**Exhibit 10.4**

 

**MASTER CREDIT FACILITY AGREEMENT**

 

**BY AND BETWEEN**

 

**SNH FM FINANCING LLC,**

 

**AND**

 

**CITIBANK, N.A.**

 

**DATED AS OF**

 

**August 4,2009**

 

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TABLE OF CONTENTS

 
| ** **  | ** **                                             | **Page** |
|-------------|--------------------------------------------------------|----------|
|        |                                                   |     |
| ARTICLE  1  | THE  TERM LOAN                                         | 2        |
|        |                                                   |     |
| ARTICLE  2  | ALLOCABLE  LOAN AMOUNT/SUPPLEMENTAL LOANS              | 2        |
|        |                                                   |     |
| ARTICLE  3  | VALUATIONS/COLLATERAL  CHANGES                         | 4        |
|        |                                                   |     |
| ARTICLE  4  | RESERVED                                               | 9        |
|        |                                                   |     |
| ARTICLE  5  | RESERVED                                               | 9        |
|        |                                                   |     |
| ARTICLE  6  | CONDITIONS  PRECEDENT TO ALL REQUESTS                  | 9        |
|        |                                                   |     |
| ARTICLE  7  | REPRESENTATIONS  AND WARRANTIES                        | 17       |
|        |                                                   |     |
| ARTICLE  8  | AFFIRMATIVE  COVENANTS OF BORROWER                     | 17       |
|        |                                                   |     |
| ARTICLE  9  | NEGATIVE  COVENANTS OF BORROWER                        | 34       |
|        |                                                   |     |
| ARTICLE  10 | FEES                                                   | 37       |
|        |                                                   |     |
| ARTICLE  11 | EVENTS  OF DEFAULT                                     | 38       |
|        |                                                   |     |
| ARTICLE  12 | REMEDIES                                               | 42       |
|        |                                                   |     |
| ARTICLE  13 | INSURANCE,  REAL ESTATE TAXES AND REPLACEMENT RESERVES | 44       |
|        |                                                   |     |
| ARTICLE  14 | LIMITS  ON PERSONAL LIABILITY                          | 45       |
|        |                                                   |     |
| ARTICLE  15 | MISCELLANEOUS  PROVISIONS                              | 48       |

 

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|        | EXHIBITS                                                                                         |
|-------------|--------------------------------------------------------------------------------------------------|
|        |                                                                                             |
| EXHIBIT A   | Schedule of Initial  Mortgaged Properties, Initial Allocable Loan Amounts and Initial Valuations |
|        |                                                                                             |
| EXHIBIT B   | Confirmation of  Guaranty                                                                        |
|        |                                                                                             |
| EXHIBIT C   | Compliance Certificate                                                                           |
|        |                                                                                             |
| EXHIBIT D-1 | Borrower Organizational  Certificate                                                             |
|        |                                                                                             |
| EXHIBIT D-2 | Guarantor  Organizational Certificate                                                            |
|        |                                                                                             |
| EXHIBIT E   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT F   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT G   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT H   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT I   | Request                                                                                          |
|        |                                                                                             |
| EXHIBIT J   | Confirmation of  Obligations                                                                     |
|        |                                                                                             |
| EXHIBIT K   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT L   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT M   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT N   | Reserved                                                                                         |
|        |                                                                                             |
| EXHIBIT O   | Disclosure Schedule                                                                              |
|        |                                                                                             |
| EXHIBIT P   | Letter of Credit                                                                                 |
|        |                                                                                             |
| EXHIBIT Q-1 | Bank Legal Opinion  (Foreign)                                                                    |
|        |                                                                                             |
| EXHIBIT Q-2 | Bank Legal Opinion  (Domestic)                                                                   |
|        |                                                                                             |
| EXHIBIT R   | Form of Rent Roll                                                                           |
|        |                                                                                             |
| EXHIBIT S   | Expansion Guaranty                                                                               |

 

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| EXHIBIT T  | Expansion Security  Agreement |
|------------|-------------------------------|
|       |                          |
| SCHEDULE 1 | Minimum Rent Payments         |
|       |                          |
| APPENDIX I | Definitions                   |

 

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**MASTER CREDIT FACILITY AGREEMENT**

 

THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 4th day ofAugust, 2009, by and between SNH FM FINANCING LLC, a Delaware limited liabilitycompany and CITIBANK, N.A., a national banking association.

 

**RECITALS**

 

A.            Borrower owns one (1) or moreSeniors Housing Facilities (unless otherwise defined or the context clearlyindicates otherwise, capitalized terms shall have the meanings ascribed to suchterms in Appendix I of this Agreement) as more particularly described in Exhibit Ato this Agreement.

 

B.            Borrower has requested that Lendermake a loan in the amount of $512,934,000 to Borrower, comprised of a$205,174,000 Variable Loan, and a $307,760,000 Fixed Loan.

 

C.            To secure the obligations ofBorrower under this Agreement and the other Loan Documents issued in connectionwith the Term Loan, Borrower shall create a Collateral Pool in favor ofLender.  The Collateral Pool shall becomprised of (i) the Seniors Housing Facilities listed on Exhibit Aand (ii) any other collateral pledged to Lender from time to time byBorrower pursuant to this Agreement or any other Loan Documents.

 

D.            Each Note and Security Documentrelated to the Mortgaged Properties comprising the Collateral Pool shall becross-defaulted (i.e., a default under any Note, Security Documentrelating to the Collateral Pool and under this Agreement, shall constitute adefault under each Note, Security Document and this Agreement related to theMortgaged Properties comprising the Collateral Pool) and cross-collateralized (i.e.,each Security Instrument related to the Mortgaged Properties within theCollateral Pool shall secure all of Borrower’s obligations under this Agreementand the other Loan Documents) and it is the intent of the parties to thisAgreement that, after an Event of Default, Lender may accelerate any Notewithout needing to accelerate any other Note and that in the exercise of itsrights and remedies under the Loan Documents, Lender may, except as provided inthis Agreement, exercise and perfect any and all of its rights in and under theLoan Documents with regard to any Mortgaged Property without needing toexercise and perfect its rights and remedies with respect to any otherMortgaged Property and that any such exercise shall be without regard to theAllocable Loan Amount assigned to such Mortgaged Property and that Lender mayrecover an amount equal to the full amount outstanding in respect of any of theNotes in connection with such exercise and any such amount shall be applied asdetermined by Lender pursuant to the terms of this Agreement, the Notes and theother Loan Documents.

 

E.             Subject to the terms, conditionsand limitations of this Agreement, Lender has agreed to make a Term Loan.

 

NOW, THEREFORE, Borrower and Lender, in consideration of the mutualpromises and agreements contained in this Agreement, hereby agree as follows:

 

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# **ARTICLE 1THE TERM LOAN**

# ** **

**Section 1.01.****                                       TermLoan.**

 

### (a)           Subjectto the terms, conditions and limitations of this Agreement, Lender agrees tomake the Term Loan to Borrower on the Initial Closing Date.  The maximum aggregate principal balance ofthe Term Loan shall be $512,934,000.

###  

**Section 1.02.****                                       Notes.**

** **

The obligation of the Borrower to repay the Term Loan shall beevidenced by the following Notes: (i) a Fixed Facility Note in theprincipal amount of $307,760,000 and (ii) a Variable Facility Note in theprincipal amount of $205,174,000.  TheNotes shall be payable to the order of Lender and shall equal the aggregateoriginal principal amount of the Term Loan to the Borrower.

 

**Section 1.03.****                                       MaturityDate/Prepayment.**

** **

The maturity date of the Term Loan shall be September 1,2019.  The Term Loan shall amortize overthe Amortization Period with the outstanding principal balance due and owing onthe maturity date.

 

**Section 1.04.****                                       YieldMaintenance/Prepayment.**

** **

The terms and conditions of yield maintenance and/or prepaymentpremiums as applicable, are contained in the Notes and such terms andconditions shall apply to the prepayment in part or whole of the Term Loanduring the term of this Agreement.

 

**Section 1.05.****                                       InterestRate Execution.**

** **

In the event that the Term Loan made on the Initial Closing Date issolely a Fixed Loan, the provisions in this Agreement referencing the VariableLoan and Variable Facility Note shall be deemed to be of no further force andeffect and be deemed to be eliminated from this Agreement.

 

# **ARTICLE 2ALLOCABLE LOAN AMOUNT/SUPPLEMENTAL LOANS**

# ** **

**Section 2.01.****                                       Determinationof Allocable Loan Amount and Valuations.**

** **

### (a)           InitialDeterminations.  On the InitialClosing Date, Lender shall determine (i) the Allocable Loan Amount andValuation for each Initial Mortgaged Property, (ii) the Aggregate NOI DebtService Coverage Ratio and the Aggregate Loan to Value Ratio and (iii) theAggregate Lease Payment Debt Service Coverage Ratio.  The determinations made as of the InitialClosing Date shall remain unchanged until the First Anniversary.  Changes in Allocable Loan Amount, Valuations,the Aggregate NOI Debt Service Coverage Ratio, the 

 

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### Aggregate LeasePayment Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shallbe made pursuant to Section 2.01(b).

###  

### (b)           MonitoringDeterminations.  Once each CalendarQuarter within twenty (20) Business Days after Borrower has delivered to Lenderthe reports required in Section 8.03, Lender shall determine theAggregate NOI Debt Service Coverage Ratio, the Aggregate Lease Payment DebtService Coverage Ratio, the Aggregate Loan to Value Ratio, Level of CareDiversity Requirements, the Valuations and the Allocable Loan Amounts andwhether Borrower is in compliance with the other covenants set forth in theLoan Documents.  After the FirstAnniversary, on an annual basis, and if Lender decides that changed market orproperty conditions warrant, Lender shall redetermine Allocable Loan Amountsand Valuations.  Lender shall alsoredetermine Allocable Loan Amounts to take account of any substitution orrelease of Collateral or other event that invalidates the outstandingdeterminations.  In determiningValuations, Lender shall use Capitalization Rates based on its internal surveyand analysis of capitalization rates for comparable sales in the vicinity ofthe Mortgaged Property, with such adjustments as Lender deems appropriate andwithout any obligation to use any information provided by Borrower.  If Lender is unable to determine aCapitalization Rate for a Mortgaged Property, Lender shall have the right, withthe prior consent of Borrower, not more than once annually, to obtain, atBorrower’s expense, a market study in order to establish a CapitalizationRate.  In the event Borrower fails toconsent to Lender obtaining a market study, Lender shall determine the CapitalizationRate pursuant to the Underwriting Requirements. Lender shall promptly disclose its determinations to Borrower.  Until redetermined, the outstanding AllocableLoan Amounts and Valuations shall remain in effect.  Notwithstanding anything in this Agreement tothe contrary, no change in Allocable Loan Amounts, Valuations, the AggregateLoan to Value Ratio, the Aggregate NOI Debt Service Coverage Ratio or theAggregate Lease Payment Debt Service Coverage Ratio shall, unless resultingfrom the concurrent release or substitution of Collateral from the CollateralPool, (i) result in a Potential Event of Default or Event of Default, (ii) requirethe prepayment of any Note, or (iii) require the addition of Collateral tothe Collateral Pool.

###  

**Section 2.02.****                                       SupplementalLoan.**

** **

After the First Anniversary, Borrower may participate in the Fannie MaeSupplemental Loan product, if the Supplemental Loan product is offered byFannie Mae at the time and if no Targeted Entity is a Prohibited Person.  Any such Supplemental Loan is subject toLender’s determination that, as a result of its annual valuation of theCollateral Pool, a Supplemental Loan may be made pursuant to Lender’sUnderwriting Requirements for Tier Four loans in effect at the time of therequest.  The Supplemental Loan will bedocumented with loan documents similar to the Loan Documents (“**Supplemental Loan Documents**”).  Supplemental Loans will not be loans advancedunder this Agreement.  Any SupplementalLoan will be priced at market at the time of the loan and will becross-defaulted with the Term Loan.  Tosecure the obligations of Borrower under the Supplemental Loan Documents,Borrower shall grant, convey and assign to Lender a second Lien on eachMortgaged Property in the Collateral Pool and on any other collateral pledgedto Lender from time to time pursuant to the Supplemental Loan Documents.  On the closing date of the Supplemental Loan,Lender shall determine the portion of the 

 

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Supplemental Loan allocated to a particular MortgagedProperty by Lender (the “**Supplemental AllocableLoan Amount**”), which Supplemental Allocable Loan Amounts shallbe set forth in a separate exhibit to this Agreement.  Lender shall redetermine the SupplementalAllocable Loan Amounts in the same manner and at the same time as theredetermination of the Allocable Loan Amounts pursuant to Section 2.01(b).Notwithstanding the foregoing, the Supplemental Loan shall be monitoredpursuant to Section 2.01 of this Agreement and Lender shall include theSupplemental Loan upon calculating the Aggregate NOI Debt Service CoverageRatio, the Aggregate Lease Payment Debt Service Coverage Ratio and theAggregate Loan to Value Ratio, in connection with any Request.  Borrower agrees to pay any fees (includinglegal fees) that may be charged in connection with a Supplemental Loan.

 

# **ARTICLE 3VALUATIONS/COLLATERAL CHANGES**

# ** **

**Section 3.01.****                                       Reserved.**

** **

**Section 3.02.****                                       Reserved.**

** **

**Section 3.03.****                                       Rightto Obtain Releases of Collateral.**

** **

Subject to the terms and conditions of this Article 3, and thelimitations set forth in Section 15.17, Borrower shall have the rightafter the First Anniversary, from time to time, to obtain a release ofCollateral from the Collateral Pool.

 

**Section 3.04.****                                       Procedurefor Obtaining Releases of Collateral.**

** **

### (a)           Request.  To obtain a release of Collateral from theCollateral Pool, Borrower may deliver a Release Request to Lender.  Upon delivery of the Release Request,Borrower shall not be permitted to re-borrow any amounts that will be prepaidin connection with the release of Collateral.

###  

### (b)           Closing.  If all conditions precedent contained in Section 6.05and all General Conditions contained in Section 6.01 are satisfied,Lender shall cause the Release Mortgaged Property to be released, at a closingto be held at offices designated by Lender on a Closing Date selected byLender, and occurring within thirty (30) days after Lender’s receipt of theRelease Request (or on such other date as Borrower and Lender may agree), byexecuting and delivering, and causing all applicable parties to execute anddeliver, all at the sole cost and expense of Borrower, the ReleaseDocuments.  Borrower shall prepare theRelease Documents and submit them to Lender for its review.

###  

### (c)           ReleasePrice.  The “Release Price”for each Release Mortgaged Property means the greater of (i) one hundredpercent (100%) of the Allocable Loan Amount for the Release Mortgaged Propertyplus one hundred percent (100%) of the Supplemental Allocable Loan Amount forthe Release Mortgaged Property and (ii) one hundred percent (100%) of theamount, if any, of the Term Loan Outstanding and any Supplemental LoanOutstanding that is required to be repaid by Borrower to Lender in connectionwith the proposed release of the 

 

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### Release MortgagedProperty from the Collateral Pool, so that, immediately after the release, theRelease Coverage and LTV Tests will be satisfied, the Aggregate NOI DebtService Coverage Ratio or Aggregate Lease Payment Debt Service Coverage Ratiowill not be reduced, and the Aggregate Loan to Value Ratio will not beincreased as a result of such release. In addition to the Release Price, Borrower shall pay to Lender all associatedprepayment premiums and other amounts due under the Notes being repaid.  In connection with a non-simultaneoussubstitution of Collateral pursuant to Section 3.06(c)(ii) ofthis Agreement, Borrower shall be permitted, in lieu of paying the ReleasePrice, to post a Letter of Credit issued by a financial institution acceptableto Lender and having terms and conditions acceptable to Lender, having a faceamount equal to the Release Price.

###  

### (d)           Applicationof Release Price.  (i) TheRelease Price for the Release Mortgaged Property shall be applied in the orderselected by Borrower, provided that (A) any amount of the SupplementalLoan Outstanding which Borrower elects to prepay must be prepaid in full, or ifthe Release Price is not sufficient to do so, the Supplemental Loan shall onlybe partially prepaid; (B) any amount of the Term Loan Outstanding whichBorrower elects to prepay must be prepaid in full, or if the Release Price isnot sufficient to do so, the Term Loan shall be only partially prepaid; (C) anyprepayment is permitted under the applicable Note; (D) any prepaymentpremium due and owing is paid; and (E) interest is paid through the end ofthe month.  If Borrower  does not give Lender direction with respectto the application of the Release Price or if such direction does not complywith the provisions of (A) — (B) above, then the Release Price shallbe applied first against any variable rate Supplemental Loan Outstanding solong as the prepayment is permitted under the applicable note, until anyvariable rate Supplemental Loan is no longer Outstanding (provided that, in theevent there are multiple variable rate Supplemental Loans Outstanding, Lendershall determine the order of application of the Release Price taking intoaccount factors including the unpaidprincipal balance of the variable rate Supplemental Loan notes, and whichvariable rate Supplemental Loan note Outstanding has the lowest prepaymentcosts or highest interest rate), then against any Variable LoanOutstanding so long as the prepayment is permitted under the Variable FacilityNote, until any Variable Loan is no longer Outstanding, then against any fixedrate Supplemental Loan Outstanding so long as the prepayment is permitted underthe applicable note, until any fixed rate Supplemental Loan is no longer Outstanding(provided that, in the event there are multiple fixed rate Supplemental LoansOutstanding, Lender shall determine the order of application of the ReleasePrice taking into account factors including the unpaid principal balance of the fixed rate Supplemental Notes, and whichfixed rate Supplemental Loan note Outstanding has the lowest prepayment costsor highest interest rate), thenagainst any Fixed Loan Outstanding as permitted under the applicable FixedFacility Note.

###  

(ii)           Inthe event Borrower desires to release a Release Mortgaged Property on a dateother than the last Business Day of the month, the Release Price or theremainder of the Release Price, if any, shall be held by Lender (or itsappointed collateral agent) as substitute Collateral (“Substitute Collateral”),in accordance with a security agreement (if required by Lender) and otherdocuments in form and substance acceptable to Lender.  Any Substitute Collateral shall first be usedto prepay the applicable Supplemental Loan and then the applicable Term Loan onthe last Business Day of the month.

 

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### (e)           Testfor Release.  A release may beeffected provided that immediately after giving effect to the requested release(i) the Release Coverage and LTV Tests for the Collateral Pool are met, (ii) theGeographical Diversification Requirements are satisfied and (iii) theLevel of Care Diversity Requirements are satisfied.  Notwithstanding the foregoing, if either theRelease Coverage and LTV Tests, the Geographical Diversification Requirementsor the Level of Care Diversity Requirements are not satisfied after the releaseof a Mortgaged Property, such release may be permitted by Lender if the releaseimproves the Collateral Pool based on factors that are consistent with Lender’sUnderwriting Requirements and result in improvement in one or more of thefollowing areas: the then current Valuation of the Mortgaged Properties, thethen current Aggregate NOI Debt Service Coverage Ratio, the then current AggregateLease Payment Debt Service Coverage Ratio or the then current Aggregate Loan toValue Ratio.

###  

**Section 3.05.****                                       Rightto Substitutions.**

** **

Subject to the terms and conditions of this Article 3 andthe limitations set forth in Section 15.17, Borrower shall have theright to obtain the release of the Mortgaged Property securing the Term Loanmade to Borrower (the “Release Mortgaged Property”) by replacing suchMortgaged Property with a Seniors Housing Facility that meets the requirementsof this Agreement (the “Substitute Mortgaged Property”) therebyeffecting a “Substitution” of Collateral.

 

**Section 3.06.****                                       Procedurefor Substitutions.**

** **

### (a)           Request.  Borrower shall deliver to Lender a completedand executed Substitution Request.  EachSubstitution Request shall be accompanied by the following:  (i) the information required by theUnderwriting Requirements with respect to the proposed Substitute MortgagedProperty and any additional information Lender reasonably requests; and (ii) thepayment of all Additional Collateral Due Diligence Fees.

###  

### (b)           Underwriting.

###  

#### (i)            Lender shallevaluate the proposed Substitute Mortgaged Property in accordance with theUnderwriting Requirements.

####  

#### (ii)           A Substitution maybe effected provided that: (i) Lender determines that the SubstituteMortgaged Property is of similar or better quality taking into account suchfactors as age of the asset, property condition and vacancy rate and located ina similar or better market, taking into account such factors as demographics,income levels, market occupancy rates and level of unemployment as the releasedSeniors Housing Facility, (ii) the proposed Substitute Mortgaged Propertyindividually satisfies the Loan to Value Ratio requirements for all MortgagedProperties in the Collateral Pool, (iii) immediately after theSubstitution, the resulting Collateral Pool satisfies the better of (A) theSubstitution Coverage and LTV Tests or (B) the Aggregate Lease PaymentDebt Service Coverage Ratio, the Aggregate NOI Debt Service Coverage Ratio andthe Aggregate Loan to Value Ratio of the Collateral Pool immediately prior tothe Substitution Request, (iv) after the Substitution, the GeographicalDiversification Requirements are met, (v) after the Substitution the Levelof Care Diversity 

 

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#### Requirements aremet, (vi) the Substitute Mortgaged Property is leased to the Master Tenantpursuant to the Operating Lease and Operator pursuant to the Sub-Lease and (vii) ifthe proposed Substitute Mortgaged Property contains Skilled Nursing Units, theNet Operating Income of the Substitute Mortgaged Property obtained from theSkilled Nursing Units is less than twenty percent (20%).  Notwithstanding the foregoing, if either theSubstitution Coverage and LTV Tests, the Geographical DiversificationRequirements or the Level of Care Diversity Requirements are not satisfiedafter the Substitution of a proposed Substitute Mortgaged Property, suchSubstitution may be permitted by Lender if the Substitution improves theCollateral Pool based on factors that are consistent with Lender’s UnderwritingRequirements and result in improvement in one or more of the following areas:the then current Valuation of the Mortgaged Properties, the then currentAggregate NOI Debt Service Coverage Ratio, the then current Aggregate LeasePayment Debt Service Coverage Ratio or the then current Aggregate Loan to ValueRatio.

####  

#### (iii)          Within thirty (30)Business Days after receipt of (A) the Substitution Request and (B) allreports, certificates and documents required by the Underwriting Requirementsand this Agreement, including a zoning analysis required by Lender inconnection with similar loans anticipated to be sold to Fannie Mae, Lendershall notify the applicable Borrower whether the Substitute Mortgaged Propertymeets the requirements of this Section 3.06(b) and theUnderwriting Requirements and the other requirements for the Substitution of aMortgaged Property as set forth in this Agreement.  Within five (5) Business Days afterreceipt of Lender’s written notice in response to the Substitution Request,Borrower shall notify Lender whether it elects to proceed with theSubstitution.  If Borrower fails torespond within the period of five (5) Business Days, it shall beconclusively deemed to have elected not to proceed with the Substitution.

####  

### (c)           Closing.  If Lender determines that the SubstitutionRequest satisfies the conditions set forth herein, Borrower timely elects toproceed with the substitution, and all conditions precedent contained in Section 3.05,Section 3.06,  Section 6.05,Section 6.06, Section 6.11 and all General Conditionscontained in Section 6.01 are satisfied, the proposed SubstituteMortgaged Property shall be added in replacement of the Mortgaged Propertybeing released, at a closing to be held at offices designated by Lender on aClosing Date selected by Lender and occurring —

###  

#### (i)            if the substitutionof the proposed Substitute Mortgaged Property is to occur simultaneously withthe release of the Release Mortgaged Property, within sixty (60) days afterLender’s receipt of the applicable Borrower’s election (or on such other dateto which Borrower and Lender may agree); or

####  

#### (ii)           if the substitutionof the proposed Substitute Mortgaged Property is to occur subsequent to therelease of the Release Mortgaged Property, within ninety (90) days after therelease of such Release Mortgaged Property (provided such date may be extendedan additional ninety (90) days if Borrower provides evidence satisfactory toLender that Borrower has identified and is under contract to purchase oralready owns a suitable proposed Substitute Mortgaged Property) (the “PropertyDelivery Deadline”).

 

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**Section 3.07.****                                       SubstitutionDeposit.**

** **

### (a)           TheDeposit.   If a Substitution of theproposed Substitute Mortgaged Property is to occur subsequent to the release ofthe Release Mortgaged Property pursuant to Section 3.06(c)(ii), atthe Closing Date of the release of the Release Mortgaged Property, Borrowershall deposit with Lender the “Substitution Deposit” described in Section 3.07(b) inthe form of cash in a non-interest bearing account held by Lender or, in lieuof depositing cash for the Substitution Deposit, Borrower may post a Letter ofCredit issued by a financial institution acceptable to Lender and having termsand conditions acceptable to Lender, having a face amount equal to theSubstitution Deposit.

###  

### (b)           SubstitutionDeposit Amount. The “Substitution Deposit” for each proposedsubstitution shall be an amount equal to the sum of (i) the Release Price,plus (ii) any and all fee maintenance or prepayment premium for: (A) suchNote or Notes designated by Borrower in accordance with the conditions set forthin Section 3.04(d) in connection with the application of ReleasePrice, as the Notes Borrower elects to prepay if the substitution fails to takeplace or (B) if Borrower does not make such designation or suchdesignation does not comply with the provisions of Section 3.04(d), Lendershall choose such Note in accordance with the provisions of Section 3.04(d) (the“Selected Note”), calculated as of the end of the month in which theProperty Delivery Deadline occurs, as if the Selected Note were to be prepaidin such month, plus (iii) principal and interest due and owing on theportion of the Selected Note which is to be prepaid through the end of themonth in which the Property Delivery Deadline occurs, plus (iv) reasonablecosts, expenses and fees of Lender pertaining to the substitution (the “SubstitutionCost Deposit”).  The amount of theSubstitution Deposit shall be recalculated by Lender in the event the PropertyDelivery Deadline is extended pursuant to Section 3.06(c)(ii).  If a Substitution of the last remaining assetis taking place, the cash collateral or Letter of Credit must include, (A) anyyield maintenance that would be due to the extent that the Fixed Facility Notemust be prepaid to effect a release at that time and (B) any feemaintenance that would be due to the extent that the Variable Facility Notemust be prepaid to effect a release at that time and (C) the full amountof principal and interest owing under all remaining Notes.  The Substitution Cost Deposit shall be usedby Lender to cover all reasonable out-of-pocket costs and expenses incurred byLender and Fannie Mae, including any out-of-pocket legal fees and expensesincurred by Fannie Mae and Lender in connection with such substitution whethersuch substitution actually closes.

###  

### (c)           Failure toClose Substitution.  If thesubstitution of the proposed Substitute Mortgaged Property does not occur bythe Property Delivery Deadline in accordance with Section 3.06(c)(ii),then such Borrower shall have irrevocably waived its right to substitute suchRelease Mortgaged Property with the proposed Substitute Mortgaged Property, andthe release of the Release Mortgaged Property shall be deemed a prepayment ofthe Note.  Subject to the terms of Section 3.06(c)(ii),the Property Delivery Deadline shall be no later than the date ninety (90) daysafter the date the Lender’s lien on such Release Mortgaged Property isreleased. Any MBS being prepaid shall be deemed to be prepaid as of the end ofthe month in which the Property Delivery Deadline falls and the Lender shallfollow standard Fannie Mae procedures for the prepayment of the Note, includingdelivery of the Substitution Deposit (less the Substitution Cost 

 

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### Deposit) to Fannie Mae inaccordance with such procedures.  Anyportion of the Substitution Deposit not needed to prepay the Note, allinterest, and any prepayment fees (including any portion of the SubstitutionCost Deposit not used by Lender to cover all reasonable out-of-pocket costs andexpenses incurred by Lender and Fannie Mae, including any out-of-pocket legalfees and expenses incurred by Fannie Mae and Lender in connection with suchSubstitution) shall be promptly refunded to the applicable Borrower after theProperty Delivery Deadline.

###  

### (d)           SubstitutionDeposit Disbursement.  At closing ofthe Substitution, the Lender shall disburse the Substitution Deposit (less anyportion of the Substitution Cost Deposit used by Lender to cover all reasonableout-of-pocket costs and expenses incurred by Lender and Fannie Mae, includingany out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender inconnection with such substitution) directly to the Borrower at such time as theconditions set forth in Sections 3.05, 3.06, 6.05, 6.06,6.11 and all General Conditions contained in Section 6.01have been satisfied, which must occur no later than the Property DeliveryDeadline.

###  

# **ARTICLE4RESERVED**

# ** **

# **ARTICLE5RESERVED**

# ** **

# **ARTICLE6CONDITIONS PRECEDENT TO ALL REQUESTS**

# ** **

**Section 6.01.****                                       ConditionsApplicable to All Requests.**

 

Borrower’s right to closethe transaction requested in a Request shall be subject to Lender’sdetermination that all of the following general conditions precedent (“GeneralConditions”) have been satisfied, in addition to any other conditionsprecedent contained in this Agreement:

 

### (a)           GeographicalDiversification. The Mortgaged Properties in the Collateral Pool satisfythe Geographical Diversification Requirements.

###  

### (b)           Payment ofExpenses.  The payment by Borrower ofLender’s and Fannie Mae’s reasonable third party out-of-pocket fees andexpenses payable in accordance with this Agreement, including, but not limitedto, the legal fees and expenses described in Section 10.03.

###  

### (c)           NoMaterial Adverse Change.  There hasbeen no material adverse change in the financial condition, business orprospects of Borrower or Key Principal in the physical condition, operatingperformance or value of any of the Mortgaged Properties (excluding anyMortgaged Property which is requested to be released) since the date of themost recent Compliance Certificate (or, with respect to the conditionsprecedent to the Term Loan, from the condition, business or prospects reflectedin the financial statements, reports and other 

 

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### information obtained byLender during its review of Borrower and Key Principal and the InitialMortgaged Properties).

###  

### (d)           No Default.  Subject to Section 8.25 and thelast paragraph of Section 11.01, there shall exist no Event of Default orPotential Event of Default in each case under Sections 11.01(b)-(k) or,in any material respect, under Sections 11.01(a), (l) or (m) (itbeing understood and agreed that any default comparable to the Events ofDefault listed in 11.01(b) - (k) in the other LoanDocuments or Supplemental Loan Documents will be treated to be material) on theClosing Date for the Request and, after giving effect to the transactionrequested in the Request, no Event of Default or Potential Event of Defaultshall have occurred.

###  

### (e)           NoInsolvency. Receipt by Lender on the Closing Date for the Request ofevidence satisfactory to Lender that neither Borrower nor Key Principal isinsolvent (within the meaning of any applicable federal or state laws relatingto bankruptcy or fraudulent transfers) or will be rendered insolvent by thetransactions contemplated by the Loan Documents, or, after giving effect tosuch transactions, will be left with an unreasonably small capital with whichto engage in its business or undertakings, or will have intended to incur, orbelieve that it has incurred, debts beyond its ability to pay such debts asthey mature or will have intended to hinder, delay or defraud any existing orfuture creditor.

###  

### (f)            No UntrueStatements.  The Loan Documents shallnot contain any untrue or misleading statement of a material fact and shall notfail to state a material fact necessary to make the information containedtherein not misleading except in relation to a Mortgaged Property which isrequested to be released.

###  

### (g)           Representationsand Warranties.  All representationsand warranties made by Borrower and Key Principal in the Loan Documents shallbe true and correct in all material respects on the Closing Date for theRequest with the same force and effect as if such representations andwarranties had been made on and as of the Closing Date for the Request exceptin relation to a Mortgaged Property which is requested to be released.

###  

### (h)           NoCondemnation or Casualty.  Except inconnection with a Release Request or a Substitution Request, there shall not bepending or threatened any condemnation or other taking, whether direct orindirect, against the Mortgaged Property and there shall not have occurred anycasualty to any improvements located on the Mortgaged Property, which casualtywould have a Material Adverse Effect.

###  

### (i)            Deliveryof Closing Documents.  The receipt byLender of the following, each dated as of the Closing Date for the Request, inform and substance satisfactory to Lender in all respects:

###  

#### (i)            The Loan Documents relating to suchRequest;

####  

#### (ii)           A Compliance Certificate;

####  

#### (iii)          An Organizational Certificate; and

 

10

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#### (iv)          Such other documents, instruments,approvals (and, if requested by Lender, certified duplicates of executed copiesthereof) and opinions as Lender may reasonably request.

####  

### (j)            Covenants.  Except to the extent that a covenant appliesexclusively and specifically to a Mortgaged Property which is requested to bereleased, Borrower is in full compliance with each of the covenants containedin Article 8 and Article 9 of this Agreement, without giving effectto any notice and cure rights of Borrower.

###  

**Section 6.02.****                                       ConditionsPrecedent to Term Loan.**

** **

The obligation of Lenderto make the Term Loan is subject to the following conditions precedent:

 

### (a)           Receipt byLender of the Replacement Reserve Agreement and Completion/Repair SecurityAgreement;

###  

### (b)           Receipt byLender of the Certificate of IDOT Guarantor and IDOT Guaranty;

###  

### (c)           Receipt byLender of opinions of counsel to Borrower, counsel to Master Tenant and counselto Operator in form and content satisfactory to Lender;

###  

### (d)           Receipt byLender of the documents and instruments required by Sections 6.11;

###  

### (e)           Delivery tothe Title Company with fully executed instructions directing the Title Companyto file and/or record in all applicable jurisdictions, all applicable LoanDocuments required by Lender to be filed or recorded, including duly executedand delivered original copies of the Variable Facility Note or Fixed FacilityNote, as applicable, the Guaranty, the Initial Security Instruments coveringthe Initial Mortgaged Properties and UCC-1 Financing Statements covering theportion of the Collateral comprised of personal property, and other appropriateinstruments, in form and substance satisfactory to Lender and in form properfor recordation, as may be necessary in the opinion of Lender to perfect theLiens created by the applicable Security Instruments and any other LoanDocuments creating a Lien in favor of Lender, and the payment of all taxes,fees and other charges payable in connection with such execution, delivery,recording and filing;

###  

### (f)            Receipt byLender of the Initial Origination Fee pursuant to Section 10.01(a) andthe Initial Due Diligence Fee pursuant to Section 10.02(a); and

###  

### (g)           Such otherdocuments, instruments, approvals (and, if requested by Fannie Mae and Lender,certified duplicates of executed copies thereof) and opinions as Fannie Mae orLender may reasonably request.

 

11

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**Section 6.03.****                                       Reserved.**

** **

**Section 6.04.****                                       Reserved.**

** **

**Section 6.05.****                                       ConditionsPrecedent to Release of Property from the Collateral Pool.**

** **

The release of aMortgaged Property from the Collateral Pool is subject to the satisfaction ofthe following conditions precedent on or before the Closing Date:

 

### (a)           Receipt byLender of the fully executed Release Request.

###  

### (b)           Immediatelyafter giving effect to the requested release, the provisions of Section 3.04(e) aresatisfied.

###  

### (c)           Receipt byLender of the Release Price and all amounts owing under Section 3.04(c);

###  

### (d)           Receipt byLender of the Release Fee;

###  

### (e)           Receipt  by Lender of all legal fees and expensespayable by Borrower in connection with a Release Request.

###  

### (f)            Receipt byLender on the Closing Date of one (1) or more counterparts of each ReleaseDocument, dated as of the Closing Date, signed by each of the parties (otherthan Lender) who is a party to such Release Document;

###  

### (g)           If requiredin Lender’s judgment under state law in order to preserve and protect Lender’srights, amendments to this Agreement, the Notes and the Security Instruments,reflecting the release of the Release Mortgaged Property from the CollateralPool and, as to any Security Instrument or Note so amended or if Lenderdetermines that such endorsement is necessary to maintain the priority of theLien created in favor of Lender with respect to the Outstanding Indebtedness orto maintain the validity of any Title Insurance Policy, the receipt by Lenderof an endorsement to each Title Insurance Policy insuring the SecurityInstruments, amending the effective date of each Title Insurance Policy to theClosing Date and showing no additional exceptions to coverage other than theexceptions shown on the Initial Closing Date, Permitted Liens and otherexceptions approved by Lender;

###  

### (h)           If Lenderdetermines the Release Mortgaged Property to be one (1) phase of aproject, and one (1) or more other phases of the project are MortgagedProperties which will remain in the Collateral Pool (“Remaining MortgagedProperties”), Lender must determine that the Remaining Mortgaged Propertiescan be operated separately from the Release Mortgaged Property and any otherphases of the project which are not Mortgaged Properties and whether any crossuse agreements or easements are necessary. In making this determination, Lender shall evaluate access, utilities,marketability, community services, ownership and operation of the 

 

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### Release Properties andany other issues identified by Lender in connection with similar loansanticipated to be sold to Fannie Mae;

###  

### (i)            Receipt byLender of endorsements to the tie-in endorsements of the Title InsurancePolicies, if deemed necessary by Lender, to reflect the release;

###  

### (j)            Receipt byLender on the Closing Date of a Confirmation of Obligations;

###  

### (k)           Receipt byLender prior to the Closing Date of the amendment to the Operating Leaseevidencing only the release of the Release Mortgaged Property from the terms ofthe Operating Lease and adjusting the rent payment under the Operating Leasepursuant to the terms of the Operating Lease.

###  

**Section 6.06.****                                       ConditionsPrecedent to Substitutions.**

** **

The obligation of Lenderto make a requested Substitution is subject to Lender’s determination that eachof the following conditions precedent has been met:

 

### (a)           Receipt byLender of the fully executed Substitution Request;

###  

### (b)           Receipt byLender of the Substitution Deposit to the extent necessary under Section 3.07;

###  

### (c)           Receipt byLender of the Additional Collateral Due Diligence Fees and Substitution Fee;

###  

### (d)           SuchSubstitute Mortgaged Property shall comply with the provisions of Section 3.06(b) ofthis Agreement;

###  

### (e)           Delivery tothe Title Company, with fully executed instructions directing the Title Companyto file and/or record in all applicable jurisdictions, all applicable LoanDocuments required by Lender to be filed or recorded, including duly executedand delivered original copies of the Security Instruments covering theSubstitute Mortgaged Properties and UCC-1 Financing Statements covering theportion of the Substitute Mortgaged Property comprised of personal property,and other appropriate instruments, in form and substance satisfactory to Lenderand in form proper for recordation, as may be necessary in the opinion ofLender to perfect the Lien created by the applicable additional SecurityInstrument, and any other relevant Loan Document creating a Lien in favor ofLender, and the payment of all taxes, fees and other charges payable inconnection with such execution, delivery, recording and filing;

###  

### (f)            Receipt byLender of endorsements to the tie-in endorsements of the Title InsurancePolicies, if deemed necessary by Lender, to reflect the substitution;

###  

### (g)           Receipt ofall documents required for the addition of the Substitute Mortgaged Propertypursuant to the Underwriting Requirements;

###  

### (h)           The Borroweris the owner of the proposed Substitute Mortgage Property;

 

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### (i)            Receipt byLender on the Closing Date of a Confirmation of Obligations; and

###  

### (j)            If requiredby Lender, amendments to this Agreement, the Notes and the SecurityInstruments, reflecting the Substitution and, as to any Security Instrument orNote so amended or if Lender determines that such endorsement is necessary tomaintain the priority of the Lien created in favor of Lender with respect tothe Outstanding Indebtedness or to maintain the validity of any Title  Insurance Policy, the receipt by Lender of anendorsement to each Title Insurance Policy insuring the Security Instruments,amending the effective date of each Title Insurance Policy to the Closing Dateand showing no additional exceptions to coverage other than the exceptionsshown on the Initial Closing Date, Permitted Liens and other exceptionsapproved by Lender, together with any reinsurance agreements required byLender.

###  

### (k)           Receipt byLender prior to the Closing Date of the amendment to the Operating Leaseevidencing only the following: (i) the release of the Release MortgagedProperty from the terms of the Operating Lease, (ii) the addition of theSubstitute Mortgaged Property to the terms of the Operating Lease, and (iii) adjustingthe rent payments under the Operating Lease pursuant to the terms of theOperating Lease.

###  

**Section 6.07.****                                       Reserved.**

** **

**Section 6.08.****                                       Reserved.**

** **

**Section 6.09.****                                       Reserved.**

** **

**Section 6.10.****                                       Deliveryof Opinion Relating to Substitution Request.**

** **

With respect to theclosing of a Substitution Request, it shall be a condition precedent thatLender receives favorable opinions of counsel (including local counsel, MasterTenant’s counsel, Operators counsel, as applicable) to Borrower, as to the dueorganization and qualification of Borrower, the due authorization, execution,delivery and enforceability of each Loan Document executed in connection withthe Request and such other matters as Lender may reasonably require, each datedas of the Closing Date for the Request, in form and substance satisfactory toLender in all respects.

 

**Section 6.11.****                                       Deliveryof Property-Related Documents.**

** **

With respect to each ofthe Initial Mortgaged Properties or a Substitute Mortgaged Property, it shallbe a condition precedent that Lender receive from Borrower each of the documentsand reports required by Lender pursuant to the Underwriting Requirements inconnection with the addition of such Mortgaged Property to the Collateral Pooland, each of the following, each dated as of the applicable Closing Date forthe Initial Mortgaged Property or a Substitute Mortgaged Property, as the casemay be, in form and substance satisfactory to Lender in all respects:

 

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### (a)           A commitmentfor the Title Insurance Policy applicable to the Mortgaged Property and a proforma Title Insurance Policy based on the title commitment in the amount oftitle insurance afforded by the Title Insurance Policy for each MortgagedProperty in the Collateral Pool equal to (i) if tie-in endorsements areavailable for all or a portion of the Mortgaged Properties, in an aggregateamount equal to the combined Allocable Loan Amounts for all of the MortgagedProperties covered by the tie-in endorsements, not to exceed the amount of theamount of the Term Loan, or (ii) if tie-in endorsements are not availablefor any of the Mortgaged Properties, then with respect to such MortgagedProperties not subject to the tie-in endorsement an amount equal to 150% of theValuation of such Mortgaged properties not subject to the tie-in endorsement(or such lesser amount that is the maximum allowed by law or regulation);

###  

### (b)           the InsurancePolicy (or a certified copy of the Insurance Policy) applicable to theMortgaged Property;

###  

### (c)           The Surveyapplicable to the Mortgaged Property;

###  

### (d)           Evidencesatisfactory to Lender of compliance of the Mortgaged Property with ApplicableLaws;

###  

### (e)           A ReplacementReserve Agreement or an amendment thereto, providing for the establishment of areplacement reserve account, to be pledged to Lender, in which the owner shall(unless waived by Lender) periodically deposit amounts for replacements forimprovements at the Mortgaged Property and as additional security forBorrower’s obligations under the Loan Documents;

###  

### (f)            ACompletion/Repair and Security Agreement or an amendment thereto, together withrequired escrows, on the standard form required by Lender;

###  

### (g)           ASubordination Assignment and Security Agreement for each Mortgaged Property;

###  

### (h)           An Assignmentof Leases and Rents, if Lender determines one to be necessary or desirable,provided that the provisions of any such assignment shall be substantivelyidentical to those in the Security Instrument covering the Collateral, withsuch modifications as may be necessitated by applicable state or local law;

###  

### (i)            In relationto each Initial Mortgaged Property, a Security Instrument to effectuate theaddition of such Initial Mortgaged Property to the Collateral Pool and inrelation to each Substitute Mortgaged Property, a Security Instrument toeffectuate the addition of such Substitute Mortgaged Property to the CollateralPool and a Note relating to the Mortgaged Properties.  The amount secured by each SecurityInstrument shall be equal to the Term Loan;

###  

### (j)            ACertificate of Borrower;

###  

### (k)           IndemnificationAgreement Regarding Taxes

 

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### (l)            Any and allOperating Leases, Sub-Leases or leases relating to a Mortgaged Property; and

###  

### (m)          Such otherdocuments, instruments, approvals (and, if requested by Fannie Mae and Lender,certified duplicates of executed copies thereof) and opinions as Fannie Mae orLender may reasonably request.

###  

**Section 6.12.****                                       Lettersof Credit.**

** **

### (a)           Letter ofCredit Requirements.  If Borrowerprovides Lender with a Letter of Credit pursuant to this Agreement, the Letterof Credit shall be in form and substance satisfactory to Lender and Lendershall be entitled to draw under such Letter of Credit solely upon presentationof a sight draft to the LOC Bank.  AnyLetter of Credit shall be for a term of at least 110 days.  Any Letter of Credit shall be issued by afinancial institution satisfactory to Lender and shall have its long-term debtobligations and its short-term debt obligations rated in accordance with therequirements of Fannie Mae then in effect.

###  

### (b)           DrawsUnder Letter of Credit.  Lender shallhave the right to draw monies under the Letter of Credit:

###  

#### (i)            upon the occurrence of (A) anEvent of Default; or (B) a Potential Event of Default of which theBorrower has knowledge which has continued for two (2) Business Days;

####  

#### (ii)           upon the failure to close asubstitution pursuant to Section 3.07(c); or

####  

#### (iii)          upon the downgrading of the ratings ofthe long-term or short-term debt obligations of the LOC Bank below therequirements of Fannie Mae then in effect.

####  

### (c)           DefaultDraws.  If Lender draws under theLetter of Credit pursuant to Section 6.12(b)(i) above, Lendershall have the right to use monies drawn under the Letter of Credit to prepayany Note.

###  

### (d)           OtherDraws.  If Lender draws under theLetter of Credit pursuant to Section 6.12(b)(ii) or (iii) above,Lender shall have the right to use monies drawn under the Letter of Credit toprepay a Selected Note as such term is defined in Section 3.07(b).

###  

### (e)           LegalOpinion.  Prior to or simultaneouswith the delivery of any new Letter of Credit (but not the extension of anyexisting Letter of Credit), such Borrower shall cause the LOC Bank’s counsel todeliver a legal opinion substantially in the form of Exhibit Q-1 orExhibit Q-2, as applicable, and in any event satisfactory in formand substance to the Lender in the Lender’s discretion.

 

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# **ARTICLE 7REPRESENTATIONS AND WARRANTIES**

 

**Section 7.01.****                                       Representationsand Warranties of Borrower.**

** **

The representations and warranties of the Borrower arecontained in the Certificate of Borrower.

 

For purposes of the Loan Documents, where Borrowerpurports to have knowledge and without limiting the scope of the meaning ofBorrower’s having actual knowledge, Borrower will automatically and immediatelybe deemed to have actual knowledge:

 

(i) of written public disclosure; or

 

(ii) in the eventthat Key Principal or REIT Management Research LLC or its successors andassigns has actual knowledge.

 

**Section 7.02.****                                       Representationsand Warranties of Lender.**

** **

Lender hereby represents and warrants to Borrower as follows as of thedate hereof:

 

### (a)           DueOrganization.  Lender is a nationalbanking association duly organized, validly existing and in good standing underthe laws of the United States.

###  

### (b)           Powerand Authority.  Lender has therequisite power and authority to execute and deliver this Agreement and toperform its obligations under this Agreement.

###  

### (c)           DueAuthorization.  The execution anddelivery by Lender of this Agreement, and the consummation by it of thetransactions contemplated thereby, and the performance by it of its obligationsthereunder, have been duly and validly authorized by all necessary action andproceedings by it or on its behalf.

 

# **ARTICLE 8AFFIRMATIVE COVENANTS OF BORROWER**

# ** **

Borrower agrees and covenants with Lender that, at all times during theTerm of this Agreement:

 

**Section 8.01.****                                       Compliancewith Agreements.**

** **

### (a)           Borrowershall comply with all the terms and conditions of each Loan Document to whichit is a party or by which it is bound; provided, however, that Borrower’sfailure to comply with such terms and conditions shall not be an Event ofDefault until the expiration of the applicable notice and cure periods, if any,specified in the applicable Loan Document.

###  

### (b)           Borrowershall comply with all the material terms and conditions of any building permitsor any conditions, easements, rights-of-way or covenants of record,restrictions of record or any recorded or, to the extent Borrower has knowledgethereof, unrecorded agreement affecting or concerning any Mortgaged Propertyincluding planned development 

 

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### permits,condominium declarations, and reciprocal easement and regulatory agreementswith any Governmental Authority; provided, however, that Borrower’s failure tocomply with such terms and conditions shall not be an Event of Default untilthe expiration of the applicable notice and cure periods, if any, specified inthe applicable document.

###  

**Section 8.02.****                                       Maintenanceof Existence.**

** **

### (a)           Borrowershall maintain its existence and continue to be organized under the laws of thestate of its organization. Borrower shall continue to be duly qualified to dobusiness in each jurisdiction in which such qualification is necessary to theconduct of its business and where the failure to be so qualified wouldadversely affect the validity of, the enforceability of, or the ability toperform, its obligations under this Agreement or any other Loan Document.

###  

### (b)           Duringthe Term of this Agreement, if Key Principal intends to qualify, and be taxedas, a real estate investment trust under Subchapter M of the Internal RevenueCode, Key Principal will not be engaged in any activities which wouldreasonably be anticipated to jeopardize such qualification and tax treatment.

###  

**Section 8.03.****                                       FinancialStatements; Accountants’ Reports; Other Information.**

** **

### (a)           Borrowershall keep and maintain at all times at the address set forth in Section 15.08of this Agreement, and upon Lender’s request shall make available at theMortgaged Property, complete and accurate books of accounts and records(including copies of supporting bills and invoices) in sufficient detail tocorrectly reflect (i) all of Borrower’s and Key Principal’s financialtransactions and assets, and (ii) the results of its operations, Borrowershall cause each Operator to keep and maintain at all times at the address setforth in Section 11 of the Subordination, Assignment and SecurityAgreement or at the Mortgaged Properties complete and accurate books ofaccounts and records (including copies of supporting bills and invoices) insufficient detail to correctly reflect (x) all its financial transactionsand assets, and (y) the results of the operation of each MortgagedProperty, and copies of all written contracts, Leases and other instrumentswhich affect each Mortgaged Property (including all bills, invoices andcontracts for electrical service, gas service, water and sewer service, wastemanagement service, telephone service and management services).  The books, records, contracts, Leases andother instruments shall be subject to examination and inspection at anyreasonable time by Lender.

###  

### (b)           Inaddition, Borrower (with respect to clauses (i), (ii), (iii), (ix) and(xi) set forth below) shall furnish, or cause to be furnished, to Lender:

###  

#### (i)            Annual FinancialStatements.  As soon as available,and in any event within ninety (90) days after the close of its fiscal yearduring the Term of this Agreement, the balance sheet showing all assets andliabilities of Borrower and Key Principal as of the end of such fiscal year,the statement of income, expenses, equity and retained earnings of Borrower’soperation and Key Principal’s operation for such fiscal year, and the statementof changes in financial position and cash flows of Borrower and Key Principalfor such fiscal year, all in reasonable detail and stating in comparative formthe respective figures for the 

 

18

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#### corresponding dateand period in the prior fiscal year, prepared in accordance with GAAPconsistently applied and accompanied by a certificate of Borrower’s and KeyPrincipal’s independent certified public accountants to the effect that (a) suchfinancial statements have been externally prepared by and reviewed by suchaccountants, (b) such financial statements fairly present the results ofits operations and financial condition for the periods and dates indicated,with such certification to be free of exceptions and qualifications as to thescope of the audit as to the going concern nature of the business.  As soon as available, and in any event withinninety (90) days after the close of its fiscal year during the Term of thisAgreement,  Key Principal’s ChiefFinancial Officer will provide to Lender, a letter as of January 1 of eachyear, to the effect that such officer has reviewed the records and systems ofthe Borrower and the Key Principal and that Borrower is in compliance withsubsections (v), (vi) and (xvi) of the Single- Purpose requirements (asset forth in the definition of Single-Purpose herein) (the “ComplianceLetter”).  If the Key Principal is nolonger a publicly traded entity, such Compliance Letter will be provided byBorrower and Key Principal’s independent certified public accounting firm orany other nationally recognized accounting firm and such Compliance Letter willbe based upon agreed upon procedures satisfactory to Lender.  All financial statements required by thissubsection (i) with respect to Key Principal shall be audited, and allfinancial statements required by this subsection (i) with respect toBorrower may be unaudited;

####  

#### (ii)           QuarterlyFinancial Statements.  As soon asavailable, and in any event within forty five (45) days after each of the firstthree fiscal quarters of each fiscal year during the Term of this Agreement,the unaudited balance sheet showing all assets and liabilities of Borrower asof the end of such fiscal quarter, the unaudited statement of income, expenses,equity and retained earnings of Borrower and the unaudited statement of changesin financial position and cash flows of Borrower for the portion of the fiscalyear ended with the last day of such quarter, and if required by Lender, astatement of income and expenses of each Mortgaged Property for the priormonth, all prepared in accordance with GAAP and in reasonable detail andstating in comparative form the respective figures for the corresponding dateand period in the previous fiscal year, accompanied by a certificate of anauthorized representative of Borrower reasonably acceptable to Lender statingthat such financial statements have been prepared in accordance with GAAP,consistently applied, and fairly present the results of its operations andfinancial condition for the periods and dates indicated, subject to year endadjustments in accordance with GAAP;

####  

#### (iii)          QuarterlyProperty Statements.  As soon asavailable, and in any event within forty five (45) days after each CalendarQuarter, a statement of income and expenses of each Mortgaged Property preparedin accordance with GAAP and accompanied by a certificate of an authorizedrepresentative of Borrower reasonably acceptable to Lender to the effect thateach such statement of income and expenses fairly, accurately and completelypresents, in all material respects, the operations of each such MortgagedProperty for the period indicated;

####  

#### (iv)          Annual PropertyStatements.  On an annual basiswithin forty five (45) days after the close of its fiscal year, an annualstatement of income and expenses of each Mortgaged Property accompanied by acertificate of an authorized representative of Borrower 

 

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#### reasonablyacceptable to Lender to the effect that each such statement of income andexpenses fairly, accurately and completely presents, in all material respects,the operations of each such Mortgaged Property for the period indicated;

####  

#### (v)           IntentionallyDeleted;

####  

#### (vi)          Updated RentRolls.  Within forty five (45) daysafter each Calendar Quarter, and at any other time upon Lender’s request, acurrent Rent Roll for each Mortgaged Property, showing the name of each tenant,and for each tenant, the space occupied, the lease expiration date, the rentpayable for the current month, the date through which rent has been paid andany other information requested by Lender and accompanied by a certificate ofan authorized representative of Borrower reasonably acceptable to Lender to theeffect that each such Rent Roll fairly, accurately and completely presents theinformation required therein;

####  

#### (vii)         Security DepositInformation.  Within forty five (45)days after each Calendar Quarter, and at any other time upon Lender’s request,a listing of all security deposits held in connection with any Lease of anypart of any Mortgaged Property, including the name and identification number ofthe accounts in which such security deposits are held, the name and address ofthe financial institutions in which such security deposits are held and thename and telephone number of the person to contact at such financialinstitution, along with any authority or release necessary for Lender to accessinformation regarding such accounts;

####  

#### (viii)        Accountants’Reports; Other Reports.  Promptlyupon receipt thereof: (i) copies of any reports or management letterssubmitted to Borrower by its independent certified public accountants in connectionwith the examination of its financial statements made by such accountants(except for reports otherwise provided pursuant to subsection (a) above);provided, however, that Borrower shall only be required to deliver such reportsand management letters to the extent that they relate to Borrower or anyMortgaged Property; and (ii) all schedules, financial statements or othersimilar reports delivered by Borrower pursuant to the Loan Documents orrequested by Lender with respect to Borrower’s business affairs or condition(financial or otherwise) or any of the Mortgaged Properties;

####  

#### (ix)           OwnershipInterests.  Within 120 days after theend of each fiscal year of Borrower, and at any other time upon Lender’srequest, a statement that identifies all owners of any interest in Borrower andthe interest held by each, if Borrower is a corporation, all officers anddirectors of Borrower, and if Borrower is a limited liability company, allmanagers who are not members;

####  

#### (x)            Complaints.  By the 15th day of each month, copies of any complaintfiled against Borrower or any Mortgaged Property management during the priormonth alleging any violation of fair housing law, handicap access or theAmericans with Disabilities Act and any final administrative or judicial dispositionsof such complaints.

####  

#### (xi)           Resident CareAgreements.  Upon the Lender’srequest, copies of resident care agreements.

 

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#### (xii)          OtherInformation.  Upon the Lender’srequest, a property management report for each Mortgaged Property and any otherinformation reasonably requested by Lender.

####  

#### (xiii)         Regulatory orLicensing.  Within 10 Business Daysafter receipt thereof, copies of all material inspection reports, surveys,reviews, and certifications prepared by, for, or on behalf of any licensing orregulatory authority relating to any Mortgaged Property and any legal actions,orders, notices, or reports relating to any Mortgaged Property issued by theapplicable regulatory or licensing authorities which in any instance wouldcause Borrower to be in noncompliance with any term or covenant in thisAgreement.

####  

For purposes of thisparagraph an inspection report, survey, review or certification or relatedcorrespondence is material if:  (i) itcontains 8 or more deficiencies or items which need to be corrected or (ii) ifit relates to assisted living units, it requires a plan of correction orotherwise imposes or threatens to impose sanctions or penalties of any kind or (iii) ifit relates to skilled nursing units, cites any  deficiency which hasa  scope and severity of “F” or higher or otherwise imposes orthreatens to impose sanctions or penalties of any kind.

 

#### (xiv)        Services andOperations.  Upon the request ofLender, copies of all reports relating to the services and operations of eachMortgaged Property, including, if applicable, Medicaid cost reports and recordsrelating to account balances due to or from Medicaid or any private insurer.

####  

#### (xv)         IntentionallyDeleted.

####  

#### (xvi)        Certification.  All certifications required to be deliveredpursuant to this Agreement shall run directly to and be for the benefit ofLender and Fannie Mae.

####  

#### (xvii)       Standards.  Each of the statements, schedules and reportsrequired by this Agreement shall be certified to be complete and accurate, orin the case of financial statements, to fairly present the informationpresented, by an individual having authority to bind Borrower or Operator, asthe case may be, and shall be in such form and contain such detail as Lendermay reasonably require.

####  

#### (xviii)      Books and Records.  If an Event of Default has occurred and iscontinuing, Borrower shall deliver to Lender upon written demand all books andrecords relating to its Mortgaged Property or its operation.

####  

#### (xix)         Incident Reports.  By the 15th dayof each month, copies of all incident reports submitted by or on behalf ofBorrower during the prior month to any liability insurance carrier or anyelderly affairs, regulatory or licensing authority.

####  

#### (xx)          Annual FinancialStatements of Operator.  Within 10days of submission to Borrower by Master Tenant or Operator, the financialstatements, reports, documents, communications and information delivered toBorrower by Master Tenant or 

 

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#### Operator pursuantto the Operating Lease as in effect on the date of this Agreement, to theextent not otherwise provided under this Agreement.

####  

#### (xxi)         Annual Budgets.  Within sixty (60) days after the start of itsfiscal year, an annual budget for each Mortgaged Property for such fiscal year,setting forth an estimate of all of the costs and expenses, including capitalexpenses, of maintaining and operating each Mortgaged Property.

####  

### (c)           Eachof the statements, schedules and reports required by Section 8.03shall be certified to be complete and accurate in all material respects by anindividual having authority to bind Borrower, and shall be in such form andcontain such detail as Lender may reasonably require.  After an Event of Default, Lender also mayrequire that any statements, schedules or reports be audited at Borrower’sexpense by independent certified public accountants acceptable to Lender.

###  

### (d)           Afteran Event of Default, Lender shall have the right to have Borrower’s books andrecords audited, at Borrower’s expense, by independent certified publicaccountants selected by Lender in order to obtain such statements, schedulesand reports, and all related costs and expenses of Lender shall becomeimmediately due and payable and shall become an additional part of the Indebtednessas provided in Section 12 of each Security Instrument.

###  

### (e)           (e)           If an Event of Default has occurredand is continuing, Borrower shall deliver to Lender upon written demand allbooks and records relating to the Mortgaged Property or its operation.

###  

### (f)            Borrowerirrevocably authorizes Lender to obtain a credit report on Borrower at anytime.

###  

### (g)           Ifan Event of Default has occurred and Lender has not previously requiredBorrower to furnish a quarterly statement of income and expense for theMortgaged Property, Lender may require Borrower to furnish such a statementwithin forty-five (45) days after the end of each fiscal quarter of Borrowerfollowing such Event of Default.

###  

**Section 8.04.****                                       Accessto Records; Discussions With Officers and Accountants.**

** **

To the extent permitted by law and in addition to the applicablerequirements of the Security Instruments, Borrower shall permit Lender andshall cause the Operator to permit Lender to:

 

### (a)           inspect,make copies and abstracts of, and have reviewed or (after an Event of Default)audited, such of Borrower’s and/or the Operator’s books and records as mayrelate to the Obligations or any Mortgaged Property;

###  

### (b)           atany time discuss Borrower’s affairs, finances and accounts with Borrower’sSenior Management or property managers and (provided that an officer ofBorrower or Key Principal has been given the opportunity by Lender to be aparty to such discussion) 

 

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### independent publicaccountants; after an Event of Default, discuss Borrower’s affairs, financesand account with Key Principal’s officers, partners and employees;

###  

### (c)           discussthe Mortgaged Properties’ conditions, operations or maintenance with theofficers of the Operator of such Mortgaged Properties, the officers andemployees of Borrower and/or the Key Principal; and

###  

### (d)           receiveany other information that Lender reasonably deems necessary or relevant inconnection with the Term Loan, any Loan Document or the Obligations from theofficers and employees of such Borrower or third parties.

###  

Notwithstanding the foregoing, prior to an Event of Default and so longas no Potential Event of Default has occurred and is continuing and in theabsence of an emergency, all inspections shall be conducted at reasonable timesduring normal business hours upon reasonable notice to Borrower.

 

**Section 8.05.****                                       Certificateof Compliance.**

** **

Borrower shall deliver to Lender concurrently with the delivery of thefinancial statements and/or reports required by Section 8.03(a) andSection 8.03(b) a certificate signed by an authorizedrepresentative of Borrower reasonably acceptable to Lender (i) settingforth in reasonable detail the calculations required to establish whetherBorrower and Key Principal were in compliance with the requirements of thisAgreement on the date of such financial statements, and (ii) stating that,to the best knowledge of such individual following reasonable inquiry, no Eventof Default or Potential Event of Default has occurred, or if an Event ofDefault or Potential Event of Default has occurred, specifying the naturethereof in reasonable detail and the action Borrower is taking or proposes totake.  Any certificate required by this Section shallrun directly to and be for the benefit of Lender and Fannie Mae.

 

**Section 8.06.****                                       MaintainLicenses.**

** **

Borrower shall procure and maintain or cause the Operator to procureand maintain full force and effect all licenses, Permits, charters andregistrations which are material to the conduct of its business and shall abideby and satisfy all terms and conditions of all such licenses, Permits, chartersand registrations.

 

**Section 8.07.****                                       InformLender of Material Events.**

** **

Borrower shall promptly inform Lender in writing of any of thefollowing (and shall deliver to Lender copies of any related writtencommunications, complaints, orders, judgments and other documents relating tothe following) of which Borrower has actual knowledge:

 

### (a)           Defaults.  The occurrence of any Event of Default or anyPotential Event of Default under this Agreement or any other Loan Document orany “Default” or “Event of Default” under the Operating Lease, Sub-Lease or anyloan document in connection with a Supplemental Loan;

 

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### (b)           RegulatorySupervision or Penalty.  Thecommencement of any rulemaking or disciplinary proceeding or the promulgationof any proposed or final rule which would have, or may reasonably beexpected to have, a Material Adverse Effect; the receipt of notice from anyGovernmental Authority having jurisdiction over Borrower or Operator that (A) Borroweror Operator is being placed under regulatory supervision, (B) any License,Permit, charter, membership or registration material to the conduct ofBorrower’s or Operator’s business or the Mortgaged Properties is to besuspended or revoked or (C) Borrower or Operator is to cease and desistany practice, procedure or policy employed by Borrower or Operator in theconduct of its business, and such cessation would have, or may reasonably be expectedto have, a Material Adverse Effect;

###  

### (c)           BankruptcyProceedings.  The commencement of anyproceedings by or against Borrower, Operator or Key Principal under anyapplicable bankruptcy, reorganization, liquidation, insolvency or other similarlaw now or hereafter in effect or of any proceeding in which a receiver,liquidator, trustee or other similar official is sought to be appointed for anysuch party;

###  

### (d)           EnvironmentalClaim.  The receipt from anyGovernmental Authority or other Person of any notice of violation, claim,demand, abatement, order or other order or direction (conditional or otherwise)for any damage, including personal injury (including sickness, disease ordeath), tangible or intangible property damage, contribution, indemnity, indirector consequential damages, damage to the environment, pollution, contaminationor other adverse effects on the environment, removal, cleanup or remedialaction or for fines, penalties or restrictions, resulting from or based upon (i) theexistence or occurrence, or the alleged existence or occurrence, of a HazardousSubstance Activity on any Mortgaged Property in violation of any law or (ii) theviolation, or alleged violation, of any Hazardous Materials Laws in connectionwith any Mortgaged Property or any of the other assets of Borrower;

###  

### (e)           MaterialAdverse Effects.  The occurrence ofany act, omission, change or event (including the commencement or writtenthreat of any proceedings by or against Borrower in any Federal, state or localcourt, or before any Governmental Authority, or before any arbitrator), thathas, or would have, a Material Adverse Effect, subsequent to the date of themost recent audited financial statements of Borrower delivered to Lenderpursuant to Section 8.03;

###  

### (f)            AccountingChanges.  Any material change inBorrower’s accounting policies or financial reporting practices;

###  

### (g)           Legaland Regulatory Status.  Theoccurrence of any material act, omission, change or event, including anyGovernmental Approval, the result of which is to change or alter in any way thelegal or regulatory status of Borrower or Operator;

###  

### (h)           Changein Senior Management.  Any change inthe identity of Senior Management; and

###  

### (i)            LegalProceedings.  The commencement orwritten threat of, or amendment to, any proceedings by or against Borrower,Master Tenant or any Operator in any 

 

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### Federal, state orlocal court or before any Governmental Authority, or before any arbitrator,which, if adversely determined, would have, or at the time of determination mayreasonably be expected to have, a Material Adverse Effect.

###  

**Section 8.08.****                                       Compliancewith Applicable Law.**

** **

Borrower shall comply and shall cause the Operator to comply in allmaterial respects with all Applicable Laws now or hereafter affecting anyMortgaged Property or any part of any Mortgaged Property or requiring anyalterations, repairs or improvements to any Mortgaged Property.  Borrower shall procure and continuouslymaintain or shall cause the Operator to procure and maintain in full force andeffect, and shall abide by and satisfy or shall cause the Operator to abide byand satisfy all material terms and conditions of all Permits and shall complywith all written notices from Governmental Authorities.  Borrower shall comply and shall cause theOperator to comply in all material respects with all requirements of insurancecompanies or similar organizations which have provided insurance with respectto Borrower or any Mortgaged Property, affecting the operation or use of anyMortgaged Property or the consummation of the transactions to be effected bythis Agreement or any of the other Loan Documents.

 

**Section 8.09.****                                       Alterationsto the Mortgaged Properties.**

** **

Borrower shall have the right to undertake, or permit to be undertaken,any alteration, improvement, demolition, removal or construction (collectively,“Alterations”) to the Mortgaged Properties without the prior consent ofLender; provided, however, that in any case, no such Alteration shall bemade to any Mortgaged Property without the prior written consent of Lender if (i) suchAlteration when completed could reasonably be expected to adversely affect thevalue of such Mortgaged Property or its operation as a Senior Housing Facilityin substantially the same manner in which it is being operated on the date suchproperty became Collateral, (ii) the construction of such Alteration couldreasonably be expected to result in interference to the occupancy of tenants ofsuch Mortgaged Property such that tenants in occupancy with respect to fivepercent (5%) or more of the Leases would be permitted to terminate their Leasesor to abate the payment of all or any portion of their rent, or (iii) suchAlteration will be completed in more than twelve (12) months from the date ofcommencement or in the last year of the Term of this Agreement.  Lender acknowledges that Borrower may requestconsent to perform an Expansion (as defined in the Expansion SecurityAgreement) to the Mortgaged Property known as Heartsfield at Easton, pursuantto the terms of the Expansion Security Agreement.  In the event such request is made and suchconsent is granted, Borrower agrees to execute and deliver the ExpansionSecurity Agreement and to cause Key Principal to execute and deliver the ExpansionGuaranty.**** Notwithstanding the foregoing, Borrower mustobtain Lender’s prior written consent to construct Alterations with respect tothe Mortgaged Property costing in excess of, with respect to any MortgagedProperty, the number of units in such Mortgaged Property multiplied by $3,000,but in any event, costs in excess of $500,000 within a Calendar Year  and Borrower must give prior written noticeto Lender of its intent to construct Alterations with respect to such MortgagedProperty costing in excess of $250,000. For purposes of this Section 8.09,the defined term Alterations is not intended to include any (i) routinemaintenance, routine repairs or routine 

 

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capital expenditures or (ii) repairs or capitalexpenditures specified in the Completion Repair and Security Agreement orReplacement Reserve Agreement.

 

**Section 8.10.****                                       LoanDocument Taxes.**

** **

If any tax, assessment or Imposition (other than a franchise tax orexcise tax imposed on or measured by, the net income or capital (includingbranch profits tax) of Lender (or any transferee or assignee thereof, includinga participation holder)) (“Loan Document Taxes”) is levied, assessed orcharged by the United States, or any State in the United States, or anypolitical subdivision or taxing authority thereof or therein upon any of theLoan Documents or the obligations secured thereby, the interest of Lender inthe Mortgaged Properties, or Lender by reason of or as holder of the LoanDocuments, Borrower shall pay all such Loan Document Taxes to, for, or onaccount of Lender (or provide funds to Lender for such payment, as the case maybe) within 30 days after written notice thereof by Lender and shall promptlyfurnish proof of such payment to Lender, as applicable.  In the event of passage of any law orregulation permitting, authorizing or requiring such Loan Document Taxes to belevied, assessed or charged, which law or regulation in the opinion of counselto Lender may prohibit Borrower from paying the Loan Document Taxes to or forLender, Borrower shall enter into such further instruments as may be permittedby law to obligate Borrower to pay such Loan Document Taxes.

 

**Section 8.11.****                                       FurtherAssurances.**

** **

Borrower, at the request of Lender, shall execute and deliver and, ifnecessary, file or record such statements, documents, agreements, UCC financingand continuation statements and such other instruments and take such furtheraction as Lender from time to time may reasonably request as reasonably necessary,desirable or proper to carry out more effectively the purposes of thisAgreement or any of the other Loan Documents or to subject the Collateral tothe lien and security interests of the Loan Documents or to evidence, perfector otherwise implement, to assure the lien and security interests intended bythe terms of the Loan Documents or in order to exercise or enforce its rightsunder the Loan Documents.  If Lenderbelieves that an “all-asset” collateral description, as contemplated by Section 9-504(2) ofthe UCC, is appropriate as to any Collateral under any Loan Document, theLender is irrevocably authorized to use such a collateral description, whetherin one or more separate filings or as part of the collateral description in afiling that particularly describes the collateral.

 

**Section 8.12.****                                       Transferof Ownership Interests in Borrower.**

** **

### (a)           Prohibitionon Transfers.  Subject to paragraph (b) ofthis Section, no Targeted Entity shall cause or permit a Transfer or a Changeof Control.

###  

### (b)           PermittedTransfers.  Notwithstanding theprovisions of paragraph (a) of this Section, or any other provisions ofthis Agreement or any other Loan Document to the contrary, the followingTransfers by a Targeted Entity, (upon thirty (30) days’ prior written notice toLender, in the case of subclauses (iv) and (v) below and in the caseof subclause (iii) within thirty (30) days of such event), are permittedwithout the consent of Lender:

 

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####  

#### (i)            A Transfer of anydirect or indirect Ownership Interest in Key Principal; provided, however, thatno Change of Control occurs as the result of such Transfer.

####  

#### (ii)           The issuance by KeyPrincipal of additional membership interests or stock (including by creation ofa new class or series of interests or stock and all varieties of convertibledebt, equity and other similar securities), as the case may be, and thesubsequent direct or indirect Transfer of such interests or stock; provided,however, that no Change of Control occurs as the result of such Transfer.

####  

#### (iii)          Any amendment,modification or any other change in the governing instrument or instruments ofKey Principal; provided, however, that no Change of Control  or material change in the decision makingprocess occurs as the result of such Transfer.

####  

#### (iv)          A merger with oracquisition of another entity by Key Principal, provided that (1) suchmerger is not with or acquisition is not of Five Star Quality Care, Inc.or any subsidiaries of Five Star Quality Care, Inc., (2) no Change inControl occurs and (3) such merger or acquisition does not result in anEvent of Default, as such terms are defined in this Agreement.

####  

#### (v)           A Transfer of 100%of the Ownership Interests in the Borrower to a Single Purpose entity that iswholly owned by  the Key Principal.

####  

**Section 8.13.****                                       Transferof Ownership of Mortgaged Property.**

** **

### (a)           Prohibitionon Transfers.  Subject to paragraph (b) ofthis Section, Borrower shall not cause or permit a Transfer of all or any partof a Mortgaged Property or interest in any Mortgaged Property.

###  

### (b)           PermittedTransfers.  Notwithstanding provision(a) of this Section or any other provisions of this Agreement or anyother Loan Document to the contrary, the following Transfers of a Mortgaged Propertyby Borrower are permitted without the consent of Lender:

###  

#### (i)            The grant of aleasehold interest in individual dwelling units or commercial spaces inaccordance with the Security Instrument.

####  

#### (ii)           A sale or otherdisposition of obsolete or worn out personal property which iscontemporaneously replaced by comparable personal property of equal or greatervalue which is free and clear of liens, encumbrances and security interestsother than those created by the Loan Documents or Permitted Liens.

####  

#### (iii)          The creation of amechanic’s or materialmen’s lien or judgment lien against a Mortgaged Propertywhich is released of record, bonded or otherwise remedied to Lender’ssatisfaction within thirty (30) days of the date of creation.

####  

#### (iv)          The grant of aneasement if, prior to the granting of the easement, Borrower causes to besubmitted to Lender all information required by Lender to evaluate the 

 

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#### easement, and ifLender consents to such easement based upon Lender’s determination that theeasement will not materially adversely affect the operation of the MortgagedProperty or Lender’s interest in the Mortgaged Property and Borrower pays toLender, on demand, all reasonable third party out-of-pocket costs and expensesincurred by Lender in connection with reviewing Borrower’s request.  Lender shall not unreasonably withhold itsconsent to or withhold its agreement to subordinate the lien of a SecurityInstrument to (1) the grant of a utility easement serving a MortgagedProperty to a publicly operated utility, or (2) the grant of an easementrelated to expansion or widening of roadways, driveways or parking areas,provided that any such easement is in form and substance reasonably acceptableto Lender and does not materially and adversely affect the access, use ormarketability of a Mortgaged Property.

####  

#### (v)           The execution of theOperating Lease and any Sub-Lease, and of any replacement Operating Lease andany replacement Sub-Lease entered into in accordance with Section 8.19.

####  

#### (vi)          Any commercialsub-lease of a Mortgaged Property permitted by Section 4 of anySubordination, Assignment and Security Agreement.

####  

### (c)           Assumptionof Collateral Pool.  Notwithstandingparagraph (a) of this Section, a Transfer of the entire Collateral Poolmay be permitted with the prior written consent of Lender if each of thefollowing requirements is satisfied:

###  

#### (i)            the transferee (“NewCollateral Pool Borrower”) is a Single-Purpose entity, is not directly orindirectly owned by and is not a Prohibited Person and executes an assumptionagreement that is acceptable to Lender pursuant to which such New CollateralPool Borrower assumes all obligations of Borrower under all the applicable LoanDocuments and Supplemental Loan Documents;

####  

#### (ii)           the applicable LoanDocuments and Supplemental Loan Documents shall be amended and restated asdeemed necessary or appropriate by Lender to meet the then-applicablerequirements of Fannie Mae; provided, however, any waivers granted inconnection with the Term Loan or Supplemental Loan will not be reinstatedunless specifically approved by Lender and Fannie Mae;

####  

#### (iii)          after giving effectto the assumption, the requirements of Section 6.05 and the GeneralConditions contained in Section 6.01 shall be satisfied;

####  

#### (iv)          New Collateral PoolBorrower shall make such deposits to the reserves or escrow funds establishedunder the Loan Documents and Supplemental Loan Documents, including replacementreserves, completion/repair reserves, and all other required escrow and reservefunds at such times and in such amounts as determined by Lender at the time ofthe assumption;

####  

#### (v)           New Collateral PoolBorrower shall propose a guarantor acceptable to Lender, which guarantor is notdirectly or indirectly owned by and is not a Prohibited Person executes anddelivers a guaranty acceptable to Lender provided that the 

 

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#### guaranty isguaranteeing a non-recourse loan with comparable exceptions to non-recourse asset forth in Section 14.01;

####  

#### (vi)          Lender shall be theservicer of the loan; and

####  

#### (vii)         the requirements of Section 8.14are satisfied.

####  

**Section 8.14.****                                       Consentto Prohibited Transfers.**

** **

### (a)           Consentto Prohibited Transfers.  Lender may,in its sole and absolute discretion, consent to a Transfer that would otherwiseviolate Sections 8.12 and 8.13 if, prior to the Transfer,Borrower has satisfied or caused to be satisfied each of the followingrequirements:

###  

#### (i)            the submission toLender of all information required by Lender to make the determination requiredby this Section;

####  

#### (ii)           the absence of anyEvent of Default;

####  

#### (iii)          the transferee andany guarantor is not directly or indirectly owned by and is not a ProhibitedPerson and meets all of the eligibility, credit, management and other standards(including any standards with respect to previous relationships between Lenderand the transferee and the organization of the transferee) customarily appliedby Lender at the time of the proposed Transfer to the approval of borrowers orguarantors, as the case may be, in connection with the origination or purchaseof similar mortgages, deeds of trust or deeds to secure debt on Seniors HousingFacilities;

####  

#### (iv)          in the case of aTransfer of direct or indirect ownership interests in Borrower, if transferoror any other person has obligations under any Loan Documents, the execution bythe transferee or one (1) or more individuals or entities acceptable toLender and/or Fannie Mae of an assumption agreement, guaranty or any otherrequired loan documents, as applicable, that is acceptable to Lender and that,among other things, requires the transferee to perform all obligations oftransferor or such person set forth in such Loan Document, and may require thatthe transferee comply with any provisions of this Agreement or any other LoanDocument which previously may have been waived by  Lender;

####  

#### (v)           Lender’s receipt ofall of the following:

####  

##### (A)                              atransfer fee equal to one percent (1%) of the unpaid Outstanding principalbalance of the Term Loan.

#####  

##### (B)                                Inaddition, Borrower shall be required to reimburse Lender for all of Lender’sreasonable out-of-pocket costs (including reasonable attorneys’ fees) incurredin reviewing the Transfer request.

 

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#### (vi)          The Transfer willnot result in a significant modification under Section 1001 of theInternal Revenue Code of any Fixed Loan or any Variable Loan that has beensecuritized in a mortgage-backed security.

####  

**Section 8.15.****                                       Date-DownEndorsements.**

** **

Before the release or substitution of a Mortgaged Property and at anytime and from time to time that Lender has reason to believe that an additionallien may encumber a Mortgaged Property, Lender may obtain an endorsement toeach Title Insurance Policy containing a revolving credit endorsement, amendingthe effective date of each such Title Insurance Policy to the date of the titlesearch performed in connection with the endorsement. Borrower shall pay for thecost and expenses incurred by Lender to the Title Company in obtaining suchendorsement, provided that, for each Title Insurance Policy, it shall not beliable to pay for more than one (1) such endorsement in any consecutivetwelve (12) month period.

 

**Section 8.16.****                                       Ownershipof Mortgaged Properties.**

** **

Borrower or an IDOT Guarantor shall be the sole owner of each of theMortgaged Properties free and clear of any Liens other than Permitted Liens.

 

**Section 8.17.****                                       Compliancewith Net Worth Test.**

** **

Until the date upon which all of the conditions set forth in Section 8.25are satisfied, Key Principal shall at all times maintain its Net Worth so thatit is not less than $515,000,000.

 

**Section 8.18.****                                       Compliancewith Liquidity Test.**

** **

Until the date upon which all of the conditions set forth in Section 8.25are satisfied, Key Principal shall at all times ensure that the sum of (i) cashand Cash Equivalents maintained by it and (ii) the amount available to bedrawn by it under its lines of credit (including, without limitation, under theAmended and Restated Credit Agreement dated as of July 29, 2005, asamended, with certain lenders and Wachovia Bank, National Association, asadministrative Agent) is not less than $21,000,000.

 

**Section 8.19.****                                       MasterTenant and Operator.**

** **

The Borrower shall not remove or permit or suffer the removal of theMaster Tenant or the Operator without the prior written consent of the Lenderand unless and until Lender has approved in writing a replacement Master Tenantor Operator as the case may be.** **If any Master Tenant and/orOperator is removed by Lender pursuant to the terms and conditions of the LoanDocuments, Borrower agrees to use commercially reasonable efforts to enter intoa new lease with a new Master Tenant and establish a new Operator on or priorto the effective date of termination unless otherwise directed by Lender.  Any new Master Tenant or Operator must beapproved in writing by Lender.  Anyoperating lease or other similar agreement between the Borrower and a new MasterTenant and any Sub-Lease or management agreement with any new Operator must beapproved in writing by Lender and the Borrower, new Master Tenant and each 

 

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new Operator must execute and deliver to Lender aSubordination, Assignment and Security Agreement.  The Borrower shall cause the Master Tenantand Operator to notify Lender in writing of any name change or any change inits place of incorporation.  The Borroweragrees that the Lender shall have the right to remove the Master Tenant and theOperator at any time: (i) upon the occurrence of an Event of Default under(and as defined in) the Operating Lease or Sub-Lease and (ii) upon theoccurrence of an “Event of Default” under (and as defined in) anySubordination, Assignment and Security Agreement.

 

**Section 8.20.****                                       Borrowerand Any Operating Lease.**

** **

Except in connection with a transaction permitted under Sections 8.12,8.13, 8.14 or 8.19, Borrower shall not assign its rights under the OperatingLease and shall cause Master Tenant and Operator to not assign either of theirrights under the Operating Lease or Sub-Lease, without the prior writtenconsent of Lender.  Within five days ofBorrower’s receipt, Borrower shall give Lender written notice of any notice orinformation that Borrower receives whichindicates that either Borrower, Master Tenant or Operator is in default underthe terms of any Operating Lease or Sub-Lease, Operator is terminating theSub-Lease, Master Tenant is terminating the Operating Lease or that Operator isotherwise discontinuing its operation and management of the Mortgaged Property.

 

**Section 8.21.****                                       Enforcementof Leases.**

** **

Borrower will comply with and shall (a) enforce the obligations ofthe Master Tenant under the Operating Lease, (b) cause the Master Tenantto perform its obligations under the Sub-Lease as sub-landlord and (c) causethe Operator to perform its obligations under the Sub-Lease.  Borrower shall not and shall cause MasterTenant or Operator, as the case may be, not to make any material amendments ormodifications to the Operating Lease or any Sub-Lease, terminate the OperatingLease or any Sub-Lease (except as provided in Section 8.19), orwaive a default thereunder, without the prior written consent of theLender.  Material amendments ormodifications include, without limitation, amendments or modifications that (i) reduceor change the rent or other payments required to be made by the Master Tenantor Operator, (ii) reduce or change the term, (iii) release anysecurity for the obligations of the Master Tenant or Operator, (iv) changeany provisions of the Operating Lease or Sub-Lease relating to facilitymortgages and the rights of mortgagees, (v) grant options to purchase or (vi) adverselyimpact the rights or interests of Lender or Fannie Mae.

 

**Section 8.22.****                                       SinglePurpose Entity.**

** **

Borrower and the sole member of Borrower shall maintain itself as aSingle Purpose entity.  Borrower shallcause Master Tenant and each Operator (to which Licenses are transferredpursuant to Section 8.25 hereof) to maintain itself as a SinglePurpose entity.

 

**Section 8.23.****                                       ERISA.**

** **

Borrower shall at all times remain in compliance in all materialrespects with all applicable provisions of ERISA, if any, and shall not incurany liability to the PBGC on a Plan 

 

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under Title IV of ERISA.  Neither the Borrower, nor any member of theControlled Group is or ever has been obligated to contribute to anyMultiemployer Plan.  The assets of theBorrower do not constitute plan assets within the meaning of Department ofLabor Regulation §2510.3-101 of any employee benefit plan subject to Title I ofERISA.

 

**Section 8.24.****                                       Consentsor Approvals.**

** **

Borrower shall obtain any required consent or approval of any creditorof Borrower, any Governmental Authority or any other Person to perform itsobligations under this Agreement and any other Loan Documents.

 

**Section 8.25.****                                       Transferof Licenses by Operator.**

** **

Within one (1) year of the Initial Closing Date, Borrower shallcause each existing Operator for each Mortgaged Property, to transfer its Licensesand all Licenses relating to the operation of the Mortgaged Property or causesuch Licenses to be issued or re-issued to a separate Single-Purpose entitywholly owned by Five Star Quality Care Inc. for each such Mortgaged Property.  The Organizational Documents of each SinglePurpose entity shall be in form and substance satisfactory to Lender.  Such Single-Purpose entity will (i) becomea tenant under the Sub-Lease for such Mortgaged Property by assuming allobligations of the existing Operator with respect to such Mortgage Property, (ii) becomean Operator under this Agreement, (iii) become a party to the applicableSubordination, Assignment and Security Agreement by assuming all of theobligations of the existing Operator with respect to such Mortgaged Property, (iv) holdin its name all Licenses pertaining to the operation of the Mortgaged Propertyoperated by such entity which are required to be held in such entity’s nameunder Applicable Law and (v) cooperate with Lender in effectuating thesetransactions including by delivery of customary corporate legal opinions satisfactory to Lender and bycooperating in the perfection of the collateral, including an “all-asset”collateral description in a UCC filing, as contemplated by Section 9-504(2) ofthe UCC, as is appropriate as to any Collateral under any SubordinationAssignment and Security Agreement.  TheLender is irrevocably authorized to use such a collateral description, whetherin one or more separate filings or as part of the collateral description in afiling that particularly describes the collateral.

 

If Borrower fails to comply with the provisions of this Section 8.25,Borrower may release the specific Mortgaged Properties that are not operated bya Single Purpose entity in compliance with the requirements of this Section 8.25,so long as the release of the specific Mortgaged Property satisfies therequirements of Sections 3.04 and 6.05. Borrower’s failure to release such Mortgaged Property pursuant to therequirements of Sections 3.04 and 6.05 within 30 days of the breach of this Section 8.25,will constitute an Event of Default under this Agreement.

 

**Section 8.26.****                                       Indemnification.**

** **

The Borrower hereby releases Lender and Fannie Mae and their respectiveofficers, directors, members, shareholders, officials, agents, independentcontractors and employees from, and covenants and agrees to indemnify, holdharmless and defend Lender and Fannie Mae and 

 

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their respective officers, members, directors,shareholders, officials, agents, independent contractors and employees and eachof them (each an “**indemnified party**”)from and against (a) any and all claims, joint or several, by or on behalfof any person arising from any cause whatsoever in connection with (i) aMaster Tenant/Operator Bankruptcy Event prior to the transfer contemplated in Section 8.25,or (ii) the transferring of any Licenses (or failure to transfer) to aSingle-Purpose entity wholly owned by Five Star Quality Care as set forth in Section 8.25or (iii) the multi-purpose nature of each existing Operator prior to thetransfer contemplated in Section 8.25.  Borrower shall pay all reasonable costs,counsel fees, expenses or liabilities incurred in connection with any suchclaim or proceeding referred to in clauses (i) through (iii) above.

 

In the event that any action or proceeding is brought against anyindemnified party with respect to which indemnity may be sought under thisSection, the Borrower, upon written notice from the indemnified party, willassume the investigation and defense thereof, including the employment ofcounsel selected by the Borrower, but acceptable to the indemnified party, andmust assume the payment of all expenses related thereto, with full power tolitigate, compromise or settle the same in its sole discretion, provided thatsuch indemnified party has the right to review and approve or disapprove anysuch compromise or settlement.

 

Each indemnified party has the right, if such indemnified partyconcludes in good faith that a conflict of interest exists, to employ separatecounsel in any such action or proceeding and participate in the investigationand defense thereof, and the Borrower must pay the reasonable fees and expensesof such separate counsel.

 

In the event that an indemnified party does not conclude that aconflict of interest exists and yet such party prefers to employ separatecounsel in such action or proceeding, it may do so at its own cost andexpense.  If such separate counsel isemployed as described above, the Borrower and any such indemnified party agreeto cooperate as may reasonably be required in order to ensure the proper andadequate defense of any such action, suit or proceeding, including, but notlimited to, making available to each other, and their counsel and accountants,all books and records relating to such action, suit or proceeding.  If any such counsel reasonably determinesthat the rendering of such assistance will adversely affect the defense orinterests of its client, such counsel is not required to comply with the termsof the immediately preceding sentence.

 

Notwithstanding any transfer of the Mortgaged Properties to anotherowner, the Borrower will remain obligated to indemnify each indemnified partypursuant to this Section with respect to acts occurring prior to the dateof transfer of legal title to the Mortgaged Properties (irrespective of when aclaim is actually made).  All amounts dueunder this Section 8.26 are payable within 30 days after delivery ofwritten notice from Lender to the Borrower unless judicial order requires thatany such payments must be made on an earlier date in which case payment is madeby such date on written demand therefor.

 

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**Section 8.27.****                                       OperatorRent Security Deposits.**

** **

Borrower shall deposit any and all cash security deposits paid byMaster Tenant in accordance with the Operating Lease or the Operator inaccordance with the Sub-Lease into an account designated by Lender.

 

**Section 8.28.****                                       OperatorGuaranty.**

** **

Borrower shall remit and shall cause Operator and/or Master Tenant, asapplicable, to remit any and all payments made under the Operator Guaranty toLender.  Borrower, Master Tenant andOperator will cause each Operator Guaranty to remain in full force and effectuntil the Term Loan under this Agreement is paid in full.  Borrower will not suffer or permit a materialnon-payment default under the Operator Guaranty.

 

**Section 8.29.****                                       Post-ClosingObligations.**

** **

Borrower shall usecommercially reasonable efforts to deliver to Lender, at Borrower’s sole costand expense, no later than sixty (60) days from the Initial Closing Date(“Estoppel Delivery Date”) the estoppel certificates as described below in theform previously agreed upon with Lender. If Borrower uses commercially reasonable efforts but is unable todeliver the estoppels within the sixty day period, the obligation to do so willterminate.  Borrower shall pay, orreimburse Lender for, all reasonable out-of-pocket third party legal fees and expensesincurred by Lender and by Fannie Mae in respect of the review and/ornegotiation of such estoppel certificates.

 

a.             In connection with the Coral Oaks, Coral Springs,Florida property:  An  Estoppel Certificate, in the form approved byFannie Mae, that addresses the issues, restrictions, assessments, liens andobligations granted within that certain Declaration of Easements, Covenants andRestrictions recorded November **6, 1986, in Book  6355, page 1101***.*

 

b.             In connection with the Woodlands, Montgomery County,Texas property, an  Estoppel Certificatefrom adjoining property owners, in the form approved by Fannie Mae, thataddresses the issues, shared maintenance costs, liens and other obligationsgranted within that certain Lake Maintenance Agreement **as****Document No. 9649482***:*

 

c.             In connection with the Meadowmere-Northshore Mequon,Ozaukee County, Wisconsin property, an Estoppel Certificate in the form approved by Fannie Mae, that addressesthe issues, shared maintenance costs, liens and other obligations grantedwithin that certain Meadowmere-Northshore, Mequon, Wisconsin MaintenanceAgreement,******dated June 26, 1996, and recorded in Book 987,page 318****.**

 

# **ARTICLE 9NEGATIVE COVENANTS OF BORROWER**

# ** **

Borrower agrees and covenants with Lender that, at all times during theTerm of this Agreement:

 

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**Section 9.01.****                                       OtherActivities.**

 

### (a)           NoTargeted Entity (other than Key Principal)****shall amendits Organizational Documents in any material respect, including without limitationthe allocation of decision-making rights among the members and partners,without the prior written consent of Lender;

###  

### (b)           NoTargeted Entity shall dissolve or liquidate in whole or in part;

###  

### (c)           Borrowershall not use, or permit to be used, any Mortgaged Property for any uses orpurposes other than as a Seniors Housing Facility and ancillary uses consistentwith Seniors Housing Facilities.

###  

**Section 9.02.****                                       Liens.**

** **

Borrower shall not create, incur, assume or suffer to exist any Lien onBorrower’s interest in any Mortgaged Property or any part of any MortgagedProperty, except the Permitted Liens.

 

**Section 9.03.****                                       Indebtedness.**

** **

Borrower shall not incur or be obligated at any time with respect toany Indebtedness (other than the Term Loan). Neither Borrower nor any owner of Borrower shall incur any“indebtedness,” or issue any equity secured by a pledge of the membershipinterests in Borrower or any owner of Borrower (i.e., “mezzanine debt”)or by a pledge of the cash flow of Borrower or issue any preferred equity.

 

**Section 9.04.****                                       PrincipalPlace of Business.**

** **

Borrower shall not change its principal place of business, state offormation, legal name or the location of its books and records, each as setforth in the Certificate of Borrower, without first giving thirty (30) days’prior written notice to Lender.

 

**Section 9.05.****                                       Condominiums.**

** **

Borrower shall not submit any Mortgaged Property to a condominiumregime during the Term of this Agreement.

 

**Section 9.06.****                                       Restrictionson Distributions.**

** **

Borrower shall not make any distributions of any nature or kindwhatsoever to the owners of its Ownership Interests as such if, at the time ofsuch distribution, a Potential Event of Default or an Event of Default hasoccurred and remains uncured, provided, however, this provision shall not beconstrued so as to prevent Borrower, only to the extent that Key Principaldoes not have sufficient cash available from any other source and proof of sameis remitted to Lender, frommaking such distributions from its Net Operating Income (after giving effect to the payment of all amountsdue and owing to Lender) as are necessary to permit Key Principal to make 

 

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distributions required tomaintain Key Principal’s taxation as a “real estate investment trust” under theInternal Revenue Code.

 

**Section 9.07.****                                       Confidentialityof Certain Information.**

** **

Borrower shall not disclose any terms, conditions, underwritingrequirements or underwriting procedures of this Agreement or any of the Loan Documents;provided, however, that such confidential information may be disclosed (A) asrequired by law or pursuant to generally accepted accounting procedures, (B) toofficers, directors, employees, agents, partners, attorneys, accountants,engineers and other consultants of Borrower who need to know such information,provided such Persons are instructed to treat such information confidentially, (C) toany regulatory authority having jurisdiction over Borrower, (D) inconnection with any filings with the Securities and Exchange Commission orother Governmental Authorities, or (E) to any other Person to which suchdelivery or disclosure may be necessary or appropriate (1) in compliancewith any law, rule, regulation or order applicable to Borrower, or (2) inresponse to any subpoena or other legal process or information investigativedemand.

 

**Section 9.08.****                                       Changesto Licenses, Permits.**

** **

Borrower shall not and shall cause the Operator not to, without theprior written consent of the Lender, amend, modify or otherwise change theLicenses or Permits to add Skilled Nursing Units at any MortgagedProperty.  Borrower will comply with theLevel of Care Diversity Requirements. Notwithstanding the foregoing, Lender may agree with Borrower to amendthe Licenses and Permits to add Skilled Nursing Units at a Mortgaged Propertyor to modify the Level of Care Diversity Requirement, if the addition ofSkilled Nursing Units or the change in acuity level improves the CollateralPool based on factors that are consistent with Lender’s UnderwritingRequirements, are consistent with market demand and result in increased NetOperating Income or increased value of the Mortgaged Property.

 

**Section 9.09.****                                       Medicare/Medicaid.**

** **

Borrower further covenants and agrees that it shall not permit morethan 20% of its effective gross income from the Mortgaged Property to bederived from units relying on Medicaid payments.  If more than 20% of effective gross incomefrom the Mortgaged Property becomes derived from units relying on Medicaidpayments, the Borrower shall diligently and expeditiously take all reasonablesteps necessary to bring the Mortgaged Property into compliance with thepreceding sentence to the extent permissible by applicable law or regulation.

 

**Section 9.10.****                                       NoChange in Minimum Rent.**

** **

The allocation of Minimum Rent among the Mortgaged Properties as setforth in Schedule 1 hereto (as such Minimum Rent may be adjusted as provided inSection 3.1.1(c) of the Operating Lease) shall not be changed,modified and/or supplemented without the prior written consent of Lender.

 

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**Section 9.11.****                                       Accounts.**

** **

Borrower and IDOT Guarantors agree not to (i) permit their ownfunds to be deposited into any account in which any Person has a securityinterest, pledge or lien; and (ii) allow or suffer any Operator fromdepositing its own funds generated from or relating to any Mortgaged Propertyinto any account in which any Person has a security interest, pledge or lien.

 

# **ARTICLE 10FEES**

# ** **

**Section 10.01.****                                OriginationFees.**

** **

Origination Fee.  Borrower shall pay to Lender on or before theInitial Closing Date an origination fee (“Initial Origination Fee”)equal to $2,564,670, 50 basis points (.50%) multiplied by the Term Loanand a Review Fee equal to $512,934, 10 basis points (.10%) multiplied bythe Term Loan.

 

**Section 10.02.****                                DueDiligence Fees.**

** **

### (a)           InitialDue Diligence Fees.  Borrower has paid to Lender non-refundable duediligence fees (“Initial Due Diligence Fees”) with respect to eachInitial Mortgaged Property.  All InitialDue Diligence Fees, third party costs and out-of-pocket fees and expensesincurred by Lender and Fannie Mae shall be paid by Borrower on the InitialClosing Date (or, if the proposed Initial Mortgaged Properties do not becomepart of the Collateral Pool, on demand).  Any portion of the Initial DueDiligence Fee paid to Lender not actually used by Lender to cover reasonabledue diligence expenses shall be promptly refunded to Borrower.

###  

### (b)           AdditionalDue Diligence Fees for Additional Collateral.  Borrower shall pay toLender non-refundable additional due diligence fees (the “AdditionalCollateral Due Diligence Fees”) with respect to each proposed SubstituteMortgaged Property, in an amount equal to $18,000 and a deposit for third-partyreports per Mortgaged Property, as applicable, which represents the estimatedcost for due diligence expenses.  AllAdditional Collateral Due Diligence Fees, third party costs and out-of-pocketfees and expenses incurred by Lender and Fannie Mae shall be paid by Borroweron the applicable Closing Date (or if the relevant proposed Substitute MortgagedProperty, does not become part of a Collateral Pool, on demand) for theSubstitute Mortgaged Property.  Anyportion of the Additional Collateral Due Diligence Fees paid to Lender and notactually used by Lender to cover reasonable due diligence expenses shall bepromptly refunded to Borrower.

###  

**Section 10.03.****                                LegalFees and Expenses.**

** **

### (a)           InitialLegal Fees.  Borrower shall pay, orreimburse Lender for, all out-of-pocket third party legal fees and expensesincurred by Lender and by Fannie Mae in connection with the preparation, reviewand negotiation of this Agreement and any other Loan Documents executed on thedate of this Agreement, to the extent the Initial Due Diligence Fee does notcover such fees and expenses.

 

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### (b)           Feesand Expenses Associated with Requests. Borrower shall pay, or reimburse Lender for, all reasonableout-of-pocket third party costs and expenses incurred by Lender, including theout-of-pocket legal fees and expenses incurred by Lender in connection with thepreparation, review and negotiation of all documents, instruments andcertificates to be executed and delivered in connection with each requestpertaining to this Agreement, the performance by Lender of any of its obligationswith respect to the request, the satisfaction of all conditions precedent toBorrower’s rights or Lender’s obligations with respect to the request, and alltransactions related to any of the foregoing, including the cost of titleinsurance premiums and applicable recordation and transfer taxes and chargesand all other reasonable costs and expenses in connection with a requestpertaining to this Agreement.  Theobligations of Borrower under this subsection shall be absolute andunconditional, regardless of whether the transaction requested in the requestactually occurs.  Borrower shall pay suchcosts and expenses to Lender on the Closing Date for the request, or, as thecase may be, after demand by Lender when Lender determines that such requestwill not close.

###  

**Section 10.04.****                                Failureto Close any Request.**

** **

If Borrower makes a Request and fails to close on the Request for anyreason other than the default by Lender, then Borrower shall pay to Lender andFannie Mae all damages incurred by Lender and Fannie Mae in connection with thefailure to close.

 

# **ARTICLE 11EVENTS OF DEFAULT**

# ** **

**Section 11.01.****                                Eventsof Default.**

** **

Each of the following events shall constitute an “Event of Default”under this Agreement, whatever the reason for such event and whether it shallbe voluntary or involuntary, or within or without the control of Borrower or beeffected by operation of law or pursuant to any judgment or order of any courtor any order, rule or regulation of any Governmental Authority:

 

### (a)           theoccurrence of a default under any Loan Document beyond the cure period, if any,set forth therein or an Event of Default under and as defined in any LoanDocument; or

###  

### (b)           thefailure by Borrower or IDOT Guarantor to pay when due any amount payable byBorrower under any Note, any Security Instrument, this Agreement or any otherLoan Document, including any fees, costs or expenses; or

###  

### (c)           thefailure by Borrower or IDOT Guarantor to perform or observe any covenantcontained in Sections 8.02, 8.07, 8.12, 8.13, 8.14,8.16, 8.17, 8.18, 8.19, 8.20, 8.21, 8.22,8.25, 8.26, 8.27 and Article 9; or

###  

### (d)           anywarranty, representation or other written statement made by or on behalf of anyTargeted Entity contained in this Agreement, any other Loan Document or in any 

 

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### instrumentfurnished in compliance with or in reference to any of the foregoing, is falseor misleading in any material respect on any date when made or deemed made; or

###  

### (e)           (i)            any Targeted Entity shall (A) commencea voluntary case (or, if applicable, or joint case) under any Chapter of theBankruptcy Code (as now or hereafter in effect) or otherwise, (B) file apetition seeking to take advantage of any other laws, domestic or foreign,relating to bankruptcy, insolvency, reorganization, debt adjustment, winding upor composition or adjustment of debts, (C) consent to or fail to contestin a timely and appropriate manner any petition filed against it in aninvoluntary case under such bankruptcy laws or other laws, (D) apply foror consent to, or fail to contest in a timely and appropriate manner, theappointment of, or the taking of possession by, a receiver, custodian, trusteeor liquidator of itself or of a substantial part of its property, domestic orforeign, (E) admit in writing its inability to pay, or generally not bepaying, its debts as they become due, (F) make a general assignment forthe benefit of creditors, (G) assert that Borrower or Key Principal(solely with respect to the Guaranty) has no liability or obligations underthis Agreement or any other Loan Document to which it is a party; or (H) takeany action for the purpose of effecting any of the foregoing; or

###  

(ii)           acase or other proceeding shall be commenced against any Targeted Entity in anycourt of competent jurisdiction seeking (A) relief under the Federalbankruptcy laws (as now or hereafter in effect) or under any other laws,domestic or foreign, relating to bankruptcy, insolvency, reorganization,winding upon or composition or adjustment of debts, or (B) the appointmentof a trustee, receiver, custodian, liquidator or the like of any TargetedEntity or of all or a substantial part of the property, domestic or foreign, ofany Targeted Entity and any such case or proceeding shall continue undismissedor unstayed for a period of sixty (60) consecutive calendar days, or any ordergranting the relief requested in any such case or proceeding against anyTargeted Entity (including an order for relief under such Federal bankruptcylaws) shall be entered; or

 

(iii)          anyTargeted Entity files an involuntary petition against Borrower under anyChapter of the Bankruptcy Code or under any other bankruptcy, insolvency,reorganization, arrangement or readjustment of debt, dissolution, liquidationor similar proceeding relating to Borrower or IDOT Guarantor under the laws ofany jurisdiction.

 

(f)            both(i) an involuntary petition under any Chapter of the Bankruptcy Code isfiled against Borrower or IDOT Guarantor or Borrower or IDOT Guarantor directlyor indirectly becomes the subject of any bankruptcy, insolvency,reorganization, arrangement, readjustment of debt, dissolution, liquidation orsimilar proceeding relating to it under the laws of any jurisdiction, or inequity, and (ii) any Targeted Entity has acted in concert or conspiredwith such creditors of Borrower or IDOT Guarantor (other than Lender) to causethe filing thereof.

 

(g)           ifany provision of this Agreement or any other Loan Document or the lien andsecurity interest purported to be created hereunder or under any Loan Documentshall at any time for any reason cease to be valid and binding in accordancewith its terms on Borrower or IDOT Guarantor or Key Principal, or shall bedeclared to be null and void, or the validity or 

 

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enforceability hereof or thereof or the validity orpriority of the lien and security interest created hereunder or under any otherLoan Document shall be contested by any Targeted Entity seeking to establishthe invalidity or unenforceability hereof or thereof, or Borrower or IDOTGuarantor or Key Principal (only with respect to the Guaranty) shall deny thatit has any further liability or obligation hereunder or thereunder; or

 

(h)           (i) theexecution by Borrower or IDOT Guarantor of a chattel mortgage or other securityagreement on any materials, fixtures or articles used in the construction oroperation of the improvements located on any Mortgaged Property or on articlesof personal property located therein (other than in connection with anyPermitted Liens), or (ii) if any such materials, fixtures or articles arepurchased pursuant to any conditional sales contract or other securityagreement or otherwise so that the Ownership thereof will not vestunconditionally in Borrower or IDOT Guarantor free from encumbrances, or (iii) ifBorrower or IDOT Guarantor does not furnish to Lender upon request thecontracts, bills of sale, statements, receipted vouchers and agreements, or anyof them, under which Borrower or IDOT Guarantor claim title to such materials,fixtures, or articles; or

 

(i)            thefailure by Borrower or IDOT Guarantor to comply with any requirement of anyGovernmental Authority by the shorter of (A)  the time period required bysuch Governmental Authority and (B) within thirty (30) days after writtennotice of such requirement shall have been given to Borrower or IDOT Guarantorby such Governmental Authority; provided that, if action is commenced anddiligently pursued by Borrower or IDOT Guarantor within such thirty (30) days,then Borrower or IDOT Guarantor shall have an additional thirty (30) days tocomply with such requirement; or

 

(j)            adissolution or liquidation for any reason (whether voluntary or involuntary) ofany Targeted Entity; or

 

(k)           anyjudgment against Borrower or IDOT Guarantor, any attachment or other levyagainst any portion of Borrower’s assets with respect to a claim or claims inan amount in excess of****$250,000 inthe aggregate remains unpaid, unstayed on appeal undischarged, unbonded, notfully insured or undismissed for a period of ninety (90) days; or any judgmentagainst Key Principal, any attachment or other levy against any portion of KeyPrincipal assets with respect to a claim or claims in an amount in excess of$1,000,000;

 

(l)            thefailure by Borrower, IDOT Guarantor or Key Principal to perform or observe anymaterial term, covenant, condition or agreement hereunder, other than ascontained in subsections (a) through (k) above, within thirty (30)days after receipt of notice from Lender identifying such failure, providedsuch period shall be extended for up to sixty (60) additional days if inLender’s judgment such default is susceptible to cure and Borrower, in thediscretion of Lender, is diligently pursuing a cure of such default withinsixty (60)****days after receipt of notice fromLender; or

 

(m)          theoccurrence of a default under any Supplemental Loan beyond the cure period, ifany, set forth therein or an event of default under and as defined in theSupplemental Loan Documents.

 

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Notwithstanding anythingto the contrary herein or in the other Loan Documents, if an Event of Defaultshall occur hereunder or under another Loan Document because a representation,warranty, affirmative covenant, negative covenant or other provision hereunderor thereunder shall be breached or violated which in Lender’s judgment isspecifically and exclusively with respect to a particular Mortgaged Property,such Event of Default shall be deemed cured, upon Borrower’s or IDOT Guarantor’ssatisfaction of conditions, as the case may be, set forth in Sections 3.04 and6.05 relating to the release of such Mortgaged Property from the CollateralPool within 30 days of the Event of Default. The existence of such cure right by the Borrower or IDOT Guarantor, asthe case may be, shall not in any way limit or restrict Lender’s right toexercise any and all remedies set forth in Article 12; provided, however,if the Borrower releases such Mortgaged Property pursuant to Sections 3.04 and6.05 as described in the preceding sentence and at the time of such release noother Event of Default has occurred and is continuing, Lender shall ceaseexercising its remedies and discontinue any proceedings it may have initiatedand the parties shall be restored to their former positions and rightshereunder.

 

**Section 11.02.****                                Tenant-TriggeredDefaults.**

** **

Except as provided in the next paragraph,notwithstanding anything herein or in any other Loan Document to the contrary, (i) anEvent of Default by the Operator under the Sub-Lease or an Event of Default bythe Master Tenant under the Operating Lease, (ii) an Event of Default bythe Operator or Master Tenant under any Subordination Assignment and SecurityAgreement, or (iii) an Event of Default under any Loan Document directlycaused solely on account of the action or inaction of the Operator or MasterTenant (a “Tenant Triggered Default”), will not be an Event of Default underany Loan Document provided that within seven (7) Business Days of Borrowerhaving actual knowledge of such Tenant Triggered Default occurring Borrowerpresents a written plan of action (setting forth the cause of the default, thespecific steps Borrower will take to remedy the default and the timetable forimplementing such remedy) (the “Plan”) and Lender approves such Plan or amodified Plan within fifteen (15) Business Days of the presentation to it ofsuch Plan or such default is otherwise cured prior to Lender responding to suchPlan.  A Plan may include the release orsubstitution of one or more Mortgaged Properties, so long as the requirementsfor a release or substitution set forth in this Agreement are satisfied.  Lender’s decision to accept or reject a Planwill not be made in an arbitrary and capricious manner.  For purposes of this Section 11.02,without limiting the scope of the meaning of Borrower’s having actualknowledge, Borrower will automatically and immediately be deemed to have actualknowledge:

 

(i) of written public disclosure;

 

(ii) of the breach by Operator or Master Tenantof any obligation which is scheduled to be performed by or on a particular date(such as the payment of rent); or

 

(iii) in the event that Key Principal or REITManagement Research LLC or its successors and assigns has actual knowledge.

 

The prior paragraph will not be applicable to any Event of Defaultunder the Sub-Lease or Operating Lease or any Loan Document or SupplementalLoan or to any Event of Default by 

 

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the Operator or Master Tenant under any SubordinationAssignment and Security Agreement relating to (i) the failure to pay anyobligations due and owing under any Loan Document; (ii) the failure to paytaxes or other Impositions, (iii) the failure to purchase and maintainrequired insurance coverage, (iv) the liquidation or dissolution of theOperator or Master Tenant, (v) the revocation or  termination of any License necessary to theoperation of any Mortgaged Property as a Seniors Housing Facility, (vi) thecancellation of any utility services, (vii) an assignment by Master Tenantof its right, title and interest under the Operating Lease or Sub-Lease, (viii) anassignment by the Operator of its right, title and interest under theSub-Lease, (ix) a failure to use any Mortgaged Property as a SeniorsHousing Facility and any uses incidental thereto, (x) the failure totransfer licenses as required under each Subordination Assignment and SecurityAgreement and Section 8.25 of this Agreement, or (xi) compliance withobligations under the Completion Repair and Security Agreement relating to thecompletion of immediate repairs.  In theevent Master Tenant or Operator breaches any obligation under the Sub-Lease,Operating Lease or Subordination Assignment and Security Agreement relating tothe creation of any encumbrance or lien on (A) any collateral pledged byMaster Tenant or Operator to Lender (B) any leasehold interest in theMortgaged Property or (C) the Collateral, upon Borrower having actualknowledge of such breach, Borrower will, within 30 days cause such encumbranceor lien to be released of record, bonded or otherwise remedied to Lender’ssatisfaction and failure to do so will be an Event of Default.

 

If Lender consents to the Plan, an Event of Default will occur ifBorrower fails to diligently implement the Plan in the judgment of Lenderwithin the agreed-upon time period set forth in the Plan.  If Lender does not respond to the Plan withinfifteen (15) Business Days it will be deemed rejected.  If Lender rejects the Plan, and if the TenantTriggered Default is property specific and pertains to no more than five (5) MortgagedProperties within any quarterly period, Borrower will have 3 Business Days fromthe date of rejection to inform Lender if it will release the impacted propertyfrom the Collateral Pool in a manner which complies with the releaserequirements set forth in Sections 3.03, 3.04 and 6.05 within thirty (30) daysof the rejection.  Thereafter, theBorrower may also substitute a property into the Collateral Pool in a mannerwhich complies with the substitution requirements set forth in Section 3.05,3.06, 3.07 and 6.06.  If Borrower (i) failsto inform the Lender within such 3 Business Day period that it will release orsubstitute the impacted property; (ii) informs Lender it will not releaseor substitute the impacted property; or (iii) fails to release theimpacted property within such thirty (30) day period in accordance with therequirements of this Section, an Event of Default under the Loan Documents willoccur.

 

# **ARTICLE 12REMEDIES**

# ** **

**Section 12.01.****                                Remedies;Waivers.**

** **

Upon the occurrence of an Event of Default, Lender may do any one ormore of the following (without presentment, protest or notice of protest, allof which are expressly waived by Borrower):

 

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### (a)           bywritten notice to Borrower, to be effective upon dispatch, terminate the TermLoan and declare the principal of, and interest on, the Term Loan and all othersums owing by Borrower to Lender under any of the Loan Documents forthwith dueand payable, whereupon the Term Loan will terminate and the principal of, andinterest on, the Term Loan and all other sums owing by Borrower to Lender underany of the Loan Documents will become forthwith due and payable.

###  

### (b)           Lendershall have the right to pursue any other remedies available to it under any ofthe Loan Documents.

###  

### (c)           Lendershall have the right to pursue all remedies available to it at law or inequity, including obtaining specific performance and injunctive relief.

###  

**Section 12.02.****                                Waivers;Rescission of Declaration.**

** **

Lender shall have the right, to be exercised in its completediscretion, to waive any breach hereunder (including the occurrence of an Eventof Default), by a writing setting forth the terms, conditions, and extent ofsuch waiver signed by Lender and delivered to Borrower.  Unless such writing expressly provides to thecontrary, any waiver so granted shall extend only to the specific event oroccurrence which gave rise to the waiver and not to any other similar event oroccurrence which occurs subsequent to the date of such waiver.  This provision shall not be construed topermit the waiver of any condition to a Request otherwise provided for herein.

 

**Section 12.03.****                                Reserved.**

** **

**Section 12.04.****                                NoRemedy Exclusive.**

** **

Unless otherwise expressly provided, no remedy herein conferred upon orreserved is intended to be exclusive of any other available remedy, but eachremedy shall be cumulative and shall be in addition to other remedies givenunder the Loan Documents or existing at law or in equity.

 

**Section 12.05.****                                NoWaiver.**

** **

No delay or omission to exercise any right or power accruing under anyLoan Document upon the happening of any Event of Default or Potential Event ofDefault shall impair any such right or power or shall be construed to be awaiver thereof, but any such right and power may be exercised from time to timeand as often as may be deemed expedient.

 

**Section 12.06.****                                NoNotice.**

** **

To entitle Lender to exercise any remedy reserved to Lender in thisArticle, it shall not be necessary to give any notice, other than such noticeas may be required under the applicable provisions of this Agreement or any ofthe other Loan Documents.

 

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# **ARTICLE 13INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES**

# ** **

**Section 13.01.****                                Insuranceand Real Estate Taxes.**

** **

Borrower shall (unless waived by Lender by separate agreement)establish funds for taxes, insurance premiums and certain other charges foreach Mortgaged Property in accordance with Section 7(a) of theSecurity Instrument for each Mortgaged Property.

 

### (a)           Insuranceand Tax Escrow; Waiver.  Borrowershall establish funds for taxes, insurance premiums and certain other chargesfor each Mortgaged Property in accordance with Section 7(a) of theSecurity Instrument for each Mortgaged Property.  Notwithstanding the foregoing, so long as noEvent of Default has occurred and subject to Section 13.01(a) below,Lender hereby waives the obligations of Borrower under Section 7(a) ofeach Security Instrument with respect to the escrow of premiums for insuranceand taxes (the “**Required Escrow Payments**”).  During any period in which the obligation topay the Required Escrow Payments has been waived pursuant to this Section 13.01,Borrower shall:  (i) pay taxes, (ii) payinsurance premiums with respect to the insurance policy meeting therequirements of the Security Instrument for each Mortgaged Property, (iii) notlater than fifteen (15) days prior to the expiration date of such policy send Lendercopies of quotes received by Borrower which set forth the gross pre-taxpremiums for new or renewal insurance policies, complete information on who mayprovide the insurance and to whom the premiums will be due (iv) not laterthan five (5) Business Days prior to the expiration date of such policysend Lender copies of binding quotes received by Borrower which set forth thegross pre-tax premiums for new or renewal insurance policies, completeinformation on who is providing the insurance and to whom the premiums are due,evidence of Borrower’s acceptance of such quotes or renewals, and certifiedcopies of evidence of insurance effective on or prior to the expiration date ofthe old existing policy, (v) not later than seven (7) days after thethen-current expiration date of the insurance policy, send Lender paid receiptsor other documentation satisfactory to Lender evidencing that the premiums forsuch new or renewal insurance policies have been paid, (vi) send Lenderinvoices and canceled checks, or other documentation satisfactory to Lender,evidencing payment of such taxes within sixty (60) days after such taxes aredue and payable, (vii) provide to Lender written proof at least fifteen(15) days prior to the then-current expiration date of the insurance policy,certified by the insurance provider, that such policy has been extended for aperiod of at least one (1) year, and (viii) include all payments ofinsurance premiums and taxes in its monthly and annual property income andexpense data.

###  

### (b)           Revocationof Waiver.  Lender’s waiver of theRequired Escrow Payments shall, at the option of Lender, be revoked upon theoccurrence of any of the following events:

###  

#### (i)            the occurrence ofan Event of Default; or

####  

#### (ii)           Borrower shall failto perform its obligations under Section 13.01(a).

 

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#### (iii)          failure by Borrowerto (A) participate in a blanket insurance policy that complies with FannieMae’s insurance requirements and (B) annually furnish signed insurance bindersto Lender within fifteen (15) days prior to the insurance renewal date.

####  

### (c)           UponLender’s revocation of its waiver of the Required Escrow Payments, Borrower’sobligations under Section 7(a) of each of the Security Instrumentsshall immediately be reinstated.

###  

**Section 13.02.****                                ReplacementReserves.**

** **

Borrower shall execute a Replacement Reserve Agreement for theMortgaged Properties and shall (unless waived by Lender) make all deposits forreplacement reserves in accordance with the terms of the Replacement ReserveAgreement.

 

**Section 13.03.****                                Completion/RepairReserves.**

** **

Borrower shall execute a Completion/Repair and Security Agreement forthe Mortgaged Properties and shall (unless waived by Lender) make all depositsfor reserves in accordance with the terms of the Completion/Repair and SecurityAgreement.

 

# **ARTICLE 14LIMITS ON PERSONAL LIABILITY**

# ** **

**Section 14.01.****                                PersonalLiability to Borrower.**

** **

Except as otherwise provided in this Article 14, Borrower shallhave no personal liability under the Loan Documents for the repayment of anyIndebtedness or for the performance of any other Obligations of Borrower underthe Loan Documents, and Lender’s only recourse for the satisfaction of theIndebtedness and the performance of such Obligations shall be Lender’s exerciseof its rights and remedies with respect to the Mortgaged Properties and anyother Collateral held by Lender as security for the Indebtedness.

 

### (a)           Exceptionsto Limits on Personal Liability. Borrower shall be personally liable to Lender for the repayment of theTerm Loan and other amounts due under the Loan Documents equal to any loss,expense, cost, liability or damage suffered by Lender as a result of or in anymanner relating to (i) failure of Borrower to pay to Lender upon demandafter an Event of Default all Rents received by Borrower to which Lender isentitled under Section 3(a) of the Security Instrument encumberingthe Mortgaged Property and the amount of all security deposits held by Borrowerfrom tenants then in residence; (ii) failure of Borrower to apply allinsurance proceeds, condemnation proceeds or security deposits from tenants asrequired by the Security Instrument encumbering the Mortgaged Property; (iii) failureof such Borrower to comply with its obligations under the Loan Documents withrespect to the delivery of books and records and financial statements; (iv) fraudor written material misrepresentation by Borrower or any officer, director,partner, member or employee of Borrower in connection with the application foror creation of the Obligations or any request for any action or consent byLender; or (v) failure to apply Rents, first, to the payment of reasonableoperating expenses and then to amounts (“Debt 

 

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### Service Amounts”)payable under the Loan Documents (except that Borrower will not be personallyliable (1) to the extent that Borrower lacks the legal right to direct thedisbursement of such sums because of a bankruptcy, receivership or similarjudicial proceeding, or (2) with respect to Rents of a Mortgaged Propertythat are loaned to an Affiliate in the ordinary course of implementing KeyPrincipal’s cash management system or distributed in any Calendar Quarter ifBorrower has paid all operating expenses and Debt Service Amounts for thatCalendar Quarter) or (vi) a failure to satisfy any and all indemnificationobligations contained in Section 8.26 herein or (vii) a failure tosatisfy any and all indemnification obligations contained in Section 52(j) ofthe Security Instrument covering the Mortgaged Property known as Foulk ManorNorth located in Wilmington, Delaware or (viii) a failure to satisfy anyand all indemnification obligations contained in Section 4(j) of theSecurity Instrument covering the Mortgaged Property known as Brookside locatedin Louisville, Kentucky.  For purposes ofthis subsection (a), the term “Rents” shall have the meaning given tosuch term in the Security Instrument.

###  

### (b)           FullRecourse.  Borrower shall bepersonally liable to Lender for the payment and performance of all Obligationsupon the occurrence of any of the following Events of Default:  (i) Borrower acquisition of any propertyor operation of any business not permitted by Section 8.22 of thisAgreement; or (ii) a Transfer that is an Event of Default under Section 8.12or 8.13 of this Agreement; or (iii) a failure to satisfy any and allindemnification obligations contained in Section 18 of any SecurityInstrument or (iv) a Bankruptcy Event.

###  

### (c)           Asused in this Subsection, the term “Bankruptcy Event” means any one ormore of the following events:

###  

##### (A)                              Borrower(i) commences a voluntary case (or, if applicable, a joint case) under anychapter of the Bankruptcy Code or otherwise or consents to or fails to contestin a timely and appropriate manner any petition filed against it in aninvoluntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes(by petition, application, answer, consent or otherwise) any other bankruptcy,insolvency, reorganization, arrangement, readjustment of debt, dissolution,liquidation or similar proceeding relating to it under the laws of anyjurisdiction, (iii) makes a general assignment for the benefit ofcreditors, (iv) applies for, consents to or acquiesces in the appointmentof any receiver, liquidator, custodian, sequestrator, trustee or similarofficer for it or for all or any substantial part of the Mortgaged Propertiesor (v) admits in writing its inability to pay its debts generally as theymature.

#####  

##### (B)                                Borrower,any Affiliate of Borrower, any Guarantor or any Affiliate of Guarantor, KeyPrincipal or any affiliate of Key Principal files an involuntary petitionagainst Borrower under any chapter of the Bankruptcy Code or under any otherbankruptcy, insolvency, reorganization, arrangement, readjustment of debt,dissolution, liquidation or similar proceeding relating to Borrower under thelaws of any jurisdiction.

 

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#####  

##### (C)                                Both(1) an involuntary petition under any chapter of the Bankruptcy Code isfiled against Borrower, or Borrower directly or indirectly becomes the subjectof any bankruptcy, insolvency, reorganization, arrangement, readjustment ofdebt, dissolution, liquidation or similar proceeding relating to it under thelaws of any jurisdiction, or in equity, and (ii) Borrower, any Affiliateof Borrower, any Guarantor or any Affiliate of Guarantor or Key Principal orany affiliate of Key Principal has acted in concert or conspired with suchcreditors of Borrower (other than Fannie Mae or Lender) to cause the filingthereof.

#####  

### (d)           Miscellaneous.  To the extent that Borrower has personalliability under this Section, or Key Principal has liability under theGuaranty, such liability shall be joint and several and Lender may exercise itsrights against Borrower or Key Principal personally without regard to whetherLender has exercised any rights against the Mortgaged Property or any othersecurity, or pursued any rights against any guarantor, or pursued any otherrights available to Lender under the Loan Documents or Applicable Law.  For purposes of this Article, the term “MortgagedProperty” shall not include any funds that (i) have been applied byBorrower as required or permitted by the Loan Documents prior to the occurrenceof an Event of Default, or (ii) are owned by Borrower and which Borrowerwas unable to apply as required or permitted by the Loan Documents because of abankruptcy, receivership, or similar judicial proceeding.

###  

**Section 14.02.****                                Preferences,Fraudulent Conveyances, Etc.**

** **

If Lender is required to refund, or voluntarily refunds, any paymentreceived from Borrower because such payment is or may be avoided, invalidated,declared fraudulent, set aside or determined to be void or voidable as apreference, fraudulent conveyance, impermissible setoff or a diversion of trustfunds under the bankruptcy laws or for any similar reason, including withoutlimitation any judgment, order or decree of any court or administrative bodyhaving jurisdiction over Borrower or any of its property, or upon or as aresult of the appointment of a receiver, intervenor, custodian or conservatorof, or trustee or similar officer for, Borrower or any substantial part of itsproperty, or otherwise, or any statement or compromise of any claim effected byLender with Borrower or any other claimant (a “Rescinded Payment”), then Borrower’s liability to Lender shallcontinue in full force and effect, with the same effect and to the same extentas if the Rescinded Payment had not been received by Lender, notwithstandingthe cancellation or termination of any of the Loan Documents, and regardless ofwhether Lender contested the order requiring the return of such payment.  In addition, Borrower shall pay, or reimburseLender for, all expenses (including all reasonable attorneys’ fees, court costsand related disbursements) incurred by Lender in the defense of any claim thata payment received by Lender in respect of all or any part of the Obligationsmust be refunded.  The provisions of thisSection 14.02 shall survive the termination of the Loan Documentsand any satisfaction and discharge of Borrower by virtue of any payment, courtorder or any federal or state law.

 

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# **ARTICLE 15MISCELLANEOUS PROVISIONS**

 

**Section 15.01.****                                Counterparts.**

** **

To facilitate execution, this Agreement may be executed in any numberof counterparts.  It shall not benecessary that the signatures of, or on behalf of, each party, or that thesignatures of all persons required to bind any party, appear on eachcounterpart, but it shall be sufficient that the signature of, or on behalf of,each party, appear on one (1) or more counterparts.  All counterparts shall collectively constitutea single agreement.  It shall not benecessary in making proof of this Agreement to produce or account for more thanthe number of counterparts containing the respective signatures of, or onbehalf of, all of the parties hereto.

 

**Section 15.02.****                                Amendments,Changes and Modifications.**

** **

This Agreement may be amended, changed, modified, altered or terminatedonly by written instrument or written instruments signed by all of the partieshereto.

 

**Section 15.03.****                                Paymentof Costs, Fees and Expenses.**

** **

In addition to the payments required by Section 10.03 ofthis Agreement, Borrower shall pay within 30 days after delivery of writtennotice from Lender, all reasonable third party out-of-pocket fees, costs,charges or expenses (including the reasonable fees and expenses of attorneys,accountants and other experts) incurred by Lender in connection with:

 

### (a)           Anyamendment, consent or waiver to this Agreement or any of the Loan Documents(whether or not any such amendments, consents or waivers are entered into).

###  

### (b)           Defendingor participating in any litigation arising from actions by third parties andbrought against or involving Lender with respect to (i) any MortgagedProperty, (ii) any event, act, condition or circumstance in connectionwith any Mortgaged Property or (iii) the relationship between Lender andBorrower and Key Principal in connection with this Agreement or any of thetransactions contemplated by this Agreement.

###  

### (c)           Theadministration or enforcement of, or preservation of rights or remedies under,this Agreement or any other Loan Documents or in connection with theforeclosure upon, sale of or other disposition of any Collateral grantedpursuant to the Loan Documents.

###  

### (d)           Anydisclosure documents, including the reasonable fees and expenses of Lender’sattorneys and accountants.

###  

Borrower shall also pay within 30 days after writtennotice from Lender, any transfer taxes, documentary taxes, assessments orcharges made by any governmental authority by reason of the execution,delivery, filing, recordation, performance or enforcement of any of the LoanDocuments or the Term Loan.  However,Borrower will not be obligated to pay any franchise, excise, estate,inheritance, income, excess profits or similar tax on Lender.  Any attorneys’ fees and expenses payable byBorrower pursuant to this Section shall be recoverable separately from andin addition to any other amount included in such judgment, and such obligationis intended 

 

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to be severable from the other provisions of thisAgreement and to survive and not be merged into any such judgment.  Any amounts payable by Borrower pursuant tothis Section, with interest thereon if not paid when due, shall become additionalindebtedness of Borrower secured by the Loan Documents.  Such amounts shall bear interest from thedate such amounts are due until paid in full at the weighted average, asdetermined by Lender, of the interest rates in effect from time to time for theTerm Loan unless collection from Borrower of interest at such rate would becontrary to Applicable Law, in which event such amounts shall bear interest atthe highest rate which may be collected from Borrower under ApplicableLaw.  The provisions of this Section arecumulative with, and do not exclude the application and benefit to Lender of,any provision of any other Loan Document relating to any of the matters coveredby this Section.

 

**Section 15.04.****                                PaymentProcedure.**

** **

All payments to be made to Lender pursuant to this Agreement or any ofthe Loan Documents shall be made in lawful currency of the United States ofAmerica and in immediately available funds by wire transfer to an accountdesignated by Lender before 1:00 p.m. (Eastern Standard Time) on the datewhen due.

 

**Section 15.05.****                                Paymentson Business Days.**

** **

In any case in which the date of payment to Lender or the expiration ofany time period hereunder occurs on a day which is not a Business Day, thensuch payment or expiration of such time period need not occur on such date butmay be made on the next succeeding Business Day with the same force and effectas if made on the day of maturity or expiration of such period, except thatinterest shall continue to accrue for the period after such date to the nextBusiness Day.

 

**Section 15.06.****                                Choiceof Law; Consent to Jurisdiction; Waiver of Jury Trial.**

** **

NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OFTHE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, ANDRIGHTS AND OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT AND THE NOTES ANDBORROWER UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED,CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THEDISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF LAW)EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO (i) THECREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS, ANDENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICHMATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THEMORTGAGED PROPERTY IS LOCATED, (ii) THE PERFECTION, THE EFFECT OFPERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONALPROPERTY, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTIONDETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE UNIFORM COMMERCIAL CODEIN EFFECT FOR THE 

 

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JURISDICTION IN WHICH THE BORROWER IS ORGANIZED.  BORROWER AGREES THAT ANY CONTROVERSY ARISINGUNDER OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THESECURITY INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISEPROVIDED HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA.  THE LOCAL AND FEDERAL COURTS AND AUTHORITIESWITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISEPROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISEUNDER OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIESRELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITHTHE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANYOTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOANDOCUMENTS.  BORROWER IRREVOCABLY CONSENTSTO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISINGFROM THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, ANDWAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE,HABITUAL RESIDENCE OR OTHERWISE.  NOTHINGCONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTIONOR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND AGAINST THECOLLATERAL IN ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANYOTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENTCONTAINED HEREIN THAT THE LAWS OF THE DISTRICT OF COLUMBIA SHALL GOVERN THERIGHTS AND OBLIGATIONS OF BORROWER AND LENDER AS PROVIDED HEREIN OR THESUBMISSION HEREIN BY BORROWER TO PERSONAL JURISDICTION WITHIN THE DISTRICT OFCOLUMBIA.  BORROWER AND LENDER EACH (I) COVENANTSAND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDERANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND (II) WAIVES ANY RIGHT TOTRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTEREXIST.  THIS WAIVER IS INTENDED TOENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO AJURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OFLENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED,EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THEPROVISIONS OF THIS SECTION. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLYAND VOLUNTARILY AGREED TO BY BORROWER UPON CONSULTATION WITH INDEPENDENT LEGALCOUNSEL SELECTED BY BORROWER’S FREE WILL.

 

**Section 15.07.****                                Severability.**

** **

In the event any provision of this Agreement or in any other LoanDocument shall be held invalid, illegal or unenforceable in any jurisdiction,such provision will be severable from 

 

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the remainder hereof as to such jurisdiction and thevalidity, legality and enforceability of the remaining provisions will not inany way be affected or impaired in any jurisdiction.

 

**Section 15.08.****                                Notices.**

** **

### (a)           Mannerof Giving Notice.  Each notice,direction, certificate or other communication hereunder (in this Section referredto collectively as “notices” and singly as a “notice”) which anyparty is required or permitted to give to the other party pursuant to thisAgreement shall be in writing and shall be deemed to have been duly andsufficiently given if:

###  

#### (i)            personallydelivered with proof of delivery thereof (any notice so delivered shall bedeemed to have been received at the time so delivered);

####  

#### (ii)           sent by FederalExpress (or other similar reputable overnight courier) designating morningdelivery (any notice so delivered shall be deemed to have been received on theBusiness Day it is delivered by the courier);

####  

#### (iii)          sent by telecopieror facsimile machine which automatically generates a transmission report thatstates the date and time of the transmission, the length of the documenttransmitted, and the telephone number of the recipient’s telecopier orfacsimile machine (to be confirmed with a copy thereof sent in accordance withparagraphs (i) or (ii) above within two Business Days) (any notice sodelivered shall be deemed to have been received (1) on the date oftransmission, if so transmitted before 5:00 p.m. (local time of therecipient) on a Business Day, or (2) on the next Business Day, if sotransmitted on or after 5:00 p.m. (local time of the recipient) on aBusiness Day or if transmitted on a day other than a Business Day);

####  

addressed to the parties as follows:

 
| As to Borrower: | SNH FM Financing LLC                    |
|-----------------|-----------------------------------------|
|            | 400 Centre Street                       |
|            | Newton, MA 02548                        |
|            | Attention:                              | David J. Hegarty,  President |
|            | Telecopy:                               | (617) 796-8349 |
|            |                                    |
| with a copy to: | Sullivan Worcester, LLP                 |
|            | One Post Office Square                  |
|            | Boston, MA 02109                        |
|            | Attention:                              | Warren Heilbronner |
|            | Telecopy:                               | (617) 338-2880 |
|            |                                    |
| As to Lender:   | Citibank, N.A.                          |
|            | 325  E. Hillcrest Drive, Suite 160 |
|            | Thousand  Oaks, CA 91360                |
|            |                                    |
|            | Attention:                              | Asset Management |
|            | Telecopy:                               | (805)  557-0924 |

 

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|              | Citibank, N.A.                |
|-------------------|-------------------------------|
|              | 390  Greenwich St., 2nd Floor |
|              | New  York, NY  10013     |
|              |                          |
|              | Attention:                    | Middle Office |
|              | Telecopy:                     | (212) 723-8951 |
|              |                          |
| As to Fannie Mae: | Fannie Mae                    |
|              | 3900 Wisconsin Avenue,  N.W.  |
|              | Washington, D.C.  20016-2899  |
|              | Attention:                    | Vice President for |
|              |                          | Multifamily Asset  Management |
|              | Telecopy No.:                 | (301) 280-2064 |
|              |                          |
| with a copy to:   | Arent Fox LLP                 |
|              | 1675 Broadway                 |
|              | New York, NY 10019            |
|              | Attention:                    | David L.  Dubrow, Esq. |
|              | Telecopy No.:                 | (212) 484-3990 |

 

### (b)           Changeof Notice Address.  Any party may, bynotice given pursuant to this Section, change the person or persons and/oraddress or addresses, or designate an additional person or persons or anadditional address or addresses, for its notices, but notice of a change ofaddress shall only be effective upon receipt. Each party agrees that it shall not refuse or reject delivery of anynotice given hereunder, that it shall acknowledge, in writing, receipt of thesame upon request by the other party and that any notice rejected or refused byit shall be deemed for all purposes of this Agreement to have been received bythe rejecting party on the date so refused or rejected, as conclusivelyestablished by the records of the U.S. Postal Service, the courier service orfacsimile.

###  

**Section 15.09.****                                FurtherAssurances and Corrective Instruments.**

 

### (a)           FurtherAssurances.  To the extent permittedby law, the parties hereto agree that they shall, from time to time, execute,acknowledge and deliver, or cause to be executed, acknowledged and delivered,such supplements hereto and such further instruments as Lender or Borrower mayreasonably request and as may be required in the opinion of Lender or itscounsel to effectuate the intention of or facilitate the performance of thisAgreement or any Loan Document.

###  

### (b)           FurtherDocumentation.  Without limiting thegenerality of subsection (a), in the event any further documentation orinformation is required by Lender to correct patent mistakes in the LoanDocuments, materials relating to the Title Insurance Policies or the funding ofthe Term Loan, Borrower shall provide, or cause to be provided to Lender, atBorrower’s cost 

 

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### and expense, suchdocumentation or information.  Borrowershall execute and deliver to Lender such documentation, including but notlimited to any amendments, corrections, deletions or additions to the Notes,the Security Instruments or the other Loan Documents as is reasonably requiredby Lender.

###  

### (c)           Compliancewith Investor Requirements.  Withoutlimiting the generality of subsection (a), Borrower shall comply with thereasonable requirements of Lender to enable Lender to sell the MBS backed by aFixed Loan.

###  

**Section 15.10.****                                Termof this Agreement.**

 

This Agreement shall continue in effect until the Termination Date.

 

**Section 15.11.****                                Assignments;Third-Party Rights.**

** **

No Borrower shall assign this Agreement, or delegate any of itsobligations hereunder, without the prior written consent of Lender.  Lender may assign its rights and/orobligations under this Agreement separately or together, without Borrower’sconsent, only to Fannie Mae or other entity if such assignment is made with theintent that such entity will further assign such rights to Fannie Mae, but maynot delegate its obligations under this Agreement unless it first receivesFannie Mae’s written approval.  Lendershall first assign its rights under this Agreement separately or together,without Borrower’s consent, to Fannie Mae. Upon assignment to Fannie Mae, Fannie Mae shall be permitted to furtherassign its rights under this Agreement separately or together, withoutBorrower’s consent.

 

**Section 15.12.****                                Headings.**

** **

Article and Section headings used herein are for convenienceof reference only, are not part of this Agreement and are not to affect theconstruction of, or to be taken into consideration in interpreting, thisAgreement.

 

**Section 15.13.****                                GeneralInterpretive Principles.**

** **

For purposes of this Agreement, except as otherwise expressly providedor unless the context otherwise requires, (i) the terms defined inAppendix I and elsewhere in this Agreement have the meanings assigned to themin this Agreement and include the plural as well as the singular, and the useof any gender herein shall be deemed to include the other genders; (ii) accountingterms not otherwise defined herein have the meanings assigned to them inaccordance with GAAP; (iii) references herein to “Articles,” “Sections,”“subsections,” “paragraphs” and other subdivisions without reference to adocument are to designated Articles, Sections, subsections, paragraphs andother subdivisions of this Agreement; (iv) a reference to a subsectionwithout further reference to a Section is a reference to such subsectionas contained in the same Section in which the reference appears, and this rule shallalso apply to paragraphs and other subdivisions; (v) a reference to an Exhibit ora Schedule without a further reference to the document to which the Exhibit orSchedule is attached is a reference to an Exhibit or Schedule to thisAgreement; (vi) the words “herein,” “hereof,” “hereunder” and other wordsof similar import 

 

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refer to this Agreement as a whole and not to anyparticular provision; and (vii) the word “including” means “including, butnot limited to.”

 

**Section 15.14.****                                Interpretation.**

** **

The parties hereto acknowledge that each party and their respectivecounsel have participated in the drafting and revision of this Agreement and theLoan Documents.  Accordingly, the partiesagree that any rule of construction that disfavors the drafting partyshall not apply in the interpretation of this Agreement and the Loan Documentsor any amendment or supplement or exhibit hereto or thereto.

 

**Section 15.15.****                                Standardsfor Decisions, Etc.**

** **

Unless otherwise provided herein, if Lender’s approval is required forany matter hereunder, such approval may be granted or withheld in Lender’s soleand absolute discretion.  Unlessotherwise provided herein, if Lender’s designation, determination, selection,estimate, action or decision is required, permitted or contemplated hereunder,such designation, determination, selection, estimate, action or decision shallbe made in Lender’s sole and absolute discretion.

 

**Section 15.16.****                                Decisionsin Writing.**

** **

Any approval, designation, determination, selection, action or decisionof Lender or Borrower must be in writing to be effective.

 

**Section 15.17.****                                Requests.**

** **

Borrower may submit up to a total of six (6) Requests per CalendarYear.

 

**Section 15.18.****                                ConflictsBetween Agreements.**

** **

Any terms and conditions contained in this Agreement that may also becontained in another Loan Document are not, to the extent reasonablypracticable, to be construed to be in conflict with each other but rather isconstrued as duplicative, confirming, additional, or cumulativeprovisions.  To the extent that, in theinterpretation of this Agreement, any ultimate conflict between the terms andconditions of this Agreement and those set forth in another Loan Document isdetermined to exist, the terms and conditions of this Agreement are to control.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof the day and year first above written.

 

(Signatures appear on following pages)

 

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| ** ** | **BORROWER:**                                                    |
|------------|------------------------------------------------------------------|
|       |                                                             |
| ** ** | **SNH FM Financing LLC**, a  Delaware limited  liability company |
|       |                                                             |   |
|       | By:                                                              | /s/ David J. Hegarty |
|       | Name:                                                            | David J. Hegarty |
|       | Title:                                                           | President |

 

S-1

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| ** ** | **LENDER:**                                         |
|------------|-----------------------------------------------------|
|       |                                                |
| ** ** | **Citibank, N.A.**, a national  banking association |
|       |                                                |   |
|       | By:                                                 | /s/ Kathy Millhouse |
|       | Name:                                               | Kathy Millhouse |
|       | Title:                                              | Vice President |

 

S-2

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**ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR**

 

 
|   | **SNH FM Financing Trust**, a  Maryland real estate  investment trust |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |   |
|   | By:                                                                   | /s/ David J. Hegarty |
|   | Name:                                                                 | David J. Hegarty |
|   | Title:                                                                | President |

 

S-3

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**ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR**

 

 
|   | **Ellicott City Land I, LLC**, a  Delaware limited  liability company |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |   |
|   | By:                                                                   | /s/ David J. Hegarty |
|   | Name:                                                                 | David J. Hegarty |
|   | Title:                                                                | President |

 

S-4

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EXHIBIT A

 

Schedule of Initial Mortgaged Properties, InitialAllocable

Loan Amounts and Initial Valuations

 

 

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EXHIBIT B

 

Confirmation of Guaranty

 

 

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EXHIBIT C

 

Compliance Certificate

 

 

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EXHIBIT D-1

 

Borrower Organizational Certificate

 

 

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EXHIBIT D-2

 

Guarantor Organizational Certificate

 

 

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EXHIBIT E

 

Reserved

 

 

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EXHIBIT F

 

Reserved

 

 

----

 

EXHIBIT G

 

Reserved

 

 

----

 

EXHIBIT H

 

Reserved

 

 

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EXHIBIT I

 

Request

 

 

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EXHIBIT J

 

Confirmation of Obligations

 

 

----

 

EXHIBIT K

 

Reserved

 

 

----

 

EXHIBIT L

 

Reserved

 

 

----

 

EXHIBIT M

 

Reserved

 

 

----

 

EXHIBIT N

 

Reserved

 

 

----

 

EXHIBIT O

 

Disclosure Schedule

 

 

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EXHIBIT P

 

Letter of Credit

 

 

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EXHIBIT Q-1

 

Bank Legal Opinion (Foreign)

 

 

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EXHIBIT Q-2

 

Bank Legal Opinion (Domestic)

 

 

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EXHIBIT R

 

Form of Rent Roll

 

 

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EXHIBIT S

 

Expansion Guaranty

 

 

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EXHIBIT T

 

Expansion Security Agreement

 

 

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SCHEDULE 1

 

Minimum Rent Payments

 

CertainSchedules and Exhibits to this agreement have been omitted and will befurnished supplementally to the Securities and Exchange Commission uponrequest.

 

 

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APPENDIX I

 

DEFINITIONS

 

For all purposes of the Agreement, the following terms shall have therespective meanings set forth below:

 

“Acquiring Person” means a “person” or “group of persons” withinthe meaning of Sections 13(d) and 14(d) of the Securities ExchangeAct of 1934, as amended.

 

“Additional Collateral Due Diligence Fees”means the due diligence fees paid by Borrower to Lender with respect to eachSubstitute Mortgaged Property, as set forth in Section 10.02(b).

 

“Adjustable Rate” means in connection with the Variable FacilityNote.

 

“Affiliate” means, as applied to any Person, any other Persondirectly or indirectly controlling, controlled by, or under common controlwith, that Person.  For the purposes ofthis definition, “control” (including with correlative meanings, the terms“controlling,” “controlled by” and “under common control with”), as applied toany Person, means the possession, directly or indirectly, of the power todirect or cause the direction of the management (other than property management)and policies of that Person, whether through the ownership of votingsecurities, partnership interests or by contract or otherwise.

 

“Aggregate Lease Payment Debt Service Coverage Ratio” means, forany specified date, the ratio (expressed as a percentage) of —

 

(a)           theaggregate of the Lease Payments for the Mortgaged Properties for the precedingnumber of months as determined pursuant to the Underwriting Requirements

 

to

 

(b)           theFacility Debt Service on the specified date.

 

“Aggregate Loan to Value Ratio” means, for any specified date,the ratio (expressed as a percentage) of—

 

(a)           theamount of the Term Loan Outstanding and Supplemental Loan Outstanding on thespecified date,

 

to

 

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(b)           theaggregate of the Valuations most recently obtained prior to the specified datefor all of the Mortgaged Properties.

 

“Aggregate NOI Debt Service Coverage Ratio” means, for anyspecified date, the ratio (expressed as a percentage) of—

 

(a)           theaggregate of the Net Operating Income for the Mortgaged Properties for thepreceding number of months as determined pursuant to the UnderwritingRequirements

 

to

 

(b)           theFacility Debt Service on the specified date.

 

“Agreement” means this Master Credit Facility Agreement, as itmay be amended, restated, supplemented or otherwise modified from time to time,including all Recitals and Exhibits to the Agreement, each of which is herebyincorporated into the Agreement by this reference.

 

“Allocable Loan Amount” means the portion of the Term Loanallocated to a particular Mortgaged Property by Lender in accordance with theAgreement.  The initial Allocable LoanAmount (“Initial Allocable Loan Amount”) for each of the Initial MortgagedProperties is as set forth in Exhibit A to the Agreement.

 

“Alzheimer/Dementia Units” shall mean all such units that arelicensed to and operate as Alzheimers or dementia care units in a SeniorsHousing Facility.

 

“Amortization Period” means a period of thirty (30) years.

 

“Applicable Law” means (a) all applicable provisions of allconstitutions, statutes, rules, regulations and orders of all governmentalbodies, all Governmental Approvals and all orders, judgments and decrees of allcourts and arbitrators, (b) all zoning, building, environmental and otherlaws, ordinances, rules, regulations and restrictions of any GovernmentalAuthority affecting the ownership, management, use, operation, maintenance orrepair of any Mortgaged Property, including the Americans with Disabilities Act(if applicable), the Fair Housing Amendment Act of 1988 and Hazardous MaterialsLaws (as defined in the Security Instrument), (c) any building permits orany conditions, easements, rights-of-way, covenants, restrictions of record orany recorded or unrecorded agreement affecting or concerning any MortgagedProperty including planned development permits, condominium declarations, andreciprocal easement and regulatory agreements with any Governmental Authority, (d) alllaws, ordinances, rules and regulations, whether in the form of rentcontrol, rent stabilization or otherwise, that limit or impose conditions onthe amount of rent that may be collected from the units of any MortgagedProperty, and (e) requirements of insurance companies or similarorganizations, affecting the operation or use of any Mortgaged Property or theconsummation of the transactions to be effected by the Agreement or any of theother Loan Documents.

 

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“Appraisal” means an appraisal of a Seniors Housing Facilityconforming to the requirements of Lender for similar loans anticipated to besold to Fannie Mae and accepted by Lender.

 

“Appraised Value” means the value set forth in an Appraisal.

 

“Assignment of Lease Guaranty” means that certain Assignment ofLease Guaranty dated the date hereof among Borrower, IDOT Guarantor, Lender andFive Star Quality Care, Inc.

 

“Assignment of Leases and Rents” means an Assignment of Leasesand Rents, required by Lender and satisfying Lender’s requirements, as the samemay be amended, restated, modified or supplemented from time to time.

 

“Assisted Living Units” shall mean all such units that arelicensed to and operate as Assisted Living care units in a Seniors HousingFacility.

 

“Bankruptcy Code” means Title 11 of the United States Codeentitled “Bankruptcy” as now and hereafter in effect, or any successor statute.

 

“Bankruptcy Event” shall have the meaning set forth in Section 14.01(b).

 

“Borrower” means SNH FM Financing LLC, a Delaware limitedliability company, together with its permitted successors and assigns.

 

“Business Day” means a day on which Fannie Mae and Servicer isopen for business.

 

“Calendar Quarter” means, with respect to any year, any of thefollowing three month periods:  (a) January-February-March;(b) April-May-June; (c) July-August-September; and (d) October-November-December.

 

“Calendar Year” means the 12-month period from the first day of January toand including the last day of December, and each 12-month period thereafter.

 

“Capitalization Rate” means, for each Mortgaged Property, acapitalization rate selected by Lender for use in determining the Valuations,which rate is determined as set forth in Section 2.01(b).

 

“Cash Equivalents” means

 

### (a)           securitiesissued or fully guaranteed or insured by the United States Government or anyagency thereof and backed by the full faith and credit of the United Stateshaving maturities of not more than twelve (12) months from the date ofacquisition (for the purposes of thisdefinition, agency securities shall mean “Government Securities” within themeaning of the Investment Act of 1940 or Section 1.860G-2(a)(8)(1) ofthe Treasury Regulations); and

 

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### (b)           certificatesof deposit, time deposits, demand deposits, eurodollar time deposits,repurchase agreements, reverse repurchase agreements, or bankers’ acceptances,having in each case a term of not more than twelve (12) months, issued byany commercial bank having membership in the FDIC, or by any U.S. commerciallender (or any branch or agency of a non-U.S. bank licensed to conduct businessin the U.S.) having combined capital and surplus of not less than $100,000,000whose short-term securities are rated at least A-1 by S&P or P-1 byMoody’s; and

###  

### (c)           commercialpaper of an issuer rated at least A-1 by S&P or P-1 by Moody’s and ineither case having a term of not more than twelve (12) months.

###  

“Certificate of Borrower” means that certainMaster Certificate of Borrower executed by the Borrower as of the date hereof,and which must be executed and delivered by the Borrower to Lender from time totime in accordance with the terms of this Agreement, the form of whichcertificate shall be the same or substantially similar to which the Borrowerexecutes as of the date hereof.

 

“Certificate of IDOT Guarantor” means those certain Certificatesof Guarantor executed by the IDOT Guarantor as of the date hereof, and whichmust be executed and delivered by the IDOT Guarantor to Lender from time totime in accordance with the terms of this Agreement, the form of whichcertificate shall be the same or substantially similar to which the IDOTGuarantor executes as of the date hereof.

 

“Change of Control” means the earliest to occurof: (a) the date on which an Acquiring Person becomes (by acquisition,consolidation, merger or otherwise), directly or indirectly, the beneficialowner of more than twenty five percent (25%) of the total ownership interest ofany Targeted Entity then outstanding, or (b) the replacement (other thansolely by reason of retirement at age sixty or older, death or disability) ofmore than fifty percent (50%) (or such lesser percentage as is required fordecision-making by the board of directors or an equivalent governing body) ofthe members of the board of directors (or an equivalent governing body) of anyTargeted Entity over a one-year period from the directors who constituted suchboard of directors at the beginning of such period and such replacement shallnot have been approved by a vote of at least a majority of such board ofdirectors of any Targeted Entity then still in office who either were membersof such board of directors at the beginning of such one-year period or whoseelection as members of the board of directors was previously so approved (itbeing understood and agreed that in the case of any entity governed by atrustee, board of managers, or other similar governing body, the foregoingclause (b) shall apply thereto by substituting such governing body and themembers thereof for the board of directors and members thereof, respectively)or (c) the board of trustees of Key Principal does not consist of at leasttwo trustees that are directors, employees or officers of REIT Management & Research LLCor the business management agreement between Key Principal and REIT Management &Research LLC is terminated or (d) the board of directors or board oftrustees of Borrower or any member of Borrower does not consist of at least acontrolling majority of directors, employees or officers of REIT Management & Research LLC.

 

I-4

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“Closing Date” means the Initial Closing Date and each dateafter the Initial Closing Date on which the funding or other transactionrequested in a Request is required to take place.

 

“Collateral” means the Mortgaged Properties and other collateralfrom time to time or at any time encumbered by the Security Instruments, or anyother property securing Borrower’s obligations under the Loan Documents.

 

“Collateral Assignment of Guaranty Agreement” shall mean thatcertain Collateral Assignment of Guaranty Agreement dated the date hereof amongSNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I, LLC andCitibank, N.A.

 

“Collateral Pool” means all of the Collateral.

 

“Compliance Certificate” means a certificate of Borrowersubstantially in the form of Exhibit C to the Agreement.

 

“Completion/Repair and Security Agreement” means a MasterCompletion/Repair and Security Agreement required by Lender and satisfyingLender’s requirements, as the same may be amended, restated, modified orsupplemented from time to time.

 

“Confirmation of Guaranty” means a confirmation of the Guarantyand the IDOT Guaranty executed by Guarantor and IDOT Guarantor, respectively,in connection with any Request after the Initial Closing, substantially in theform of Exhibit B to the Agreement.

 

“Confirmation of Obligations” means a Confirmation ofObligations delivered in connection with the addition of a Substitute MortgagedProperty to the Collateral Pool or a release of a Release Mortgaged Propertyfrom the Collateral Pool, dated as of the Closing Date for each such addition,signed by Borrower and Key Principal, pursuant to which Borrower and KeyPrincipal confirm their obligations under the Loan Documents substantially inthe form of Exhibit J to the Agreement.

 

“Controlled” (or any variation of such term) of one entity (the“controlled entity”) by another (the “controlling entity”) meansthat the controlling entity has the power and authority, directly orindirectly, to direct or cause the direction of the management and policies ofthe controlled entity, by contract or otherwise.

 

“Controlled Group” means all members of a controlled group ofcorporations and all trades or businesses (whether or not incorporated) undercommon control which, together with the Borrower, are treated as a singleemployer under Section 414 of the Internal Revenue Code.

 

“Debt Service Amounts” shall have the meaning set forth in Section 14.01(a).

 

“Disclosure Schedule” means that certain Disclosure Scheduleattached hereto as Exhibit O.

 

“DUS Guide” means the Fannie Mae Delegated Underwriting andServicing Guide in its present form and as amended, modified, supplemented orreissued from time to time (all 

 

I-5

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references to Parts, Chapters, Sections and othersubdivisions of the DUS Guide shall be deemed references to (i) the Parts,Chapters, Sections and other subdivisions in effect on the date of the DUSGuide and (ii) any successor provisions to such Parts, Chapters, Sectionsand other subdivisions.

 

“ERISA” means the Employee Retirement IncomeSecurity Act of 1974, as amended from time to time, and the regulationspromulgated thereunder.

 

“Event of Default” means any event defined to be an “Event ofDefault” under Article 11.

 

“Event of Default has occurred and is continuing” shall meanthat an Event of Default has occurred which has not been cured to thesatisfaction of Lender, provided however, that nothing shall be construed torequire Lender to accept any cure, or grant any cure period not otherwiseprovided for in this Agreement.

 

“Expansion Guaranty” means that certain Expansion Guaranty,attached hereto as Exhibit S, as it may be amended, restated,supplemented or otherwise modified from time to time.

 

“Expansion Security Agreement” means that certain ExpansionSecurity Agreement, attached hereto as Exhibit T, as it may beamended, restated, supplemented or otherwise modified from time to time.

 

“Facility Debt Service” means —

 

For use in determiningthe Aggregate NOI Debt Service Coverage Ratio, for purposes of determiningcompliance with the Release Coverage and LTV Tests and the SubstitutionCoverage and LTV Tests, and for other ongoing monitoring purposes, and inconnection with the underwriting of any substitution or release, the sum of:

 

###### (i)                                     theamount of interest and principal amortization, during the preceding number ofmonths as determined pursuant to the Underwriting Requirements, with respect tothe Term Loan Outstanding and Supplemental Loan Outstanding (if any) on thespecified date, except that, for these purposes:

######  

(A)                              theVariable Loan shall be deemed to require level monthly payments of principaland interest at an interest rate equal to the Cap Rate (the Cap Rate is 9.415%,the maximum Adjustable Rate set forth in the Variable Facility Note) in anamount necessary to fully amortize the original principal amount of theVariable Loan over the Amortization Period, with such amortization to commenceon the first day of the twelve (12) month period; and

 

(B)                                eachvariable rate Supplemental Loan shall be deemed to require level monthlypayments of principal and interest at an interest rate equal to that 

 

I-6

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ratewhich is calculated in accordance with the Underwriting Requirements then ineffect; and

 

(C)                                theFixed Loan and each fixed rate Supplemental Loan shall require level monthlypayments of principal and interest (at the Interest Rate as set forth in theFixed Facility Note or the interest rate as set forth in the note evidencingsuch Supplemental Loan) in an amount necessary to fully amortize the originalprincipal amount of the Fixed Loan and Supplemental Loan over the AmortizationPeriod, with such amortization to commence on the first day of the perioddetermined pursuant to the Underwriting Requirements.

 

“Fannie Mae” means the body corporate dulyorganized under the Federal National Mortgage Association Charter Act, asamended, 12 U.S.C. §1716 etseq. and duly organized and existingunder the laws of the United States.

 

“Fees” means Additional Collateral Due Diligence Fees, InitialDue Diligence Fees, Initial Origination Fee, Release Fee, Substitution Fee, LOCFee and any and all other fees specified in the Agreement.

 

“First Anniversary” means the date that is one year after theInitial Closing Date.

 

“Fixed Loan” means the loan in the amount of $307,760,000evidenced by the Fixed Facility Note.

 

“Fixed Facility Note” means a promissory note (together with allschedules, riders, allonges, addenda, renewals, extensions, amendments andmodifications thereto) which will be issued by Borrower to Lender, concurrentlywith the funding of the Fixed Loan on the Initial Closing Date.

 

“GAAP” means generally accepted accounting principles in theUnited States in effect from time to time, consistently applied.

 

“General Conditions” shall have the meaning set forth in Article 6.

 

“Geographical Diversification Requirements” shall mean that asthe result of the release or substitution of a Mortgaged Property (i) theaggregate Allocable Loan Amount allocated to Mortgaged Properties in any onestate does not increase by 5% or more from the percentages set forth below and (ii) theAllocable Loan Amount associated with the Mortgaged Properties located in anytwo states shall not exceed 40% of the Outstanding principal balance of theTerm Loan:

 

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| **State** | ** ** | **Percentage of Allocable  Loan Amount** | ** ** |
|-----------|------------|------------------------------------------|------------|
| CA        |       | 14.87                                    | %          |
|      |       |                                     |       |
| TX        |       | 18.60                                    | %          |
|      |       |                                     |       |
| KY        |       | 6.06                                     | %          |
|      |       |                                     |       |
| NM        |       | 5.40                                     | %          |
|      |       |                                     |       |
| OH        |       | 3.76                                     | %          |
|      |       |                                     |       |
| IN        |       | 5.01                                     | %          |
|      |       |                                     |       |
| FL        |       | 7.77                                     | %          |
|      |       |                                     |       |
| AZ        |       | 6.56                                     | %          |
|      |       |                                     |       |
| MA        |       | 4.38                                     | %          |
|      |       |                                     |       |
| KS        |       | 4.12                                     | %          |
|      |       |                                     |       |
| MD        |       | 9.50                                     | %          |
|      |       |                                     |       |
| DE        |       | 1.50                                     | %          |
|      |       |                                     |       |
| GA        |       | 1.88                                     | %          |
|      |       |                                     |       |
| VA        |       | 8.01                                     | %          |
|      |       |                                     |       |
| NC        |       | 1.71                                     | %          |
|      |       |                                     |       |
| WI        |       | 0.87                                     | %          |
|      |       |                                     |       |
| Total     |       | 100.00                                   | %          |

 

“Governmental Approval” means an authorization, permit, consent,approval, license, registration or exemption from registration or filing with,or report to, any Governmental Authority.

 

“Governmental Authority” means any court, board, agency,commission, office or authority of any nature whatsoever for any governmentalunit (federal, state, county, district, municipal, city or otherwise) whethernow or hereafter in existence.

 

“Gross Revenues” means, for any specified period, with respectto any Seniors Housing Facility, all income in respect of such Seniors HousingFacility as reflected on the certified operating statement for such specifiedperiod as adjusted to exclude unusual income (e.g. temporary or nonrecurringincome), income not allowed by Lender for similar loans anticipated 

 

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to be sold to Fannie Mae (e.g. interest income,furniture income, etc.), and the value of any unreflected concessions.

 

“Guarantor” means the Key Principal, IDOT Guarantor and anyPerson that becomes a guarantor and provides a Guaranty in connection with theObligations under this Agreement.

 

“Guaranty” means the Guaranty executed by Key Principalguaranteeing the obligations set forth in Section 14.01(a)(vi), as the same may be amended,restated, modified or supplemented from time to time.

 

“Hazardous Substance Activity” means, with respect to anyMortgaged Property, any storage, holding, existence, release, spill, leaking,pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching,migration, use, treatment, emission, discharge, generation, processing,abatement, removal, disposition, handling or transportation of any HazardousMaterials (as defined in the Security Instrument) from, under, into or on suchMortgaged Property in violation of Hazardous Materials Laws (as defined in theSecurity Instrument), including the discharge of any Hazardous Materialsemanating from such Mortgaged Property in violation of Hazardous Materials Lawsthrough the air, soil, surface water, groundwater or property and alsoincluding the abandonment or disposal of any barrels, containers and otherreceptacles containing any Hazardous Materials from or on such MortgagedProperty in violation of Hazardous Materials Laws, in each case whether suddenor nonsudden, accidental or nonaccidental.

 

“IDOT Guarantor” means SNH FM Financing Trust, a Maryland realestate investment trust and Ellicott City Land I, LLC, a Delaware limitedliability company.

 

“IDOT Guaranty” means each Guaranty executed by the IDOTGuarantor as the same may be amended, restated, modified or supplemented fromtime to time.

 

“Impositions” means, with respect to any Mortgaged Property, all(1) water and sewer charges which, if not paid, may result in a lien onall or any part of the Mortgaged Property, (2) premiums for fire and otherhazard insurance, rent loss insurance and such other insurance as Lender mayrequire under any Security Instrument, (3) Taxes, and (4) amounts forother charges and expenses which Lender at any time reasonably deems necessaryto protect the Mortgaged Property, to prevent the imposition of liens on theMortgaged Property, or otherwise to protect Lender’s interests.

 

“Indebtedness” means, with respect to any Person, as of anyspecified date, without duplication, all:

 

### (a)           indebtednessof such Person for borrowed money or for the deferred purchase price ofproperty or services (other than (i) current trade liabilities incurred inthe ordinary course of business and payable in accordance with customarypractices, and (ii) for construction of improvements to property, if suchperson has a non-contingent contract to purchase such property);

 

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### (b)           otherindebtedness of such Person that is evidenced by a note, bond, debenture orsimilar instrument;

###  

### (c)           obligationsof such Person as lessee under any lease of property, real or personal, whichobligations are required by GAAP to be capitalized on a balance sheet of thelessee or to be otherwise disclosed as such in a note to such balance sheet;

###  

### (d)           obligationsof such Person in respect of acceptances (as defined in Article 3 of theUniform Commercial Code of the District of Columbia) issued or created for theaccount of such Person;

###  

### (e)           liabilitiessecured by any Lien on any property owned by such Person even though suchPerson has not assumed or otherwise become liable for the payment of suchliabilities; and

###  

### (f)            asto any Person (“guaranteeing person”), any obligation of (a) theguaranteeing person or (b) another Person (including any bank under anyletter of credit) to induce the creation of a primary obligation (as definedbelow) with respect to which the guaranteeing person has issued areimbursement, counterindemnity or similar obligation, in either caseguaranteeing, or in effect guaranteeing, any indebtedness, lease, dividend orother obligation (“primary obligations”) of any third person (“primaryobligor”) in any manner, whether directly or indirectly, including anyobligation of the guaranteeing person, whether or not contingent, to (1) purchaseany such primary obligation or any property constituting direct or indirectsecurity therefor, (2) advance or supply funds for the purchase or paymentof any such primary obligation or to maintain working capital or equity capitalof the primary obligor or otherwise to maintain the net worth or solvency ofthe primary obligor, (3) purchase property, securities or servicesprimarily for the purpose of assuring the owner of any such primary obligationof the ability of the primary obligor to make payment of such primaryobligation, or (4) otherwise assure or hold harmless the owner of any suchprimary obligation against loss in respect of the primary obligation, provided,however, that the term “Contingent Obligation” shall not includeendorsements of instruments for deposit or collection in the ordinary course ofbusiness.  The amount of any ContingentObligation of any guaranteeing person shall be deemed to be the lesser of (i) anamount equal to the stated or determinable amount of the primary obligation inrespect of which such Contingent Obligation is made and (ii) the maximumamount for which such guaranteeing person may be liable pursuant to the termsof the instrument embodying such Contingent Obligation, unless such primaryobligation and the maximum amount for which such guaranteeing person may beliable are not stated or determinable, in which case the amount of suchContingent Obligation shall be such guaranteeing person’s maximum reasonablyanticipated liability in respect thereof as determined by such person in goodfaith.

###  

“IndemnificationAgreement Regarding Taxes” means that certain Indemnification AgreementRegarding Taxes executed by IDOT Guarantor, Borrower and Key Principal on theInitial Closing Date.

 

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“Independent Living Units” shall mean all such units that arelicensed to and operate as Independent Living care units in a Seniors HousingFacility.

 

“Initial Closing Date” means the date of the Agreement.

 

“Initial Due Diligence Fees” shall have the meaning set forth inSection 10.02(a).

 

“Initial Mortgaged Properties” means the Seniors HousingFacilities described on Exhibit A to the Agreement and whichrepresent the Seniors Housing Facilities which are made part of the CollateralPool on the Initial Closing Date.

 

“Initial Origination Fee” shall have the meaning set forth in Section 10.01(a).

 

“Initial Security Instruments” means the Security Instrumentscovering the Initial Mortgaged Properties.

 

“Initial Valuation” means, when used with reference to specifiedCollateral, the Valuation initially performed for the Collateral as of the dateon which the Collateral was added to the Collateral Pool.  The Initial Valuation for each of the InitialMortgaged Properties is as set forth in Exhibit A to the Agreement.

 

“Insurance Policy” means, with respect to a Mortgaged Property,the insurance coverage and insurance certificates evidencing such insurancerequired to be maintained pursuant to the Security Instrument encumbering theMortgaged Property.

 

“Internal Revenue Code” means the Internal Revenue Code of 1986,as amended.  Each reference to theInternal Revenue Code shall be deemed to include (a) any successorinternal revenue law and (b) the applicable regulations whether final,temporary or proposed.

 

“Key Principal” means Senior Housing Properties Trust, aMaryland real estate investment trust.

 

“Lease” means any lease, any sublease or sub-sublease, license,concession or other agreement (whether written or oral and whether now orhereafter in effect) pursuant to which any Person is granted a possessoryinterest in, or right to use or occupy all or any portion of any space in anyMortgaged Property, and every modification, amendment or other agreementrelating to such lease, sublease, sub-sublease or other agreement entered intoin connection with such lease, sublease, sub-sublease or other agreement, andevery guarantee of the performance and observance of the covenants, conditionsand agreements to be performed and observed by the other party thereto, any residency,occupancy, admission and care agreements pertaining to residents of theMortgaged Property and any Operating Lease.

 

“Lease Payment” means for any specified period for any MortgageProperty, the rental payments (including but not limited to payments defined as“Rent”, “Additional Rent” and/or “Minimum Rent” in the Operating Lease butshould not include payments that are reimbursed to landlord by tenant if evensuch amounts are treated as “Rent”, “Additional Rent” under an 

 

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Operating Lease) made by Master Tenant astenant/lessee to Borrower as landlord/lessor pursuant to the terms of theOperating Lease.

 

“Lease Payment Debt Service Coverage Ratio” means, for anyMortgaged Property, for any specified date, the ratio (expressed as apercentage) of —

 

(a)           theLease Payments for the subject Mortgaged Property for the preceding number ofmonths as determined pursuant to the Underwriting Requirements

 

to

 

(b)           theFacility Debt Service on the specified date, assuming, for the purpose ofcalculating the Facility Debt Service for this definition, that the amount ofthe Term Loan Outstanding shall be the Allocable Loan Amount and the amount ofthe Supplemental Loan Outstanding  shallbe the Supplemental Allocable Loan Amount, in each case for the subjectMortgaged Property.

 

“Lender” means Citibank, N.A. and, after the assignment toFannie Mae, means Fannie Mae and its successors and assigns for all purposes ofthis Agreement except that “Lender” shall continue to mean Citibank, N.A. orany replacement Person designated by Fannie Mae in relation to all obligationsunder this Agreement including the obligation to make any Supplemental Loans.

 

“Letter of Credit” means a letter of credit issued by an LOC Banksatisfactory to Fannie Mae naming Fannie Mae as beneficiary, in form andsubstance as attached hereto as Exhibit P.

 

“Level of Care Diversity Requirements” means that the seniorshousing units of the Mortgaged Properties shall conform on a Collateral Poolbasis with the following percentage requirements:

 

Independent Living Units — minimum 51%;

 

Assisted Living Units — maximum 35%;

 

Alzheimer/Dementia Units — maximum 10%; and

 

Skilled Nursing Units — maximum 13%.

 

“Licenses” means any operating license,certificates of occupancy, health department licenses, food service licenses,certificates of need, business licenses, permits, registrations, certificates,authorizations, approvals, and similar documents required by applicable lawsand regulations for the operation of the Mortgaged Property as a SeniorsHousing Facility, including replacements and additions thereto.

 

“Lien” means any mortgage, deed of trust, deed to secure debt,security interest or other lien or encumbrance (including both consensual andnon-consensual liens and encumbrances).

 

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“Liquidity” means, at any time, the amount of cash and CashEquivalents owned by a Person.

 

“Loan Document Taxes” shall have the meaning set forth in Section 8.10.

 

“Loan Documents” means the Agreement, the Notes, the SecurityDocuments, the Guaranty, the IDOT Guaranty, the Certificate of IDOT Guarantor,the Indemnification Agreement Regarding Taxes, Collateral Assignment ofGuaranty Agreement, Expansion Security Agreement, if any, Expansion Guaranty,if any and all documents executed by Borrower, IDOT Guarantor or Key Principalpursuant to the General Conditions set forth in Section 6.01 of theAgreement and any other documents executed by Borrower, IDOT Guarantor or KeyPrincipal from time to time in connection with the Agreement or thetransactions contemplated by the Agreement.

 

“Loan to Value Ratio” means, for a Mortgaged Property, for anyspecified date, the ratio (expressed as a percentage) of —

 

### (a)           theAllocable Loan Amount and the Supplemental Allocable Loan Amount of the subjectMortgaged Property on the specified date,

###  

to

 

### (b)           theValuation most recently obtained prior to the specified date for the subjectMortgaged Property.

###  

“LOC Bank” means any financial institution issuing the Letter ofCredit and meeting the requirements set forth in Section 6.12(a).

 

“Margin” has the definition set forth in the Variable FacilityNote or the note evidencing a Supplemental Loan, as applicable.

 

“Master Tenant” means, FVE FM Financing, Inc., corporationorganized under the laws of Maryland, and its successors and assigns or anyother Master Tenant under the Operating Lease of all the Mortgaged Propertiesapproved in writing by Lender.

 

“Master Tenant’s Authorized Representative” means those personsduly appointed and identified as such by the Master Tenant, which AuthorizedRepresentative shall initially be the President, any Vice President or theTreasurer of the Master Tenant (or such other officer of the Master Tenant asmay be designated by any of them), each with the authority to act alone or withone or more persons, and those persons appointed and identified as such by theMaster Tenant in a writing delivered to Borrower, each with the authority toact alone or with one or more persons.

 

“Master Tenant/Operator Bankruptcy Event” means any one or moreof the following events:

 

##### (A)                              MasterTenant or Operator (i) commences a voluntary case (or, if applicable, ajoint case) under any chapter of the Bankruptcy Code or otherwise or consentsto 

 

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##### or fails tocontest in a timely and appropriate manner any petition filed against it in aninvoluntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes(by petition, application, answer, consent or otherwise) any other bankruptcy,insolvency, reorganization, arrangement, readjustment of debt, dissolution,liquidation or similar proceeding relating to it under the laws of anyjurisdiction, (iii) makes a general assignment for the benefit ofcreditors, (iv) applies for, consents to or acquiesces in the appointmentof any receiver, liquidator, custodian, sequestrator, trustee or similarofficer for it or for all or any substantial part of the Mortgaged Propertiesor (v) admits in writing its inability to pay its debts generally as theymature.

#####  

##### (B)                                AnyMaster Tenant or Operator, any Affiliate of Master Tenant or Operator files aninvoluntary petition against Master Tenant or Operator under any chapter of theBankruptcy Code or under any other bankruptcy, insolvency, reorganization,arrangement, readjustment of debt, dissolution, liquidation or similarproceeding relating to Master Tenant or Operator under the laws of anyjurisdiction.

#####  

##### (C)                                Both(1) an involuntary petition under any chapter of the Bankruptcy Code isfiled against Master Tenant or Operator, or Master Tenant or Operator directlyor indirectly becomes the subject of any bankruptcy, insolvency,reorganization, arrangement, readjustment of debt, dissolution, liquidation orsimilar proceeding relating to it under the laws of any jurisdiction, or inequity, and (ii) any Master Tenant or Operator, any Affiliate of MasterTenant or Operator has acted in concert or conspired with such creditors ofMaster Tenant or Operator (other than Fannie Mae or Lender) to cause the filingthereof.

#####  

“Material Adverse Effect” means, with respect to anycircumstance, act, condition or event of whatever nature (including any adversedetermination in any litigation, arbitration, or governmental investigation orproceeding), whether singly or in conjunction with any other event or events,act or acts, condition or conditions, or circumstance or circumstances, whetheror not related, a material adverse change in or a materially adverse effectupon any of (a) the business, operations, property or condition (financialor otherwise) of Borrower or Key Principal, as applicable, to the extentspecifically referred to in the applicable provision of the applicable LoanDocument, (b) the present or future ability of Borrower to perform theObligations for which it is liable, or of Key Principal to perform itsobligations under the Guaranty, as the case may be, to the extent specificallyreferred to in the applicable provision of the applicable Loan Document, (c) thevalidity, priority, perfection or enforceability of the Agreement or any otherLoan Document or the rights or remedies of Lender under any Loan Document, or (d) thevalue of, or Lender’s ability to have recourse against, any Mortgaged Property.

 

“MBS” means a mortgage-backed security issued by Fannie Maewhich is “backed” by a Fixed Loan and has an interest in the Note and theCollateral Pool securing the Note, which interest permits the holder of the MBSto participate in the Note and the Collateral Pool to the extent of such FixedLoan.

 

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“Moody’s” means Moody’s Investors Service, Inc., acorporation organized and existing under the laws of the State of Delaware, andits successors and assigns, if such successors and assigns shall continue toperform the functions of a securities rating agency.

 

“Mortgaged Properties” means, collectively, the SubstituteMortgaged Properties, and the Initial Mortgaged Properties, but excluding eachRelease Mortgaged Property from and after the date of its release from theCollateral Pool.

 

“Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) ofERISA.

 

“Net Operating Income” means, for any specified period, withrespect to any Mortgaged Property, the aggregate net income during such periodequal to Gross Revenues during such period less the aggregate OperatingExpenses during such period.  If aMortgaged Property is not owned by a Borrower or an Affiliate of a Borrower forthe entire specified period, the Net Operating Income for the MortgagedProperty for the time within the specified period during which the MortgagedProperty was owned by a Borrower or an Affiliate of a Borrower shall be theMortgaged Property’s pro forma net operating income determined by Lender inaccordance with the underwriting procedures set forth by Lender for similarloans anticipated to be sold to Fannie Mae.

 

“Net Worth” means, as of any specified date, for any Person, theexcess of the Person’s assets over the Person’s liabilities, determined inaccordance with GAAP on a consolidated basis, provided that all real propertyshall be valued on an undepreciated basis.

 

“NOI Debt Service Coverage Ratio” means, for any MortgagedProperty, for any specified date, the ratio (expressed as a percentage) of —

 

(a)           theNet Operating Income for the subject Mortgaged Property for the precedingnumber of months as determined pursuant to the Underwriting Requirements

 

to

 

(b)           theFacility Debt Service on the specified date, assuming, for the purpose ofcalculating the Facility Debt Service for this definition, that the amount ofthe Term Loan Outstanding shall equal the Allocable Loan Amount and the amountof the Supplemental Loan Outstanding shall be the Supplemental Allocable LoanAmount, in each case for the subject Mortgaged Property.

 

“Note” means any Fixed Facility Note and/or any VariableFacility Note.

 

“Obligations” means the aggregate of the obligations of Borrowerand Key Principal****under the Agreement and the otherLoan Documents.

 

“Operating Expenses” means, for any period,with respect to any Mortgaged Property, all expenses in respect of suchMortgaged Property, as determined by Lender based on the certified operatingstatement for such specified period as adjusted to provide for the following:

 

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(i) all appropriate types of expenses, includinga management fee, deposits for the replacement reserves (whether funded ornot), and deposits for completion/repair reserves are included in the totaloperating expense figure; (ii) upward adjustments to individual line itemexpenses to reflect market norms or actual costs and correct any unusually lowexpense items, which could not be replicated by a different owner or manager (e.g.,a market rate management fee will be included regardless of whether or not amanagement fee is charged, market rate payroll will be included regardless ofwhether shared payroll provides for economies, etc.); and (iii) downwardadjustments to individual line item expenses to reflect unique or aberrantcosts (e.g., non-recurring capital costs, non-operating borrowerexpenses, etc.).

 

“Operating Lease” means the Amended and Restated Master LeaseAgreement among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott CityLand I, LLC and FVE FM Financing, Inc. and each other Lease, if any,related to all the Mortgaged Properties executed by and between Borrower, aslessor, and Master Tenant, as lessee and approved in writing by Lender and anySub-Lease thereunder.

 

“Operator” means, any Operator (including any tenant under aSub-Lease) of all the Mortgaged Properties approved in writing by Lender.

 

“Operator Guaranty” means any and all guaranties of Operator’sand/or Master Tenant’s obligations under the Sub-Lease and/or Operating Lease,respectively.

 

“Operator’s Authorized Representative” means those persons dulyappointed and identified as such by the Operator, which AuthorizedRepresentative shall initially be the President, any Vice President (includingany Senior Vice President), the Treasurer, the Secretary or any AssistantSecretary of the Operator (or such other officer of the Operator as may bedesignated by any of them), each with the authority to act alone or with one ormore persons, and those persons appointed and identified as such by theOperator in a writing delivered to Borrower, each with the authority to actalone or with one or more persons.

 

“Organizational Certificate” means, collectively, certificatesfrom Borrower and Key Principal to Lender, in the form of Exhibits D-1and D-2 to the Agreement, certifying as to certain organizationalmatters with respect to Borrower and Key Principal.

 

“Organizational Documents” means all certificates, instrumentsand other documents pursuant to which an organization is organized or operates,including but not limited to, (i) with respect to a corporation, itsarticles of incorporation and bylaws, (ii) with respect to a limitedpartnership, its limited partnership certificate and partnership agreement, (iii) withrespect to a general partnership or joint venture, its partnership or jointventure agreement and (iv) with respect to a limited liability company,its articles of organization and operating agreement.

 

“Outstanding” or “outstanding” means, when used inconnection with promissory notes, other debt instruments or the Term Loan orSupplemental Loan, for a specified date, promissory notes or other debtinstruments which have been issued, to the extent not repaid in full as of thespecified date.

 

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“Ownership Interests” means, with respect to any entity, anyownership interests in the entity and any economic rights (such as a right todistributions, net cash flow or net income) to which the owner of suchownership interests is entitled.

 

“PBGC” means the Pension Benefit Guaranty Corporation or anyentity succeeding to any or all of its functions under ERISA.

 

“Permits” means all permits, or similar licenses or approvalsissued and/or required by an applicable Governmental Authority or anyApplicable Law in connection with the ownership, use, occupancy, leasing,management, operation, repair, maintenance or rehabilitation of any MortgagedProperty or Borrower’s business.

 

“Permitted Liens” means, with respect to a Mortgaged Property, (i) theexceptions to title to the Mortgaged Property set forth in the Title InsurancePolicy for the Mortgaged Property which are approved by Lender, (ii) theSecurity Instrument and the Subordination, Assignment and Security Agreementencumbering the Mortgaged Property, (iii) any other Liens approved byLender or permitted under the terms of the Security Instrument, (iv) mechanicsor materialmen’s liens or judgment liens provided the same is removed or bondedoff to the satisfaction of Lender within thirty (30) days of notice of filing, (v) realestate taxes and water and sewer and other utility charges that are a lien butnot yet due and payable or that are due and payable but not yet delinquent and (vi) leasesand licenses otherwise permitted under this Agreement (including, withoutlimitation, the Operating Lease and Sub-lease).

 

“Person” means an individual, an estate, a trust, a corporation,a partnership, a limited liability company or any other organization or entity(whether governmental or private).

 

“Plan” means at any time an employee pension benefit plan whichis covered by Title IV of ERISA or subject to the minimum funding standardsunder Section 412 of the Internal Revenue Code and is either (i) maintainedby a member of the Controlled Group for employees of any member of theControlled Group or (ii) maintained pursuant to a collective bargainingagreement or any other agreement under which more than one employer makescontributions and to which a member of the Controlled Group is then making oraccruing an obligation to make contributions or has within the preceding five (5) planyears made contributions.

 

“Potential Event of Default” means any event that, with thegiving of notice or the passage of time, or both, would constitute an Event ofDefault.

 

“Potential Event of Default has occurred and is continuing”shall mean that Potential Event of Default has occurred which has not beencured to the satisfaction of Lender, provided however, that nothing shall beconstrued to require Lender to accept any cure, or grant any cure period nototherwise provided for in this Agreement.

 

“Prohibited Person” means (i) a Person that is the subjectof, whether voluntary or involuntary, any case, proceeding or other actionagainst such Person under any existing or future law of any jurisdictionrelating to bankruptcy, insolvency, reorganization or relief of debtors, or (ii) anyPerson with whom Servicer or Fannie Mae is prohibited from doing business 

 

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pursuant to any law, rule, regulation, judicialproceeding or administrative directive, or (iii) any Person identified onthe federal “Excluded Parties List System”, the “Specially Designated Nationaland Blocked Persons List”, the federal “Office of Foreign Assets and Controllist, the U.S. Department of Housing and Urban Development’s Limited Denial ofParticipation, HUD Funding Disqualifications and Voluntary Abstentions List”,or on Fannie Mae’s “Multifamily Applicant Experience Check”, each of which maybe amended from time to time and any successor or replacement thereof, or (iv) aPerson that Fannie Mae determines to be an unacceptable credit risk due to theaggregate amount of debt such Person owes to Fannie Mae, or (v) a Personthat has caused any unsatisfactory experience of a material nature with FannieMae or Servicer, such as a default, fraud, intentional misrepresentation,litigation, arbitration or other similar act, or (vi) a Person that is, orwhose senior management has ever been convicted of a felony or held liable forfraud in a civil or criminal action or (vii) a Person that does not meetthe requirements of Section 61 of the Certificate of Borrower.

 

“Property” means any estate or interest in any kind of propertyor asset, whether real, personal or mixed, and whether tangible or intangible.

 

“Rate Change Date”, in connection with a Variable Loan, has themeaning set forth in the Variable Facility Note.

 

“Release Coverage and LTV Tests” mean, for any specified date,each of the following financial tests:

 

### (a)           TheAggregate NOI Debt Service Coverage Ratio is not less than 1:95:1 with respectto the amount of the Fixed Loan and any fixed rate Supplemental Loan, and1:70:1 with respect to the amount of the Variable Loan and any variable rateSupplemental Loan;

###  

### (b)           TheAggregate Lease Payment Debt Service Coverage Ratio shall not be less than  1:35:1.

###  

### (c)           TheAggregate Loan to Value Ratio does not exceed 55 percent (55%).

###  

“Release Documents” mean instruments releasing the applicableSecurity Instrument and the applicable Subordination, Assignment and SecurityAgreement as a Lien on a Mortgaged Property, and UCC-3 Termination Statementsterminating the UCC-1 Financing Statements, and such other documents andinstruments to evidence the release of such Mortgaged Property from theCollateral Pool.

 

“Release Fee” means with respect to any Release effected inaccordance with Section 3.04(c), a fee in the amount of$10,000  per Release Mortgaged Property.

 

“Release Mortgaged Property” shall have the meaning set forth inSection 3.05.

 

“Release Price” shall have the meaning set forth in Section 3.04(c).

 

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“Release Request” means a written request, substantially in theform of Exhibit T to the Agreement, to obtain a release ofCollateral from the Collateral Pool pursuant to Section 3.04(a).

 

“Remaining Mortgaged Properties” shall have the meaning setforth in Section 6.05(f).

 

“Rent Roll” means, with respect to any Seniors Housing Facility,a rent roll prepared and certified by the Operator of the Seniors HousingFacility, on Fannie Mae Form 4243 or on another form approved by Lenderand containing substantially the same information as Form 4243 requires,it being acknowledged that the forms attached hereto as Exhibit Rare satisfactory to Lender.

 

“Replacement Reserve Agreement” means a Master ReplacementReserve and Security Agreement required by Lender, and satisfying Lender’s  requirements, as the same may be amended,modified or supplemented from time to time.

 

“Request” means a Release Request and a Substitution Request.

 

“Required Escrow Payments” has the meaning given that term in Section 13.01(a) ofthis Agreement.

 

“Rescinded Payment” has the meaning given that term in Section 14.02of this Agreement.

 

“S&P” shall mean Standard & Poor’s Credit MarketsServices, a division of The McGraw-Hill Companies, Inc., a New Yorkcorporation, and its successors and assigns, if such successors and assignsshall continue to perform the functions of a securities rating agency.

 

“Security” means a “security” as set forth in Section 2(1) ofthe Securities Act of 1933, as amended.

 

“Security Documents” means the Security Instruments, theSubordination, Assignment and Security Agreements, Assignment of LeaseGuaranty, the Master Replacement Reserve Agreements, the Completion/Repair andSecurity Agreement and any other documents executed by Borrower or IDOTGuarantor from time to time to secure any of Borrower’s obligations under theLoan Documents as the same may be amended, restated, modified or supplementedfrom time to time.

 

“Security Instrument” means, for each Mortgaged Property, aMultifamily Mortgage, Deed of Trust or Deed to Secure Debt, Assignment ofLeases and Rents and Security Agreement given by a Borrower and each IndemnityMultifamily Deed of Trust, Assignment of Rent and Security Agreement given byIDOT Guarantor to or for the benefit of Lender to secure the obligations ofBorrower under the Loan Documents.  Withrespect to each Mortgaged Property owned by a Borrower or IDOT Guarantor, theSecurity Instrument shall be substantially in the form published by Fannie Maefor use in the state in which the Mortgaged Property is located.  The amount secured by the Security Instrumentshall be equal to the Term Loan amount.

 

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“Senior Management” means the President and/or Chief FinancialOfficer.

 

“Seniors Housing Facility” means a residential housing facilitythat qualifies as “housing for older persons” under the Fair Housing AmendmentsAct of 1988 and the Housing for Older Persons Act of 1995 comprised ofindependent living units, assisted living units and/or Alzheimer’s/dementiacare units, or skilled nursing units, as applicable.

 

“Servicer” means a servicer approved by Fannie Mae, whichinitially shall be Citibank, N.A., and any permitted successor or assign.

 

“Single-Purpose” means, with respect to a Person that is anyform of partnership, real estate investment trust or corporation or limitedliability company, that such Person at all times since its formation:

 

#### (i)            has been a dulyformed and existing partnership, real estate investment trust, corporation orlimited liability company, as the case may be;

####  

#### (ii)           has been dulyqualified in each jurisdiction in which such qualification was at such timenecessary for the conduct of its business;

####  

#### (iii)          has complied withthe provisions of its organizational documents and the laws of its jurisdictionof formation in all respects;

####  

#### (iv)          has observed allcustomary formalities regarding its partnership, real estate investment trust,limited liability or corporate existence, as the case may be;

####  

#### (v)           has accurately maintainedits income and expense statements, accounting records and other partnership,real estate investment trust, limited liability company, or corporate documentsseparate from those of any other Person;

####  

#### (vi)          has not commingledits assets or funds with those of any other Person (except that each Operatormay commingle its funds with the funds of the other Operators in which case itsassets and funds will be separately accounted for in the books and records ofthe Person in whose name any assets or funds are held);

####  

#### (vii)         has identifieditself in all dealings with creditors (other than trade creditors in theordinary course of business and creditors for the construction of improvementsto property on which such Person has a non-contingent contract to purchase suchproperty) under its own name and as a separate and distinct entity;

####  

#### (viii)        has been adequatelycapitalized in light of its contemplated business operations;

####  

#### (ix)           has not assumed,guaranteed or become obligated for the liabilities of any other Person (exceptin connection with the Term Loan or as otherwise contemplated in the LoanDocuments, or the endorsement of negotiable instruments in the ordinary courseof business) or held out its credit as being available to satisfy theobligations of any other Person;

 

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#### (x)            has not acquiredobligations or securities of any other Person;

####  

#### (xi)           except ascontemplated under the Operating Lease, and except for deposits and investmentsin Cash Equivalents made in the ordinary course of business, has not made loansor advances to any other Person;

####  

#### (xii)          has not enteredinto and was not a party to any transaction with any Affiliate of such Person,except in the ordinary course of business and on terms which are no lessfavorable to such Person than would be obtained in a comparable arm’s-lengthtransaction with an unrelated third party;

####  

#### (xiii)         has paid thesalaries of its own employees, if any, and maintained a sufficient number ofemployees in light of its contemplated business operations (or has entered intoagreements with third parties or Affiliates to provide all required servicesthat would otherwise be provided by such number of employees in a mannerconsistent with (xii) above;

####  

#### (xiv)        has not engaged inany business or activity other than the leasing, ownership, operation andmaintenance of the Mortgaged Properties, and activities incidental thereto;

####  

#### (xv)         shall not acquire orown any assets other than (A) the Mortgaged Properties and/or equityinterests in a Person that owns the Mortgaged Properties and (B) suchincidental personal property as may be necessary to conduct the business andactivities permitted under clause (xiv) above;

####  

#### (xvi)        shall not maintainits assets in such a manner that it will be costly or difficult to segregate,ascertain or identify its individual assets from those of any other Person;

####  

#### (xvii)       has not failed tohold itself out to the public as a legal entity separate and distinct from anyother Person or to conduct its business solely in its own name or fail tocorrect any known misunderstanding regarding its separate identity;

####  

#### (xviii)      has allocated fairlyand reasonably any overhead for shared office space;

####  

#### (xix)         has not engaged in anon-exempt prohibited transaction described in Section 406 of ERISA or Section 4975of the Internal Revenue Code; and

####  

#### (xx)          has complied withthe requirements of Section 33 of the Security Instrument.

####  

“Skilled Nursing Units” shall mean all such facilities, beds orunits that are licensed to operate as Skilled Nursing facilities, beds or unitsin a Seniors Housing Facility.

 

“Sub-Lease” means each sub-lease entered into pursuant to theOperating Lease in which the Master Tenant is the landlord and the Operator of the Mortgaged Property is thetenant.

 

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“Subordination, Assignment and Security Agreement” means thosecertain Subordination, Assignment and Security Agreements, dated on the InitialClosing Date and any subsequent Closing Date, as the same may be amended,restated, modified and supplemented from time to time.

 

“Substitute Collateral” shall have the meaning set forth in Section 3.04(d)(ii).

 

“Substitute Mortgaged Property” shall have the meaning set forthin Section 3.05.

 

“Substitution” shall have the meaning set forth in Section 3.05(a).

 

“Substitution Coverage and LTV Tests” mean, for any specifieddate, each of the following financial tests:

 

##### (A)                              EachMortgaged Property and the Substitute Mortgaged Property meet the followingtests:

#####  

###### (i)            If greater than 50% of the units ina Mortgaged Property consist of Independent Living Units, the NOI Debt ServiceCoverage Ratio of such Mortgaged Property will be equal to or greater than theNOI Debt Service Coverage Ratio which results from calculating the weightedaverage of the Independent Living Units, Assisted Living Units andAlzheimer/Dementia Units based on the following NOI Debt Service CoverageRatios:

######  

### (a)           IndependentLiving Units - not less than 1:60:1 with respect to the amount of the FixedLoan, and 1:35:1 with respect to the amount of the Variable Loan;

###  

### (b)           AssistedLiving Units and Alzheimer/Dementia Units - not less than 1:70:1 with respectto the amount of the Fixed Loan, and 1:45:1 with respect to the amount of theVariable Loan;

###  

### (c)           SkilledNursing Units -  not less than 1:70:1with respect to the amount of the Fixed Loan, and 1:45:1 with respect to theamount of the Variable Loan.

###  

or

 

###### (ii)           If 50% or more of the units in aMortgaged Property consist of Assisted Living Units and Alzheimer/DementiaUnits, the NOI Debt Service Coverage Ratio shall not be less than 1:70:1.

######  

or

 

###### (iii)          if the MortgagedProperty contains any Skilled Nursing Units, the NOI Debt Service CoverageRatio shall not be less than 1:70:1.

 

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##### (B)

######  

###### (i)            The Aggregate Lease Payment DebtService Coverage Ratio for the Collateral Pool shall not be less than 1.35:1;

######  

###### (ii)           The Lease Payment Debt ServiceCoverage Ratio for each Mortgaged Property and the Substitute Mortgaged Propertyshall not be less than 1.20:1.

######  

##### (C)

#####  

###### (i)            The Aggregate Loan to Value Ratiodoes not exceed 55 percent (55%).

######  

“Substitution Fee” means with respect to any Substitutioneffected in accordance with Section 3.05, a fee in the sum of: (i) 50basis points of the Allocable Loan Amount for the Released Mortgaged Propertyand (ii) the Release Fee, per Mortgaged Property being released.

 

“Substitution Request” means the written request to add aSubstitute Mortgaged Property to the Collateral Pool pursuant to Section 3.05,Section 3.06 and Section 3.07.

 

“Supplemental Loan” means such loan given in accordance with theFannie Mae Supplemental Loan product.

 

“Supplemental Loan Documents” shall have the meaning set forthin Section 2.02.

 

“Survey” means the as-built surveyof each Mortgaged Property prepared in accordance with Lender’s requirementsfor similar loans that are anticipated to be sold to Fannie Mae.

 

“Targeted Entity” means individually and collectively, KeyPrincipal, any direct or indirect Subsidiary of Key Principal that is an ownerof Borrower, IDOT Guarantor and Borrower.

 

“Taxes” means all taxes, assessments, vault rentals and othercharges, if any, general, special or otherwise, including all assessments forschools, public betterments and general or local improvements, which arelevied, assessed or imposed by any public authority or quasi-public authority,and which, if not paid, will become a lien, on the Mortgaged Properties.

 

“Term Loan” means the Fixed Loan and Variable Loan.

 

“Term of this Agreement” shall be determined as provided in Section 15.10.

 

“Termination Date” means the maturity date for the Term Loan orat such time as the Term Loan is no longer Outstanding.

 

“Tier Four Loan” means such loans made pursuantto the Tier Four requirements and guidelines set forth in the DUS Guide.  If the term Tier Four is no longer a term setforth in the DUS Guide or is defined by Fannie Mae in a document other than theDUS Guide, a loan underwritten to a requirement which is the lowest loan tovalue ratio and highest debt service coverage ratio categorized by Fannie Maeat the time.

 

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“Title Company” means the title company which provides titleinsurance for a Mortgaged Property.

 

“Title Insurance Policies” means the mortgagee’s policies oftitle insurance issued by the Title Company from time to time relating to eachof the Security Instruments, conforming to Lender’s requirements for similarloans anticipated to be sold to Fannie Mae, together with such endorsements,coinsurance, reinsurance and direct access agreements with respect to suchpolicies as Lender may, from time to time, consider necessary or appropriate,including variable credit endorsements, if available, and tie-in endorsements,if available, and with a limit of liability under the policy (subject to thelimitations contained in sections of the Stipulations and Conditions of thepolicy relating to a Determination and Extent of Liability) equal to the TermLoan amount.

 

“Transfer” means

 

(1)           as used with respectto ownership interests in a Targeted Entity, (i) a sale, assignment,pledge, transfer or other disposition of any ownership interest in a TargetedEntity, or (ii) the issuance or other creation of new ownership interestsin a Targeted Entity, or (iii) a merger or consolidation of TargetedEntity into another entity or of another entity into Targeted Entity as thecase may be, or (iv) the reconstitution of Targeted Entity from one typeof entity to another type of entity, or (v) the amendment, modification orany other change in the governing instrument or instruments of Targeted Entitywhich has the effect of changing the relative powers, rights, privileges,voting rights or economic interests of the ownership interests in such TargetedEntity.

 

(2)           as used with respectto ownership interests in a Mortgaged Property, (i) a sale, assignment,lease, pledge, transfer or other disposition (whether voluntary or by operationof law) of, or the granting or creating of a lien, encumbrance or securityinterest in, any estate, rights, title or interest in a Mortgaged Property, orany portion thereof (other than a Permitted Lien).  Transfer does not include a conveyance of aMortgaged Property at a judicial or non-judicial foreclosure sale under anysecurity instrument or the Mortgaged Property becoming part of a bankruptcyestate by operation of law under the Bankruptcy Code.

 

“Underwriting Requirements” means Lender’s overall underwritingrequirements for Seniors Housing Facilities in connection with loansanticipated to be sold to Fannie Mae, pursuant to Fannie Mae’s then currentguidelines, including, without limitation, requirements relating to Appraisals,physical needs assessments, and environmental site assessments, as suchrequirements may be amended, modified, updated, superseded, supplemented orreplaced from time to time.

 

“Valuation” means, for any specified date, with respect to aSeniors Housing Facility, (a) if an Appraisal of the Seniors HousingFacility was more recently obtained than a Capitalization Rate for the SeniorsHousing Facility, the Appraised Value of such Seniors Housing Facility, or (b) ifa Capitalization Rate for the Seniors Housing Facility was more recentlyobtained than an Appraisal of the Seniors Housing Facility, the value derivedby dividing—

 

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#### (i)            the Net OperatingIncome of such Seniors Housing Facility, by

####  

#### (ii)           the most recentCapitalization Rate determined by Lender.

####  

Notwithstanding the foregoing, any Valuation for a Seniors HousingFacility calculated for a date occurring before the first anniversary of thedate on which the Seniors Housing Facility becomes a part of the CollateralPool shall equal the Appraised Value of such Seniors Housing Facility, unlessLender determines that changed market or property conditions warrant that thevalue be determined as set forth in the preceding sentence.

 

“Variable Loan” means the loan in the principal amount of$205,174,000 evidenced by the Variable Facility Note.

 

“Variable Facility Note” means the Adjustable Rate MultifamilyNote (together with all schedules, riders allonges, addenda, renewals,extensions, amendments and modifications thereto), which has been issued byBorrower to Lender to evidence Borrower’s obligation to repay the VariableLoan.

 

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