.  If no such
successor shall have been so appointed by Required Lenders and shall have
accepted such appointment within ten (10) Business Days after the retiring Agent
gives notice of its resignation, then the retiring Agent may on behalf of the
Lenders, appoint a successor Agent; provided that if Agent shall notify
Borrowers and the Lenders that no Person has accepted such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice from Agent that no Person has accepted such appointment and, from and
following delivery of such notice, (i) the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Financing
Documents and (ii) all payments, communications and determinations provided to
be made by, to or through Agent shall instead be made by or to each Lender
directly, until such time as Required Lenders appoint a successor Agent as
provided for above in this paragraph.
 
(c) Upon (i) an assignment permitted by subsection (a) above or (ii) the
acceptance of a successor’s appointment as Agent pursuant to subsection (b)
above, such successor shall succeed to
 

 
 
 

CHICAGO/#2321168.11
 
65

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

 

and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Agent, and the retiring Agent shall be discharged from all
of its duties and obligations hereunder and under the other Financing Documents
(if not already discharged therefrom as provided above in this paragraph).  The
fees payable by Borrowers to a successor Agent shall be the same as those
payable to its predecessor unless otherwise agreed between Borrowers and such
successor.  After the retiring Agent’s resignation hereunder and under the other
Financing Documents, the provisions of this Article and Section 13.12 shall
continue in effect for the benefit of such retiring Agent and its sub-agents in
respect of any actions taken or omitted to be taken by any of them while the
retiring Agent was acting or was continuing to act as Agent.
 
Section 13.13 Payment and Sharing of Payment.
 
(a) Loan Payments.  Payments of principal, interest and fees in respect of the
Loan will be settled on the date of receipt if received by Agent on the last
Business Day of a month or on the Business Day immediately following the date of
receipt if received on any day other than the last Business Day of a month.
 
(b) Return of Payments.
 
(i) If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from a
Borrower and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without setoff,
counterclaim or deduction of any kind, together with interest accruing on a
daily basis at the Federal Funds Rate.
 
(ii) If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to any Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Financing Document, Agent will
not be required to distribute any portion thereof to any Lender.  In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
 
(c) Defaulted Lenders.  The failure of any Defaulted Lender to make any payment
required by it hereunder shall not relieve any other Lender of its obligations
to make payment, but neither any other Lender nor Agent shall be responsible for
the failure of any Defaulted Lender to make any payment required
hereunder.  Notwithstanding anything set forth herein to the contrary, a
Defaulted Lender shall not have any voting or consent rights under or with
respect to any Financing Document or constitute a “Lender” (or be included in
the calculation of “Required Lenders” hereunder) for any voting or consent
rights under or with respect to any Financing Document.
 
(d) Sharing of Payments.  If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of setoff or otherwise)
on account of any Loan (other than pursuant to the terms of Section 2.7(d)) in
excess of its Pro Rata Share of payments entitled pursuant to the other
provisions of this Section 13.13, such Lender shall purchase from the other
Lenders such participations in extensions of credit made by such other Lenders
(without recourse, representation or warranty) as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender
 

 
 
 

CHICAGO/#2321168.11
 
66

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

 

the purchase price to the ratable extent of such recovery, without
interest.  Each Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this clause (d) may, to the fullest extent
permitted by law, exercise all its rights of payment (including pursuant to
Section 11.5) with respect to such participation as fully as if such Lender were
the direct creditor of Borrowers in the amount of such participation).  If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this clause (d) applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this clause (d) to share in the benefits of any recovery on such secured
claim.
 
Section 13.14 Right to Perform, Preserve and Protect.  Upon the occurrence and
continuation of an Event of Default, if any Credit Party fails to perform any
obligation hereunder or under any other Financing Document (after giving effect
to any cure periods provided for in this Agreement or such other Financing
Document), Agent itself may, but shall not be obligated to, cause such
obligation to be performed at Borrowers’ expense.  Agent is further authorized
by Borrowers and the Lenders to make expenditures from time to time which Agent,
in its reasonable business judgment, deems necessary or desirable to
(a) preserve or protect the business conducted by Borrowers, the Collateral, or
any portion thereof, and/or (b) enhance the likelihood of, or maximize the
amount of, repayment of the Loan and other Obligations.  Each Borrower hereby
agrees to reimburse Agent on demand for any and all costs, liabilities and
obligations incurred by Agent pursuant to this Section 13.14.  Each Lender
hereby agrees to indemnify Agent upon demand for any and all costs, liabilities
and obligations incurred by Agent pursuant to this Section 13.14, in accordance
with the provisions of Section 13.6.
 
Section 13.15 Additional Titled Agents.  Except for rights and powers, if any,
expressly reserved under this Agreement to any bookrunner, arranger or to any
titled agent named on the cover page of this Agreement, other than Agent
(collectively, the “Additional Titled Agents”), and except for obligations,
liabilities, duties and responsibilities, if any, expressly assumed under this
Agreement by any Additional Titled Agent, no Additional Titled Agent, in such
capacity, has any rights, powers, liabilities, duties or responsibilities
hereunder or under any of the other Financing Documents.  Without limiting the
foregoing, no Additional Titled Agent shall have nor be deemed to have a
fiduciary relationship with any Lender.  At any time that any Lender serving as
an Additional Titled Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loan, such Lender shall be
deemed to have concurrently resigned as such Additional Titled Agent.
 
Section 13.16 Amendments and Waivers.
 
(a) No provision of this Agreement or any other Financing Document may be
amended, waived or otherwise modified unless such amendment, waiver or other
modification is in writing and is signed or otherwise approved by each Credit
Party that is a party thereto, the Required Lenders, and any other Lender to the
extent required under Section 13.16(b); provided, however, that (i) the Fee
Letter may be amended, or rights or privileges thereunder waived, in a writing
executed only by the parties thereto, and (ii) Agent shall be entitled, in its
sole and absolute discretion, to waive any financial covenant of any Credit
Party.
 
(b) In addition to the required signatures under Section 13.16(a), no provision
of this Agreement or any other Financing Document may be amended, waived or
otherwise modified unless such amendment, waiver or other modification is in
writing and is signed or otherwise approved by the following Persons:
 
(i) if any amendment, waiver or other modification would increase a Lender’s
funding obligations in respect of any Loan, by such Lender; and/or
 

 
 
 

CHICAGO/#2321168.11
 
67

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

 

 
(ii) if the rights or duties of Agent are affected thereby, by Agent;
 
provided, however, that, in each of (i) and (ii) above, no such amendment,
waiver or other modification shall, unless signed by all the Lenders directly
affected thereby, (i) reduce the principal of, rate of interest on or any fees
with respect to any Loan or forgive any principal, interest (other than default
interest) or fees (other than late charges) with respect to any Loan;
(ii) postpone the date fixed for, or waive, any payment (other than any
mandatory prepayment pursuant to Section 2.1(b)(ii)) of principal of any Loan,
or of interest on any Loan (other than default interest) or any fees provided
for hereunder (other than late charges) or for any termination of any
commitment; (iii) change the definition of the term Required Lenders or the
percentage of Lenders which shall be required for Lenders to take any action
hereunder; (iv) release all or substantially all of the Collateral, authorize
any Borrower to sell or otherwise dispose of all or substantially all of the
Collateral or release any Guarantor of all or any portion of the Obligations or
its Guarantee obligations with respect thereto, except, in each case with
respect to this clause (iv), as otherwise may be provided in this Agreement or
the other Financing Documents (including in connection with any disposition
permitted hereunder); (v) amend, waive or otherwise modify this Section 13.16(b)
or the definitions of the terms used in this Section 13.16(b) insofar as the
definitions affect the substance of this Section 13.16(b); or (vi) consent to
the assignment, delegation or other transfer by any Credit Party of any of its
rights and obligations under any Financing Document or release any Borrower of
its payment obligations under any Financing Document, except, in each case with
respect to this clause (vi), pursuant to a merger or consolidation permitted
pursuant to this Agreement.  It is hereby understood and agreed that all Lenders
shall be deemed directly affected by an amendment, waiver or other modification
of the type described in the preceding clauses (iii), (iv), (v) and (vi) of the
preceding sentence.
 
Section 13.17 Assignments and Participations.
 
(a) Assignments.
 
(i) Any Lender may at any time assign to one or more Eligible Assignees all or
any portion of such Lender’s Loan together with all related obligations of such
Lender hereunder.  Except as Agent may otherwise agree, the amount of any such
assignment (determined as of the date of the applicable Assignment Agreement or,
if a “Trade Date” is specified in such Assignment Agreement, as of such Trade
Date) shall be in a minimum aggregate amount equal to $1,000,000 or, if less,
the assignor’s entire interests in the outstanding Loan; provided, however,
that, in connection with simultaneous assignments to two or more related
Approved Funds, such Approved Funds shall be treated as one assignee for
purposes of determining compliance with the minimum assignment size referred to
above.  Borrowers and Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned to an
Eligible Assignee until Agent shall have received and accepted an effective
Assignment Agreement executed, delivered and fully completed by the applicable
parties thereto and a processing fee of $3,500 to be paid by the assigning
Lender; provided, however, that only one processing fee shall be payable in
connection with simultaneous assignments to two or more related Approved Funds.
 
(ii) From and after the date on which the conditions described above have been
met, (A) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder, and (B) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, shall be released from its rights and obligations
 

 
 
 

CHICAGO/#2321168.11
 
68

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

 

hereunder (other than those that survive termination pursuant to
Section 14.1).  Upon the request of the Eligible Assignee (and, as applicable,
the assigning Lender) pursuant to an effective Assignment Agreement, each
Borrower shall execute and deliver to Agent for delivery to the Eligible
Assignee (and, as applicable, the assigning Lender) Notes in the aggregate
principal amount of the Eligible Assignee’s Loan (and, as applicable, Notes in
the principal amount of that portion of the principal amount of the Loan
retained by the assigning Lender).  Upon receipt by the assigning Lender of such
Note, the assigning Lender shall return to Borrower Representative any prior
Note held by it.
 
(iii) Agent, acting solely for this purpose as an agent of Borrower, shall
maintain at its offices located in Bethesda, Maryland a copy of each Assignment
Agreement delivered to it and a register for the recordation of the names and
addresses of each Lender, and the commitments of, and principal amount of the
Loan owing to, such Lender pursuant to the terms hereof.  The entries in such
register shall be conclusive, and Borrower, Agent and Lenders may treat each
Person whose name is recorded therein pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary.  Such register shall be available for inspection by Borrower and any
Lender, at any reasonable time upon reasonable prior notice to Agent.
 
(iv) Notwithstanding the foregoing provisions of this Section 13.17(a) or any
other provision of this Agreement, any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided, however, that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
 
(v) Notwithstanding the foregoing provisions of this Section 13.17(a) or any
other provision of this Agreement, Agent has the right, but not the obligation,
to effectuate assignments of Loan via an electronic settlement system acceptable
to Agent as designated in writing from time to time to the Lenders by Agent (the
“Settlement Service”).  At any time when the Agent elects, in its sole
discretion, to implement such Settlement Service, each such assignment shall be
effected by the assigning Lender and proposed assignee pursuant to the
procedures then in effect under the Settlement Service, which procedures shall
be consistent with the other provisions of this Section 13.17(a).  Each
assigning Lender and proposed Eligible Assignee shall comply with the
requirements of the Settlement Service in connection with effecting any
assignment of Loan pursuant to the Settlement Service.  If so elected by each of
Agent and the Borrowers, Agent’s and the Borrowers’ approval of such Eligible
Assignee shall be deemed to have been automatically granted with respect to any
transfer effected through the Settlement Service.  Assignments and assumptions
of the Loan shall be effected by the provisions otherwise set forth herein until
Agent notifies Lenders of the Settlement Service as set forth herein.
 
(b) Participations.  Any Lender may at any time, without the consent of, or
notice to, any Borrower or Agent, sell to one or more Persons participating
interests in its Loan, commitments or other interests hereunder (any such
Person, a “Participant”).  In the event of a sale by a Lender of a participating
interest to a Participant, (i) such Lender’s obligations hereunder shall remain
unchanged for all purposes, (ii) Borrowers and Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations hereunder, and (iii) all amounts payable by each Borrower shall be
determined as if such Lender had not sold such participation and shall be paid
directly to such Lender.  Each Borrower agrees that if amounts outstanding under
this Agreement are due and
 

 
 
 

CHICAGO/#2321168.11
 
69

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

 

payable (as a result of acceleration or otherwise), each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided, however, that such right of set-off shall be subject to the
obligation of each Participant to share with Lenders, and Lenders agree to share
with each Participant, as provided in Section 11.5.
 
(c) Replacement of Lenders.  Within thirty (30) days after: (i) receipt by Agent
of notice and demand from any Lender for payment of additional costs as provided
in Section 2.7(d), which demand shall not have been revoked, (ii) any Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.7(a), (iii) any
Lender is a Defaulted Lender, and the circumstances causing such status shall
not have been cured or waived; or (iv) any failure by any Lender to consent to a
requested amendment, waiver or modification to any Financing Document in which
Required Lenders have already consented to such amendment, waiver or
modification but the consent of each Lender, or each Lender affected thereby, is
required with respect thereto (each relevant Lender in the foregoing clauses (i)
through (iv) being an “Affected Lender”) each of Borrower Representative and
Agent may, at its option, notify such Affected Lender and, in the case of
Borrowers’ election, the Agent, of such Person’s intention to obtain, at
Borrowers’ expense, a replacement Lender (“Replacement Lender”) for such Lender,
which Replacement Lender shall be an Eligible Assignee and, in the event the
Replacement Lender is to replace an Affected Lender described in the preceding
clause (iv), such Replacement Lender consents to the requested amendment, waiver
or modification making the replaced Lender an Affected Lender.  In the event
Borrowers or Agent, as applicable, obtains a Replacement Lender within ninety
(90) days following notice of its intention to do so, the Affected Lender shall
sell, at par, and assign all of its Loan and funding commitments hereunder to
such Replacement Lender in accordance with the procedures set forth in
Section 13.17(a); provided, however, that (i) Borrowers shall have reimbursed
such Lender for its increased costs and additional payments for which it is
entitled to reimbursement under Section 2.7(a) or Section 2.7(d), as applicable,
of this Agreement through the date of such sale and assignment, and (ii)
Borrowers shall pay to Agent the $3,500 processing fee in respect of such
assignment.  In the event that a replaced Lender does not execute an Assignment
Agreement pursuant to Section 13.17(a) within five (5) Business Days after
receipt by such replaced Lender of notice of replacement pursuant to this
Section 13.17(c) and presentation to such replaced Lender of an Assignment
Agreement evidencing an assignment pursuant to this Section 13.17(c), such
replaced Lender shall be deemed to have consented to the terms of such
Assignment Agreement, and any such Assignment Agreement executed by Agent, the
Replacement Lender and, to the extent required pursuant to Section 13.17(a),
Borrowers, shall be effective for purposes of this Section 13.17(c) and
Section 13.17(a).  Upon any such assignment and payment, such replaced Lender
shall no longer constitute a “Lender” for purposes hereof, other than with
respect to such rights and obligations that survive termination as set forth in
Section 14.1.
 
(d) Credit Party Assignments.  No Credit Party may assign, delegate or otherwise
transfer any of its rights or other obligations hereunder or under any other
Financing Document without the prior written consent of Agent and each Lender.
 
Section 13.18 Buy-Out Upon Refinancing.  MCF shall have the right to purchase
from the other Lenders all of their respective interests in the Loan at par in
connection with any refinancing of the Loan upon one or more new economic terms,
but which refinancing is structured as an amendment and restatement of the Loan
rather than a payoff of the Loan.
 
Section 13.19 Lender’s Rights to Offset, Set-Off.  Notwithstanding anything to
the contrary contained in Section 11.5, each Lender hereby acknowledges that the
exercise by any Lender of offset, set-off, banker's lien or similar rights
against any deposit or other indebtedness of Borrowers whether or not located in
any state with certain laws restricting lenders from pursuing multiple
collection methods
 

 
 
 

CHICAGO/#2321168.11
 
70

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

 

could result under such laws in significant impairment of the ability of all
Lenders to recover further amounts in respect of the Loan.  THEREFORE,
EACH LENDER AGREES THAT NO LENDER SHALL EXERCISE ANY SUCH RIGHT OF SET-OFF,
BANKER'S LIEN, OR OTHERWISE, AGAINST ANY ASSETS OF ANY BORROWER (INCLUDING ALL
GENERAL OR SPECIAL, TIME OR DEMAND, PROVISIONAL OR OTHER DEPOSITS AND OTHER
INDEBTEDNESS OWING BY SUCH LENDER TO OR FOR THE CREDIT OR THE ACCOUNT OF ANY
BORROWER) WITHOUT THE PRIOR WRITTEN CONSENT OF AGENT AND THE REQUIRED LENDERS.
 
Section 13.20 Definitions.  As used in this Article 13, the following terms have
the following meanings:
 
“Additional Titled Agents” has the meaning set forth in Section 13.15.
 
“Affected Lender” has the meaning set forth in Section 13.17(c).
 
“Approved Fund” means any (a) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the Ordinary Course of Business or (b) any Person (other than a natural person)
which temporarily warehouses loans for any Lender or any entity described in the
preceding clause (a) and that, with respect to each of the preceding clauses (a)
and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a
Lender, or (iii) a Person (other than a natural person) or an Affiliate of a
Person (other than a natural person) that administers or manages a Lender.
 
“Assignment Agreement” means an assignment agreement in form and substance
acceptable to Agent.
 
“Defaulted Lender” means, so long as such failure shall remain in existence and
uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement, settlement or reimbursement required pursuant to
the terms of any Financing Document.
 
“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by Agent; provided, however, that notwithstanding the foregoing, “Eligible
Assignee” shall not include any Borrower or any of a Borrower’s Affiliates.
 
“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided, however, that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day, and (b) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Agent on such day on such transactions
as determined by Agent.
 
“Replacement Lender” has the meaning set forth in Section 13.17(c).
 
“Settlement Service” has the meaning set forth in Section 13.17(a)(v).
 

 
 
 

CHICAGO/#2321168.11
 
71

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

 

 
ARTICLE 14 – MISCELLANEOUS
 
Section 14.1 Survival.  All agreements, representations and warranties made
herein and in every other Financing Document shall survive the execution and
delivery of this Agreement and the other Financing Documents and the other
Operative Documents.  The provisions of Sections 2.7 and 14.15 and Article 13
shall survive the payment of the Obligations (both with respect to any Lender
and all Lenders collectively) and any termination of this Agreement, and any
judgment with respect to any Obligations, including any final foreclosure
judgment with respect to any Security Document, and no unpaid or unperformed,
current or future, Obligations will merge into any such judgment.
 
Section 14.2 No Waivers.  No failure or delay by Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.  Any reference in any Financing Document to the “continuing” nature of any
Event of Default shall not be construed as establishing or otherwise indicating
that any Borrower or any other Credit Party has the independent right to cure
any such Event of Default, but is rather presented merely for convenience should
such Event of Default be waived in accordance with the terms of the applicable
Financing Documents.
 
Section 14.3 Notices.
 
(a) All notices, requests and other communications to any party hereunder shall
be in writing (including prepaid overnight courier, facsimile transmission or
similar writing) and shall be given to such party at its address, facsimile
number or e-mail address set forth on the signature pages hereof (or, in the
case of any such Lender who becomes a Lender after the date hereof, in an
assignment agreement or in a notice delivered to Borrower Representative and
Agent by the assignee Lender forthwith upon such assignment) or at such other
address, facsimile number or e-mail address as such party may hereafter specify
for the purpose by notice to Agent and Borrower Representative; provided,
however, that notices, requests or other communications shall be permitted by
electronic means only in accordance with the provisions of Section 14.3(b) and
(c).  Each such notice, request or other communication shall be effective (i) if
given by facsimile, when such notice is transmitted to the facsimile number
specified by this Section and the sender receives a confirmation of transmission
from the sending facsimile machine, or (ii) if given by mail, prepaid overnight
courier or any other means, when received or when receipt is refused at the
applicable address specified by this Section 14.3(a).
 
(b) Notices and other communications to the parties hereto may be delivered or
furnished by electronic communication (including facsimile, e-mail and Internet
or intranet websites) pursuant to procedures approved from time to time by
Agent, provided, however, that the foregoing shall not apply to notices sent
directly to any Lender if such Lender has notified the Agent that it is
incapable of receiving notices by electronic communication.  The Agent or
Borrower Representative may, in their discretion, agree to accept notices and
other communications to them hereunder by electronic communications pursuant to
procedures approved by it, provided, however, that approval of such procedures
may be limited to particular notices or communications.
 
(c) Unless the Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of
an acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgment), and (ii) notices or communications posted to an Internet or
intranet website
 

 
 
 

CHICAGO/#2321168.11
 
72

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

 

shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor; provided, however, that if any such notice or other communication is
not sent or posted during normal business hours, such notice or communication
shall be deemed to have been sent at the opening of business on the next
Business Day.
 
Section 14.4 Severability.  In case any provision of or obligation under this
Agreement or any other Financing Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
 
Section 14.5 Headings.  Headings and captions used in the Financing Documents
(including the Exhibits, Schedules and Annexes hereto and thereto) are included
for convenience of reference only and shall not be given any substantive effect.
 
Section 14.6 Confidentiality.
 
(a)           Borrower agrees (i) not to transmit or disclose provisions of any
Financing Document to any Person (other than to Borrowers’ advisors and officers
on a need-to-know basis or as otherwise may be required by Law) without Agent’s
prior written consent, (ii) to inform all Persons of the confidential nature of
the Financing Documents and to direct them not to disclose the same to any other
Person and to require each of them to be bound by these provisions.
 
(b)           Agent and each Lender shall hold all non-public information
regarding the Credit Parties and their respective businesses identified as such
by Borrowers and obtained by Agent or any Lender pursuant to the requirements
hereof in accordance with such Person’s customary procedures for handling
information of such nature, except that disclosure of such information may be
made (i) to their respective agents, employees, Affiliates, attorneys, auditors,
professional consultants, rating agencies, insurance industry associations and
portfolio management services, (ii) to prospective transferees or purchasers of
any interest in the Loan, the Agent or a Lender; provided, however, that any
such Persons are bound by obligations of confidentiality, (iii) as required by
Law, subpoena, judicial order or similar order and in connection with any
litigation, (iv) as may be required in connection with the examination, audit or
similar investigation of such Person; and (v) to a Person that is a trustee,
investment advisor, collateral manager, servicer, noteholder or secured party in
a Securitization (as hereinafter defined) in connection with the administration,
servicing and reporting on the assets serving as collateral for such
Securitization.  For the purposes of this Section, “Securitization” shall mean
(A) the pledge of the Loans as collateral security for loans to a Lender or (B)
a public or private offering by a Lender or any of its Affiliates or their
respective successors and assigns, of securities which represent an interest in,
or which are collateralized, in whole or in part, by the Loan.  Confidential
information shall include only such information identified as such at the time
provided to Agent and shall not include information that either:  (y) is in the
public domain, or becomes part of the public domain after disclosure to such
Person through no fault of such Person, or (z) is disclosed to such Person by a
Person other than a Credit Party; provided, however, Agent does not have actual
knowledge that such Person is prohibited from disclosing such information.  The
obligations of Agent and Lenders under this Section 14.6 shall supersede and
replace the obligations of Agent and Lenders under any confidentiality agreement
in respect of this financing executed and delivered by Agent or any Lender prior
to the date hereof.
 
Section 14.7 Waiver of Consequential and Other Damages.  To the fullest extent
permitted by applicable law, no Borrower shall assert, and each Borrower hereby
waives, any claim against any Indemnitee (as defined below), on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of this
 

 
 
 

CHICAGO/#2321168.11
 
73

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

 

Agreement, any other Financing Document or any agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof.  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Financing Documents or the transactions contemplated hereby or thereby.
 
Section 14.8 GOVERNING LAW; SUBMISSION TO JURISDICTION.  THIS AGREEMENT, EACH
NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR
THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR
OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.  EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN MONTGOMERY COUNTY, MARYLAND AND
IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS
SHALL BE LITIGATED IN SUCH COURTS.  EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS
TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
 
Section 14.9 WAIVER OF JURY TRIAL.  EACH BORROWER, AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  EACH BORROWER, AGENT AND
EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO
THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH BORROWER, AGENT AND
EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.
 
Section 14.10 Publication; Advertisement.
 
(a) Publication.  No Credit Party will directly or indirectly transmit or
disclose any term or provision of any Financing Document to any Person, publish,
disclose or otherwise use in any public disclosure, advertising material,
promotional material, press release or interview, any reference to the name,
logo or any trademark of MCF or any of its Affiliates or any reference to this
Agreement or the financing evidenced hereby, in any case except (i) as required
by Law, subpoena or judicial or similar order, in which case the applicable
Credit Party shall give Agent prior written notice of such publication or other
disclosure, or (ii) with MCF’s prior written consent.   
 

 
 
 

CHICAGO/#2321168.11
 
74

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

 

 
(b) Advertisement.  Each Lender and each Credit Party hereby authorizes MCF to
publish the name of such Lender and Credit Party, the existence of the financing
arrangements referenced under this Agreement, the primary purpose and/or
structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which MCF elects to submit for publication.  In
addition, each Lender and each Credit Party agrees that MCF may provide lending
industry trade organizations with information necessary and customary for
inclusion in league table measurements after the Closing Date.  With respect to
any of the foregoing, MCF shall provide Borrowers with an opportunity to review
and confer with MCF regarding the contents of any such tombstone, advertisement
or information, as applicable, prior to its submission for publication and,
following such review period, MCF may, from time to time, publish such
information in any media form desired by MCF, until such time that Borrowers
shall have requested MCF cease any such further publication.
 
Section 14.11 Counterparts; Integration.  This Agreement and the other Financing
Documents may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.  Signatures by facsimile or by electronic mail delivery of
an electronic version (e.g., .pdf or .tif file) of an executed signature
page shall bind the parties hereto.  This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
 
Section 14.12 No Strict Construction.  The parties hereto have participated
jointly in the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
 
Section 14.13 Time.  Time is of the essence in each Borrower’s and each other
Credit Party’s performance under this Agreement and all other Financing
Documents.
 
Section 14.14 Lender Approvals.  Unless expressly provided herein to the
contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with
respect to any matter that is the subject of this Agreement, the other Financing
Documents may be granted or withheld by Agent and Lenders in their sole and
absolute discretion and credit judgment.
 
Section 14.15 Expenses; Indemnity.
 
(a) Borrowers agree to pay all reasonable legal, audit and appraisal fees and
all other reasonable out-of-pocket charges and expenses incurred by Agent and
Lenders (including the fees and expenses of Agent’s counsel, advisors and
consultants) in connection with the negotiation, preparation, legal review,
syndication and execution of each of the Financing Documents, including but not
limited to UCC and judgment lien searches and UCC filings and fees for
post-closing UCC and judgment lien searches.  In addition, Borrowers shall pay
all such fees and expenses associated with any amendments, modifications and
terminations to the Financing Documents following closing.  If Agent or any
Lender uses in-house counsel for any of these purposes, Borrowers further agree
that the Obligations include reasonable charges for such work commensurate with
the fees that would otherwise be charged by outside legal counsel selected by
Agent or such Lender for the work performed.
 

 
 
 

CHICAGO/#2321168.11
 
75

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

 

 
(b) Borrowers agree to pay all out-of-pocket charges and expenses incurred by
Agent (including the fees and expenses of Agent’s counsel, advisers and
consultants) in connection with the administration of this Agreement and the
other Financing Documents and the credit facilities provided hereunder and
thereunder, the administration, enforcement, protection or preservation of any
right or claim of Agent, the termination of this Agreement, the termination of
any Liens of Agent on the Collateral, or the collection of any amounts due under
the Financing Documents, including any such charges and expenses incurred in
connection with any “work-out” or with any proceeding under the Bankruptcy Code
with respect to any Credit Party.  If Agent uses in-house counsel for any of
these purposes (i.e., for any task in connection with the enforcement,
protection or preservation of any right or claim of Agent and Lenders and the
collection of any amounts due under the Financing Documents or in connection
with any other purpose mentioned in the foregoing sentence), Borrowers further
agree that the Obligations include reasonable charges for such work commensurate
with the fees that would otherwise be charged by outside legal counsel selected
by Agent for the work performed.
 
(c) Borrowers hereby indemnify and agree to defend (with counsel acceptable to
Agent) and hold harmless Agent and Lenders, their partners, officers, agents and
employees (collectively in the singular, “Indemnitee”) from and against any
liability, loss, cost, expense (including reasonable attorneys’ fees and
expenses for both in-house and outside counsel), claim, damage, suit, action or
proceeding ever suffered or incurred by any Indemnitee or in which an Indemnitee
may ever be or become involved (whether as a party, witness or otherwise)
(i) arising from any Credit Party’s failure to observe, perform or discharge any
of its covenants, obligations, agreements or duties under the Financing
Documents, (ii) arising from the breach of any of the representations or
warranties contained in any Financing Document, (iii) arising by reason of this
Agreement, the other Financing Documents or the transactions contemplated hereby
or thereby, or (iv) relating to claims of any Person with respect to the
Collateral; provided, however, Borrower shall not be liable under this
Section 14.15(c) to the extent such loss is solely related to Indemnitee’s gross
negligence or willful misconduct.
 
(d) Notwithstanding any contrary provision in this Agreement, the obligations of
Borrowers under this Section 14.15 shall survive the payment in full of the
Obligations and the termination of this Agreement.  NO INDEMNITEE SHALL BE
RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY FINANCING
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.
 
Section 14.16 Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of Borrowers and Agent and each Lender and their respective
successors and permitted assigns.
 
Section 14.17 USA PATRIOT Act Notification.  Agent (for itself and not on behalf
of any Lender) and each Lender hereby notifies Borrowers that pursuant to the
requirements of the USA PATRIOT Act, it is required to obtain, verify and record
certain information and documentation that identifies Borrowers, which
information includes the name and address of Borrower and such other information
that will allow Agent or such Lender, as applicable, to identify Borrowers in
accordance with the USA PATRIOT Act.
 

 
 
 

CHICAGO/#2321168.11
 
76

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

 

 
Section 14.18 Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition or other proceeding be
filed by or against any Credit Party for liquidation or reorganization, should
any Credit Party become insolvent or make an assignment for the benefit of any
creditor or creditors or should an interim receiver, receiver, receiver and
manager or trustee be appointed for all or any significant part of any Credit
Party’s assets, and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a fraudulent preference reviewable transaction or otherwise, all as
though such payment or performance had not been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
 
Section 14.19 No Impairment.  Each Borrower further agrees that its obligations
hereunder shall not be impaired in any manner whatsoever by any bankruptcy,
extensions, moratoria or other relief granted to any other Borrowers pursuant to
any statute presently in force or hereafter enacted.
 
[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]
 

 
 
 

CHICAGO/#2321168.11
 
77

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

 

 
(Signature Page to Credit and Security Agreement)
 

IN WITNESS WHEREOF, intending to be legally bound, and intending that this
Agreement constitute an agreement executed under seal, each of the parties have
caused this Agreement to be executed under seal the day and year first above
mentioned.
 
BORROWER:
EMERICHIP WALLA WALLA LLC, a Delaware limited liability company
By:  EMERITUS CORPORATION, a Washington corporation
Its: Sole Member
By: /s/ Eric Mendelsohn                                                   (SEAL)
 Eric Mendelsohn
 Senior Vice President Corporate Development
 
Address:
3131 Elliot Avenue, Suite 500
Seattle, WA 98121
Attention: Eric Mendelsohn
Facsimile: (___) ___-____
E-Mail: eMendelsohn@emeritus.com

[SIGNATURES CONTINUE ON FOLLOWING PAGE(S)]
 

     

CHICAGO/#2321168.11
 
 

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

 

 
(Signature Page to Credit and Security Agreement)
 

AGENT:
MIDCAP FUNDING VIII, LLC, a Delaware limited liability company
 
By: /s/ Brett
Robinson                                                                   
Brett Robinson
Managing Director
 
Address:
7255 Woodmont Avenue, Suite 200
Bethesda, MD  20814
Attention:  Account Manager for Emerichip at Garrison Creek Lodge
Facsimile:  301-941-1450
 
Payment Account Designation:
SunTrust Bank
25 Park Place
Atlanta, Georgia 30303
ABA #:  061-000-104
Account Name:  MidCap Funding VIII, LLC
Account #:  1000143045606
Attention:  Account Manager for Emerichip at Garrison Creek Lodge

[SIGNATURES CONTINUE ON FOLLOWING PAGE(S)]
 

     

CHICAGO/#2321168.11
 
 

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

 

 
(Signature Page to Credit and Security Agreement)
 

LENDERS:
MIDCAP FUNDING VIII, LLC, a Delaware limited liability company
By:  /s/ Brett
Robinson                                                                  
Brett Robinson
Managing Director
 
Address:
7255 Woodmont Avenue, Suite 200
Bethesda, MD  20814
Attention:  Account Manager for Emerichip at Garrison Creek Lodge
Facsimile:  301-941-1450
   

       

     

CHICAGO/#2321168.11
 
 

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

 

ANNEXES, EXHIBITS AND SCHEDULES
 
ANNEXES
 
Annex A
Commitment Annex
EXHIBITS
 
Exhibit A
Single Purpose Entity Requirements
   
Exhibit B
Form of Compliance Certificate
Exhibit C
Form of Payment Notification
 
SCHEDULES
 
Schedule 3.1
Existence, Organizational ID Numbers, Foreign Qualification, Prior Names
Schedule 3.4
Capitalization
Schedule 3.6
Litigation
Schedule 3.15
Brokers
Schedule 3.17
Material Contracts
Schedule 3.18
Environmental Compliance
Schedule 4.4
Insurance Requirements
Schedule 5.1
Permitted Indebtedness; Permitted Contingent Obligations
Schedule 5.8
Transactions with Affiliates
Schedule 5.14
List of Deposit Accounts and Securities Accounts
Schedule 7.3
Post Closing Obligations
Schedule 8.1
Regulatory Disclosures
Schedule 8.2
Management Agreements

     

CHICAGO/#2321168.11
 
 

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

 

Annex A to Credit Agreement (Commitment Annex)
 
Lender
 
Loan Commitment Amount
   
Loan Commitment Percentage
 
MidCap Funding VIII, LLC
  $ 6,800,000.00       100 %                  
TOTALS
  $ 6,800,000.00       100 %

 
Annex A – Page 1
 

CHICAGO/#2321168.11
 
 

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

 

Exhibit A to Credit Agreement (Single Purpose Entity Requirements)
 
1. The Borrowers’ business and purposes are and will continue to be limited to
the following:
 
(a) to enter into and perform its obligations under this Agreement and the other
Operative Documents;
 
(b) to acquire, own, hold, lease, maintain, develop and improve the Projects;
 
(c) to sell, transfer, service, convey, dispose of, pledge, assign, borrow money
against, finance or otherwise deal with the Projects to the extent permitted
under the Financing Documents;
 
(d) to refinance the Projects in connection with a permitted repayment of the
Loan; and
 
(e) to engage in any lawful act or activity and to exercise any powers permitted
to entities of the type (e.g., limited partnerships, limited liability
companies, corporations, as applicable to each Borrower) formed under the laws
of the state of organization of such Person as of the date of this Agreement
that are related or incidental to and necessary, convenient or advisable for the
accomplishment of the above mentioned purposes.
 
2. Borrowers shall do (or cause to be done) all things necessary in order to
preserve their existence to the fullest extent permitted by law.  Borrowers
shall do (or cause to be done) all of the following:
 
(a) not own any asset or property other than (i) a fee interest in the Projects,
and (ii) incidental personal property necessary for the ownership or operation
thereof;
 
(b) not enter into any contract or agreement with any Affiliate of the
Borrowers, any constituent party of the Borrowers, any guarantor or indemnitor
under any of the Financing Documents or any Affiliate of any such constituent
party or guarantor or indemnitor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm’s-length basis with third parties other than any such party;
 
(c) maintain their intention to remain solvent and pay their debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from their assets, to the extent of their assets, as the same shall become due;
 
(d) do or cause to be done all things necessary to observe organizational
formalities of the Borrowers and preserve their existence, and not terminate or
fail to comply with any of the provisions in this Section;
 
(e) maintain all of their books, records, financial statements and bank accounts
separate from those of their Affiliates and any other person or entity;
provided, however, that the Borrowers’ financial position, assets, results of
operations and cash flows may be included in a consolidated financial statement
of an Affiliate of the Borrowers in accordance with GAAP so long as any such
consolidated financial statement contains a note indicating that the Borrowers
and their Affiliates comprising the consolidated group are separate legal
entities;

 
Exhibit A – Page 1
 

CHICAGO/#2321168.11
 
 

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

 

 
 
 
(f) hold themselves out to the public as a legal entities separate and distinct
from each other and from any other entity (including any Affiliate of the
Borrowers, any guarantor or any constituent party of the Borrowers), correct any
known misunderstanding regarding their status as a separate entities, conduct
business in their own name, and not identify themselves or any of their
Affiliates as a division or part of the other; provided, however, that all
Borrowers shall be permitted to, and shall at all times, hold themselves out to
the public as entities that operate as a common enterprise;
 
(g) to the extent of cash flow available from ownership of the Projects and
other business of the Borrowers, intend to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of their size and
character and in light of their contemplated business operations;
 
(h) not commingle the funds and other assets of the Borrowers with those of any
Affiliate or constituent party, any guarantor or any other person, except for
funds deposited into any lockbox accounts or other cash management arrangements
required under this Agreement;
 
(i) maintain their assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any Affiliate or constituent party, any guarantor or any other person or
entity;
 
(j) not permit any Affiliate or constituent party independent access to the
Borrowers’ bank accounts;
 
(k) pay the salaries of their own employees, if any;
 
(l) compensate each of their consultants and agents, if any;
 
(m) maintain an arm’s-length relationship with their Affiliates;
 
(n) allocate fairly and reasonably shared expenses, if any, including shared
office space;
 
(o) not pledge any of their assets for the benefit of any person or entity other
than Agent;
 
(p) have no obligation to indemnify their equity owners or their respective
officers, directors or members, as the case may be, except to the extent that
payment of such obligation is fully subordinated to the payment of the
Obligations; provided, however, the foregoing shall not apply where the
indemnity is paid from third party funds, such as insurance proceeds;
 
(q) maintain records, books of account and bank accounts separate and apart from
any other person or entity (other than any lockbox account or other cash
management arrangement required hereunder); and file their own tax returns, if
any, as may be required under applicable law, provided, however, that the
Borrowers may file their federal tax return on a consolidated basis); and
maintain their books, records, resolutions and agreements as official records;
and
 
(r) not make any loans or advances to any third party, and not acquire
obligations or securities of their Affiliates, except, in each case, as
permitted under the Financing Documents.
 
3. So long as any Credit Exposure shall exist, the Borrowers shall not do (or
cause to be done) any of the following, except to the extent otherwise permitted
under the Financing Documents (if at all):
 
 

 
Exhibit A – Page 2
 

CHICAGO/#2321168.11
 
 

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

 

 
 
(a) assume, guarantee, become obligated for, or hold themselves out to be
responsible for the debts or obligations of any other person or entity or the
decisions or actions respecting the daily business or affairs of any other
person;
 
(b) engage, directly or indirectly, in any business other than the actions
required or permitted to be performed under the Borrower’s Organizational
Documents (as the same may be amended or supplemented from time to time with
Agent’s consent);
 
(c) incur, create or assume any indebtedness other than the Loan;
 
(d) make or permit to remain outstanding any loan or advance to, or own or
acquire any stock or securities of, any person or entity;
 
(e) form, acquire or hold any Subsidiary (whether corporate, partnership,
limited liability company or other); or
 
(f) to the fullest extent permitted by law, engage in any dissolution,
liquidation, consolidation, merger or sale of all or substantially all of their
assets.
 

 
Exhibit A – Page 3
 

CHICAGO/#2321168.11
 
 

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

 

Exhibit B to Credit Agreement (Form of Compliance Certificate)
 

 
COMPLIANCE CERTIFICATE
 
This Compliance Certificate is given by _____________________, a Responsible
Officer of Emerichip Walla Walla LLC (“Borrower”), pursuant to that certain
Credit Agreement dated as of July 13, 2012 among Borrower, the Lenders from time
to time party thereto and MidCap Funding VIII, LLC, as Agent for Lenders (as
such agreement may have been amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”).  Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.
 
The undersigned Responsible Officer hereby certifies to Agent and Lenders that:
 
(a) The financial statements delivered with this certificate in accordance with
Section 4.1 of the Credit Agreement fairly present in all material respects the
results of operations and financial condition of Borrower as of the dates and
the accounting period covered by such financial statements;
 
(b) I have reviewed the terms of the Credit Agreement and have made, or caused
to be made under my supervision, a review in reasonable detail of the
transactions and conditions of Borrower during the accounting period covered by
such financial statements, and  such review has not disclosed the existence
during or at the end of such accounting period, and I have no knowledge of the
existence as of the date hereof, of any condition or event that constitutes a
Default or an Event of Default, except as set forth in Schedule 1 hereto, which
includes a description of the nature and period of existence of such Default or
an Event of Default and what action Borrower has taken, is undertaking and
proposes to take with respect thereto;
 
(c) Borrower is in compliance with the covenants contained in Article 6 of the
Credit Agreement and in any other Financing Documents, as demonstrated by the
calculation of such covenants as evidenced on the worksheets attached hereto as
Schedule 2, each of which are true, correct and complete for the monthly period
ending ________________, 201__;
 
(d) Except as noted on Schedule 3 attached hereto, the Credit Agreement contains
a complete and accurate list of all business locations of Borrower and all names
under they currently conduct business, and specifically notes any changes in the
names under which Borrower conducts business;
 
(e) Except as noted on Schedule 4 attached hereto, the undersigned has no
knowledge of (i) any federal or state tax liens having been filed against
Borrower or any Collateral, or (ii) any failure of  Borrower to make required
payments of withholding or other tax obligations during the accounting period to
which the attached statements pertain or any subsequent period;
 
(f)   Schedule 5.14 of the Credit Agreement contains a complete and accurate
statement of all deposit or investment accounts maintained by Borrower;
 
(g) Except as described on Schedule 5 attached hereto:
 
(i) there are no current, pending or threatened proceedings relating to a
condemnation or other public taking of any Project;
 

 
Page 1
 

CHICAGO/#2321168.11
 
 

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

 

 
(ii) no Project has suffered any casualty or other damage or loss of the type
typically covered by hazard insurance;
 
(iii) all insurance required to be maintained by any applicable Credit Parties
under the Credit Agreement is in force and premiums therefor have been paid as
and when due, and no Credit Party has made any claims thereunder;
 
(iv) all real estate taxes or other assessments pertaining to such real property
have been paid as and when due and Borrower maintains adequate reserves or
escrows to pay all such taxes and assessments as they come due;
 
(v) the undersigned has no knowledge of any current, pending or threatened
changes to the zoning classification or permitted uses of any Project; and
 
(h) Except as described in the Credit Agreement or in Schedule 6 attached
hereto, the undersigned has no knowledge of any current, pending or threatened:
 
(i) litigation against Borrower;
 
(ii) inquiries, investigations or proceedings concerning the business affairs,
practices, licensing or reimbursement entitlements of Borrower;
 
(iii) default by Borrower under any Material Contract to which it is a party,
including, without limitation, any Operating Lease; and
 
(iv) right of set-off, claim, counterclaim, withholding or other defenses to
which any of the Collateral or Agent’s rights with respect to the Collateral are
subject or that exist against such sums and Borrower’s obligations under the
Financing Documents.
 

 
Page 2
 

CHICAGO/#2321168.11
 
 

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

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, 201__.
 

 
EMERICHIP WALLA WALLA LLC
By:                                                              
Name:                                                             
Title: of Borrower Representative

 
Page 
 

CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Exhibit C to Credit Agreement (Form of Payment Notification)
 

 
PAYMENT NOTIFICATION
 
This Payment Notification is given by _____________________, a Responsible
Officer of Emerichip Walla Walla LLC (“Borrower”), pursuant to that certain
Credit Agreement dated as of July 13, 2012 among Borrower, the Lenders from time
to time party thereto and MidCap Funding VIII, LLC, as Agent for Lenders (as
such agreement may have been amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”).  Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.
 
Please be advised that funds in the amount of $_____________ will be wire
transferred to Agent on _________, 201_.  Such funds shall constitute [an
optional] [a mandatory] prepayment of the Loan, with such prepayments to be
applied in the manner specified in Section 2.1(e)(i).  Such mandatory prepayment
is being made pursuant to Section ____ of the Credit Agreement.
 
Fax to MCF Operations 301-941-1450 no later than noon Eastern time
 
 
Note:
Funds must be received in the Payment Account no later than noon Eastern time
for same day application.

 
IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, 201__.
 

 
 EMERICHIP WALLA WALLA LLC
By:                                                              
Name:                                                             
Title: of Borrower Representative
 

 
Exhibit C – Page 1
 

CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.1 - Existence, Organizational Identification Numbers, Foreign
Qualification, Prior Names
 

Emerichip Walla Walla LLC
Emeritus Corporation
State of Organization: Delaware
State of Organization: Washington
Foreign Qualification: Washington
Foreign Qualification: See attached
UBI #602-749-363
UBI #601-485-049
Prior Name:  None
Prior Name:  None
       

     

CHICAGO/#2321168.11
 
 

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

 

Foreign Jurisdictions
AL
SC
AZ
TN
AR
TX
CA
UT
CO
VA
CT
VT
DE
WI
FL
WV
GA
WY
ID
 
IL
 
IN
 
IA
 
KS
 
KY
 
LA
 
MD
 
MA
 
MN
 
MS
 
MO
 
MT
 
ND
 
NE
 
NM
 
NV
 
NH
 
NJ
 
NY
 
NC
 
OH
 
OK
 
OR
 
PA
 

 

     

CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.4 – Capitalization
 
Credit Party
Type of Company
Owner
Emerichip Walla Walla LLC
a Delaware limited liability company
Emeritus Corporation,
Emeritus Corporation
a Washington corporation
public entity

 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.6 – Litigation
 
None.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.15 – Brokers
 
None.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.17 – Material Contracts
 
Master Lease and Management Agreement dated August 15, 2007, by and between
Operator, as tenant, and Borrower, as landlord, as amended as of the date
hereof.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 3.18 – Environmental Compliance
 
None.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 4.4 – Insurance Requirements
 
See attached certificates.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 5.1 – Permitted Indebtedness; Permitted Contingent Obligations
 
None.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 5.8 – Transactions with Affiliates
 
Master Lease and Management Agreement dated August 15, 2007, by and between
Operator, as tenant, and Borrower, as landlord, as amended as of the date
hereof.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 5.14 – List of Deposit Accounts
 
Account Name                                            Emeritus Corporation dba
Garrison Creek Lodge
Account Number                                           xxxxxxxxxx
Bank                                                            Wells Fargo
Bank Address                                             205 108th Avenue NE,
Suite 600
                       Bellevue, WA 98004

 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 7.3 – Post Closing Obligations
 
1.           On or before the thirtieth (30th) day following the Closing Date,
Borrower shall provide file-stamped copies of UCC -3 terminations in connection
financing statements naming Borrower, as debor, and Capmark Bank, as secured
party, with the Delaware Secretary of State as Filing Number 73459293 and the
recorder’s office of Walla Walla County, Washington as document number
2007-09943.
 
2.           On or before the thirtieth (30th) day following the Closing Date,
Borrower and Principal shall execute and deliver an insurance side letter
regarding the umbrella insurance policy maintained by Principal in order to
address, among other things, the allocation of insurance premiums to the
Project, which side letter shall be in form and substance acceptable to Agent.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 8.1 – Regulatory Disclosures
 
None.
 

     

 
 
CHICAGO/#2321168.11
 
 

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

 

MIDCAP SMALL LOGO [midcapsmalllogo.jpg]
 
Schedule 8.2 – Managers; Management Agreements
 
Emeritus Corporation pursuant to that certain Master Lease and Management
Agreement dated August 15, 2007, by and between Emeritus Corporation and
Borrower, as amended as of the date hereof.

 
Schedule 8.2 – Page 1
 

CHICAGO/#2321168.11
 
 

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