EX 10.100.3 Joint Venture Loan Agreement


     

    


     

     

     

     

    $167,000,000

     

     

    AMENDED
      AND RESTATED CREDIT AGREEMENT

     

    Dated
      as
      of December 11, 2006

     

    among

     

    BREA
      EMERITUS LLC AND EACH OF ITS SUBSIDIARIES,

    as
      Borrowers

     

    


     

    THE
      LENDERS PARTY HERETO

     

    and

     

    GENERAL
      ELECTRIC CAPITAL CORPORATION,
      

     

    as
      Administrative Agent and Collateral Agent

     

     

    ♦
♦
      ♦

     

    GE
      CAPITAL MARKETS, INC.,
      

     

    as
      Sole
      Lead Arranger

     

    


     

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
          TABLE
            OF
            CONTENTS

                                                                                                                                                                             Page

        

      

    



     

    ARTICLE
      I
      DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

    

      
        	 	
                Section
                  1.1

              	
                Defined
                  Terms

              	
                1

              
	 	
                Section
                  1.2

              	
                UCC
                  Terms

              	
                26

              
	 	
                Section
                  1.3

              	
                Accounting
                  Terms and Principles

              	
                26

              
	 	
                Section
                  1.4

              	
                Payments.

              	
                27

              
	 	
                Section
                  1.5

              	
                Interpretation.

              	
                27

              


      



    ARTICLE
      II
      THE
      FACILITIES

     

    

      
        	 	
                Section
                  2.1

              	
                Term
                  Loan Commitment, Borrowing Procedures and Escrow
                  Requirement.

              	
                28

              
	 	
                Section
                  2.2

              	
                Termination
                  of the Commitments, Maturity Date and Repayment

              	 
	 	 	
                of
                  Loans. (a) Termination of Term Loan Commitments.

              	
                32

              
	 	
                Section
                  2.3

              	
                Optional
                  Prepayments.

              	
                32

              
	 	
                Section
                  2.4

              	
                Mandatory
                  Payments.

              	
                33

              
	 	
                Section
                  2.5

              	
                Interest.

              	
                34

              
	 	
                Section
                  2.6

              	
                Application
                  of Payments.

              	
                34

              
	 	
                Section
                  2.7

              	
                Payments
                  and Computations.

              	
                35

              
	 	
                Section
                  2.8

              	
                Evidence
                  of Debt.

              	
                36

              
	 	
                Section
                  2.9

              	
                Suspension
                  of Eurodollar Rate.

              	
                37

              
	 	
                Section
                  2.10

              	
                Breakage
                  Costs; Increased Costs; Capital Requirements.

              	
                38

              
	 	
                Section
                  2.11

              	
                Taxes.

              	
                39

              
	 	
                Section
                  2.12

              	
                Substitution
                  of Lenders.

              	
                41

                 

              


      

    

     

    ARTICLE
      III
      CONDITIONS TO LOANS

     

    

      
        	 	
                Section
                  3.1

              	
                Conditions
                  Precedent to Funding.

              	
                42

              
	 	
                Section
                  3.2

              	
                Determinations
                  of Initial Borrowing Conditions.

              	
                45

              


      

    

     

     

    ARTICLE
      IV
      REPRESENTATIONS AND WARRANTIES

    

      
        	 	
                Section
                  4.1

              	
                Corporate
                  Existence; Compliance with Law.

              	
                46

              
	 	
                Section
                  4.2

              	
                Loan
                  and Related Documents.

              	
                47

              
	 	
                Section
                  4.3

              	
                Ownership
                  of the Borrowers

              	
                48

              
	 	
                Section
                  4.4

              	
                Financial
                  Statements

              	
                48

              
	 	
                Section
                  4.5

              	
                Material
                  Adverse Effect.

              	
                49

              
	 	
                Section
                  4.6

              	
                Solvency.

              	
                49

              
	 	
                Section
                  4.7

              	
                Litigation.

              	
                49

              
	 	
                Section
                  4.8

              	
                Taxes.

              	
                49

              
	 	
                Section
                  4.9

              	
                Margin
                  Regulations

              	
                50

              
	 	
                Section
                  4.10

              	
                No
                  Burdensome Obligations; No Defaults

              	
                50

              
	 	
                Section
                  4.11

              	
                Single
                  Purpose Entity

              	
                50

              
	 	
                Section
                  4.12

              	
                Labor
                  Matters

              	
                50

              
	 	
                Section
                  4.13

              	
                ERISA

              	
                50

              
	 	
                Section
                  4.14

              	
                Environmental
                  Matters

              	
                51

              
	 	
                Section
                  4.15

              	
                Intellectual
                  Property

              	
                51

              


      

    

     

     

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
          
            TABLE
              OF
              CONTENTS

                                                                                          
              (continued)                                                                                     Page

          

        

      

    

     

    

      
        	 	
                Section
                  4.16

              	
                Title;
                  Real Property

              	
                52

              
	 	
                Section
                  4.17

              	
                Full
                  Disclosure

              	
                53

              
	 	
                Section
                  4.18

              	
                Operation

              	
                53

              
	 	
                Section
                  4.19

              	
                Estoppel
                  Certificates

              	
                54

              


      

    

     

    ARTICLE
      V
      FINANCIAL COVENANTS

     

    

      
        	 	
                Section
                  5.1

              	
                Minimum
                  Consolidated Project Yield

              	
                54

              


      

    

     

     

    ARTICLE
      VI
      REPORTING COVENANTS

     

    

      
        	 	
                Section
                  6.1

              	
                Financial
                  Statements

              	
                55

              
	 	
                Section
                  6.2

              	
                Other
                  Events

              	
                57

              
	 	
                Section
                  6.3

              	
                Copies
                  of Notices and Reports

              	
                57

              
	 	
                Section
                  6.4

              	
                Taxes

              	
                57

              
	 	
                Section
                  6.5

              	
                Labor
                  Matters

              	
                58

              
	 	
                Section
                  6.6

              	
                ERISA
                  Matters

              	
                58

              
	 	
                Section
                  6.7

              	
                Environmental
                  Matters

              	
                58

              
	 	
                Section
                  6.8

              	
                Other
                  Information

              	
                58

              


      

    

     

     

    ARTICLE
      VII
      AFFIRMATIVE COVENANTS

     

    

      
        	 	
                Section
                  7.1

              	
                Maintenance
                  of Corporate Existence

              	
                59

              
	 	
                Section
                  7.2

              	
                Compliance
                  with Laws and Healthcare Matters, Etc.

              	
                59

              
	 	
                Section
                  7.3

              	
                Payment
                  of Obligations

              	
                60

              
	 	
                Section
                  7.4

              	
                Maintenance
                  of Property

              	
                60

              
	 	
                Section
                  7.5

              	
                Maintenance
                  of Insurance

              	
                60

              
	 	
                Section
                  7.6

              	
                Keeping
                  of Books

              	
                62

              
	 	
                Section
                  7.7

              	
                Access
                  to Books and Property

              	
                62

              
	 	
                Section
                  7.8

              	
                Environmental

              	
                63

              
	 	
                Section
                  7.9

              	
                Use
                  of Proceeds

              	
                63

              
	 	
                Section
                  7.10

              	
                Additional
                  Collateral, Subsidiaries and Further Assurances

              	
                63

              
	 	
                Section
                  7.11

              	
                Deposit
                  Accounts; Securities Accounts

              	
                64

              
	 	
                Section
                  7.12

              	
                Interest
                  Rate Contracts

              	
                64

              


      

    

     

     

    ARTICLE
      VIII
      NEGATIVE
      COVENANTS

     

    

      
        	 	
                Section
                  8.1

              	
                Indebtedness

              	
                64

              
	 	
                Section
                  8.2

              	
                Liens

              	
                65

              
	 	
                Section
                  8.3

              	
                Investments

              	
                65

              
	 	
                Section
                  8.4

              	
                Transfers

              	
                66

              
	 	
                Section
                  8.5

              	
                Restricted
                  Payments

              	
                67

              
	 	
                Section
                  8.6

              	
                Prepayment
                  of Indebtedness

              	
                67

              
	 	
                Section
                  8.7

              	
                Fundamental
                  Changes

              	
                67

              
	 	
                Section
                  8.8

              	
                Change
                  in Nature of Business

              	
                68

              
	 	
                Section
                  8.9

              	
                Transactions
                  with Affiliates

              	
                68

              
	 	
                Section
                  8.10

              	
                Third-Party
                  Restrictions on Indebtedness, Liens, Investments or 

              	 
	 	 	
                Restricted
                  Payments

              	
                68

              
	 	
                Section
                  8.11

              	
                Modification
                  of Certain Documents

              	
                68

              
	 	
                Section
                  8.12

              	
                Accounting
                  Changes; Fiscal Year

              	
                69

              


      

    

     

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
          
            
              TABLE
                OF
                CONTENTS

                                                                                            
                (continued)                                                                                     Page

            

          

        

      

    

     

    

      
        	 	
                Section
                  8.13

              	
                Margin
                  Regulations

              	
                69

              
	 	
                Section
                  8.14

              	
                Compliance
                  with ERISA

              	
                69

              
	 	
                Section
                  8.15

              	
                Hazardous
                  Materials

              	
                69

              


      

    

     

     

    ARTICLE
      IX
      EVENTS
      OF DEFAULT

     

    

      
        	 	
                Section
                  9.1

              	
                Definition

              	
                69

              
	 	
                Section
                  9.2

              	
                Remedies

              	
                71

              


      

    

     

     

    ARTICLE
      X
      THE
      ADMINISTRATIVE AGENT

     

    

      
        	 	
                Section
                  10.1

              	
                Appointment
                  and Duties

              	
                71

              
	 	
                Section
                  10.2

              	
                Binding
                  Effect

              	
                72

              
	 	
                Section
                  10.3

              	
                Use
                  of Discretion

              	
                73

              
	 	
                Section
                  10.4

              	
                Delegation
                  of Rights and Duties

              	
                73

              
	 	
                Section
                  10.5

              	
                Reliance
                  and Liability

              	
                73

              
	 	
                Section
                  10.6

              	
                Administrative
                  Agent Individually

              	
                74

              
	 	
                Section
                  10.7

              	
                Lender
                  Credit Decision

              	
                75

              
	 	
                Section
                  10.8

              	
                Expenses;
                  Indemnities

              	
                75

              
	 	
                Section
                  10.9

              	
                Resignation
                  of Administrative Agent

              	
                75

              
	 	
                Section
                  10.10

              	
                Release
                  of Collateral

              	
                76

              
	 	
                Section
                  10.11

              	
                Additional
                  Secured Parties

              	
                77

              


      

    

     

     

    ARTICLE
      XI
      MISCELLANEOUS

     

    

      
        	 	
                Section
                  11.1

              	
                Amendments,
                  Waivers, Etc.

              	
                77

              
	 	
                Section
                  11.2

              	
                Assignments
                  and Participations; Binding Effect

              	
                79

              
	 	
                Section
                  11.3

              	
                Costs
                  and Expenses

              	
                81

              
	 	
                Section
                  11.4

              	
                Indemnities

              	
                82

              
	 	
                Section
                  11.5

              	
                Survival

              	
                82

              
	 	
                Section
                  11.6

              	
                Limitation
                  of Liability for Certain Damages

              	
                83

              
	 	
                Section
                  11.7

              	
                Lender-Creditor
                  Relationship

              	
                83

              
	 	
                Section
                  11.8

              	
                Right
                  of Setoff

              	
                83

              
	 	
                Section
                  11.9

              	
                Sharing
                  of Payments, Reinstatement Etc.

              	
                83

              
	 	
                Section
                  11.10

              	
                Marshaling;
                  Payments Set Aside

              	
                84

              
	 	
                Section
                  11.11

              	
                Notices

              	
                84

              
	 	
                Section
                  11.12

              	
                Electronic
                  Transmissions

              	
                86

              
	 	
                Section
                  11.13

              	
                Governing
                  Law

              	
                87

              
	 	
                Section
                  11.14

              	
                Jurisdiction

              	
                87

              
	 	
                Section
                  11.15

              	
                Waiver
                  of Jury Trial

              	
                87

              
	 	
                Section
                  11.16

              	
                Severability

              	
                87

              
	 	
                Section
                  11.17

              	
                Execution
                  in Counterparts

              	
                88

              
	 	
                Section
                  11.18

              	
                Entire
                  Agreement

              	
                88

              
	 	
                Section
                  11.19

              	
                Use
                  of Name

              	
                88

              
	 	
                Section
                  11.20

              	
                Non-Public
                  Information; Confidentiality

              	
                88

              
	 	
                Section
                  11.21

              	
                Patriot
                  Act Notice

              	
                89

              
	 	
                Section
                  11.22

              	
                Limitation
                  of Liability

              	
                89

              
	 	
                Section
                  11.23

              	
                Existing
                  Agreements Superseded; Exhibits and Schedules

              	
                89

              


      

    

     

     

     

    


     


    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

        
          


          
            
              TABLE
                OF
                CONTENTS

                                                                                            
                (continued)                                                                                     Page

            

          

        

      

    



    
      	 	 	
              SCHEDULES

            
	
              Schedule
                I

            	
              -

            	
              Commitments

            
	
              Schedule
                2.1

            	
              -

            	
              Repairs,
                Replacements and Improvements

            
	
              Schedule
                4.2

            	
              -

            	
              Consents

            
	
              Schedule
                4.3

            	
              -

            	
              Ownership
                of the Borrowers

            
	
              Schedule
                4.7

            	
              -

            	
              Litigation

            
	
              Schedule
                4.12

            	
              -

            	
              Labor
                Matters

            
	
              Schedule
                4.13

            	
              -

            	
              List
                of Plans

            
	
              Schedule
                4.14

            	
              -

            	
              Environmental
                Matters

            
	
              Schedule
                4.16

            	
              -

            	
              Real
                Property, Allocated Loan Amount and Beds

            
	
              Schedule
                7.2

            	
              -

            	
              Provider
                Agreements and Licenses

            
	
              Schedule
                8.1

            	
              -

            	
              Existing
                Indebtedness

            
	
              Schedule
                8.2

            	
              -

            	
              Existing
                Liens

            
	
              Schedule
                8.3

            	
              -

            	
              Existing
                Investments

            
	
              Schedule
                8.7

            	
              -

            	
              Permitted
                Acquisitions

            
	 	 	 
	
              EXHIBITS

            	 	
              EXHIBITS

            
	
              Exhibit
                A

            	
              -

            	
              List
                of Borrowers

            
	
              Exhibit
                B

            	
              -

            	
              Form
                of Assignment

            
	
              Exhibit
                C

            	
              -

            	
              Form
                of Compliance Certificate

            
	
              Exhibit
                D

            	
              -

            	
              Corporate
                Chart

            
	
              Exhibit
                E

            	
              -

            	
              Form
                of Note

            
	
              Exhibit
                F

            	
              -

            	
              Notice
                of Borrowing

            


    

     


    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

        
          


           

           

        

      

    


    

      This
        AMENDED AND RESTATED CREDIT
        AGREEMENT,
        dated
        as of December 11, 2006, is entered into among BREA
        EMERITUS LCC,
        a
        Delaware limited liability company (the “Parent”),
        and
        each of its subsidiaries listed on Exhibit A hereto (each an “SPE”
and
        collectively with the Parent, the “Borrowers”), the
        Lenders (as defined below), GENERAL
        ELECTRIC CAPITAL CORPORATION
        (“GE
        Capital”),
        as
        administrative agent and collateral agent for the Lenders (in such capacity,
        and
        together with its successors and permitted assigns, the
        “Administrative
        Agent”)
        and
        GE
        CAPITAL MARKETS, INC., as sole lead arranger.

       

      WHEREAS,
        in order to correct certain scrivener’s errors and to add Merrill Lynch Capital,
        a Division of Merrill Lynch Business Financial Services Inc. as a Lender
        hereunder, the parties have agreed to amend and restate that certain Credit
        Agreement, dated as of December 1, 2006, among the Parent, the other Borrowers,
        the Administrative Agent and GE Capital Markets, Inc. (the “Original
        Credit Agreement”).
        

       

      NOW,
        THEREFORE,
        in
        consideration of the promises and covenants contained in this Agreement,
        and for
        other good and valuable consideration, the receipt and sufficiency of which
        are
        hereby acknowledged, the parties covenant and agree as follows:

       

       

      ARTICLE
        I  

       

       

      


       

       

      DEFINITIONS,
        INTERPRETATION AND ACCOUNTING TERMS

       

       

      Section
        1.1  Defined
        Terms As
        used
        in this Agreement, the following terms have the following meanings: 

       

      “Acquisition”
means
        the acquisition of each Facility and the assets related thereto of the Seller
        and its Subsidiaries to the extent such Facility is acquired pursuant to
        the
        terms of the Acquisition Agreement.

       

      “Acquisition
        Agreement”
means
        that certain Purchase and Sale Agreement, among the Seller and the
        Borrowers.

       

      “Administrative
        Agent”
has
        the
        meaning specified in the preamble hereto.

       

      “Affected
        Lender”
has
        the
        meaning specified in Section 2.12.

       

      “Affiliate”
means,
        with respect to any Person, each officer, director, general partner or
        joint-venturer of such Person and any other Person that directly or indirectly
        controls, is controlled by, or is under common control with, such Person;
        provided,
        however,
        that no
        Secured Party shall be an Affiliate of any Borrower. For purpose of this
        definition, “control”
means
        the possession of either (a) the power to vote, or the beneficial ownership
        of,
        10% or more of the Voting Interests of such Person or (b) the power to direct
        or
        cause the direction of the management and policies of such Person, whether
        by
        contract or otherwise.

       

      “Agreement”
means
        this Credit Agreement.

       

      “Applicable
        Margin” means
        2.35%; provided,
        however,
        from
        and after the first five (5) Fiscal Quarters immediately following the Closing
        Date and provided no Event of Default has occurred and is continuing, the
        Applicable Margin will be reduced as follows for the then current



      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      


      Fiscal
        Quarter if the Consolidated Project Yield (based on the average end of quarter
        balance for the immediately preceding four (4) quarters) for each of the
        two (2)
        immediately preceding Fiscal Quarters then most recently ended for which
        a
        Compliance Certificate has been delivered (and if no Compliance Certificate
        is
        delivered, it shall not be reduced as follows), (a) is greater than or equal
        to
        10% and less than 11%, then the Applicable Margin for the period for which
        the
        determination is being made shall be equal to 2.20%, or (b) is greater than
        or
        equal to 11%, then the Applicable Margin for the period for which the
        determination is being made shall be equal to 2.00%. 

      


      Each
        date
        of determination for the “Applicable
        Margin”
shall
        be the date that is 3 Business Days after delivery by the Borrowers to the
        Administrative Agent of a new Compliance Certificate pursuant to Section 6.1(d).
        Notwithstanding anything to the contrary set forth in this Agreement (including
        the then effective Consolidated Project Yield), the Applicable Margin shall
        equal 2.35%, effective immediately upon (x) the occurrence of any Event of
        Default under Section 9.1(e)(ii)
        or (y)
        the delivery of a notice by the Administrative Agent to the Parent during
        the
        continuance of any other Event of Default and, in each case, for as long
        as such
        Event of Default shall be continuing.

       

      “Approved
        Fund”
means,
        with respect to any Lender, any Person (other than a natural Person) that
        (a) is
        or will be engaged in making, purchasing, holding or otherwise investing
        in
        commercial loans and similar extensions of credit in the ordinary course
        of its
        business and (b) is advised or managed by (i) such Lender, (ii) any Affiliate
        of
        such Lender or (iii) any Person (other than an individual) or any Affiliate
        of
        any Person (other than an individual) that administers or manages such
        Lender.

       

      “Assignment”
means
        an assignment agreement entered into by a Lender, as assignor, and any
        prospective assignee thereof and accepted by the Administrative Agent, in
        substantially the form of Exhibit B.

       

      “As-Built
        Survey”
shall
        mean an “as-built” survey of the Real Property, showing all of the Improvements
        situated thereon, which shall (i) be in the form of an ALTA/ACSM “as-built”
Survey, be made in accordance with the 2005 Minimum Standard Detailed
        Requirements for such surveys, shall include items 1 through 4, 6, 7(a),
        7(b)(1), 7(c), 8, 9, 10, 11(a), 13, 16, 17 and 18 of Table A, and be in
        accordance with the then-current “Accuracy Standards for ALTA/ACSM Land Title
        Surveys” as adopted by the American Land Title Association, American Congress on
        Surveying & Mapping and National Society of Professional Surveyors, (ii) be
        certified to Lender and the Title Company, and (iii) set forth such other
        information as Lender may reasonably require.

       

      “Base
        Rate”
means,
        at any time, a rate per annum equal to the higher of (a) the rate last quoted
        by
        The Wall Street Journal as the “base rate on corporate loans posted by at least
        75% of the nation’s largest banks” in the United States or, if The Wall Street
        Journal ceases to quote such rate, the highest per annum interest rate published
        by the Federal Reserve Board in Federal Reserve Statistical Release H.15
        (519)
        (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no
        longer quoted therein, any similar rate quoted therein (as determined by
        the
        Administrative Agent) or any similar release by the Federal Reserve Board
        (as
        determined by the Administrative Agent) and (b) the sum of 0.5% per annum
        and
        the Federal Funds Rate.

       


      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      “Benefit
        Plan”
means
        any employee benefit plan as defined in Section 3(3) of ERISA (whether governed
        by the laws of the United States or otherwise) to which any Borrower incurs
        or
        otherwise has any obligation or liability.

       

      “Blackstone”
means
        Blackstone Real Estate Associates V L.P. 

       

      “Borrowers”
has
        the
        meaning specified in the preamble hereto.

       

      “Borrowers’
        Accountants”
means
        KPMG LLP or other nationally-recognized independent registered certified
        public
        accountants acceptable to the Administrative Agent.

       

      “Boynton”
means
        that certain healthcare facility known as The Gardens, formerly known as
        Cypress
        Gardens at Boynton Village, and located at 1935 South Federal Highway, Boynton
        Beach, Florida.

       

      “Business
        Day”
means
        any day of the year that is not a Saturday, Sunday or a day on which banks
        are
        required or authorized to close in New York City and, when determined in
        connection with notices and determinations in respect of any Eurodollar Rate
        or
        Eurodollar Rate Loan or any funding, conversion, continuation, Interest Period
        or payment of any Eurodollar Rate Loan, that is also a day on which dealings
        in
        Dollar deposits are carried on in the London interbank market.

       

      “Capital
        Expenditures”
means,
        for any Person
        for any
        period, the aggregate of all expenditures, whether or not made through the
        incurrence of Indebtedness, by such Person and its Subsidiaries during such
        period for the acquisition, leasing (pursuant to a Capital Lease), construction,
        replacement, repair, substitution or improvement of fixed or capital assets
        or
        additions to equipment, in each case required to be capitalized under GAAP
        on a
        Consolidated balance sheet of such Person, excluding (a) interest capitalized
        during construction
        and (b)
        any expenditure to the extent, for purpose of the definition of Permitted
        Acquisition, such expenditure is part of the aggregate amounts payable in
        connection with, or other consideration for, any Permitted Acquisition
        consummated during or prior to such period.

       

      “Capital
        Improvement Holdback”
has
        the
        meaning given such term in Section
        2.1(b)(i).

       

      “Capital
        Lease”
means,
        with respect to any Person, any lease of, or other arrangement conveying
        the
        right to use, any property (whether real, personal or mixed) by such Person
        as
        lessee that has been or should be accounted for as a capital lease on a balance
        sheet of such Person prepared in accordance with GAAP.

       

      “Cash
        Equivalents”
means
        (a) any readily-marketable securities (i) issued by, or directly,
        unconditionally and fully guaranteed or insured by the United States federal
        government or (ii) issued by any agency of the United States federal
        government the obligations of which are fully backed by the full faith and
        credit of the United States federal government, (b) any readily-marketable
        direct obligations issued by any other agency of the United States federal
        government, any state of the United States or any political subdivision of
        any
        such state or any public instrumentality thereof, in each case having a rating
        of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any
        commercial paper rated at least “A-1”
by
        S&P or “P-1”
by
        Moody’s and issued by any Person organized under the laws of any state of the
        United States, (d) any Dollar-denominated time deposit, insured certificate
        of
        deposit, overnight bank deposit or bankers’ 

       


      
        
          
          

        

        
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      acceptance
        issued or accepted by (i) any Lender or (ii) any commercial bank that is
        (A) organized under the laws of the United States, any state thereof or the
        District of Columbia, (B) “adequately capitalized” (as defined in the
        regulations of its primary federal banking regulators) and (C) has Tier 1
        capital (as defined in such regulations) in excess of $250,000,000 and (e)
        shares of any United States money market fund that (i) has substantially
        all of
        its assets invested continuously in the types of investments referred to
        in
clause
        (a),
        (b),
        (c)
        or
(d)
        above
        with maturities as set forth in the proviso below, (ii) has net assets in
        excess
        of $500,000,000 and (iii) has obtained from either S&P or Moody’s the
        highest rating obtainable for money market funds in the United States;
provided,
        however,
        that
        the maturities of all obligations specified in any of clauses
        (a),
        (b),
        (c)
        and
(d)
        above
        shall not exceed 365 days.

       

      “CERCLA”
means
        the United States Comprehensive Environmental Response, Compensation, and
        Liability Act (42 U.S.C. §§ 9601 et seq.).

       

      “Change
        of Control”
means
        the occurrence of any of the following: (a) the Permitted Investors shall
        cease
        to own at least 51% and control legally and beneficially all of the economic
        and
        voting rights of Parent, (b) Parent shall cease to own and control legally
        and
        beneficially all of the economic and voting rights any SPE, or (c) any Facility
        ceases to be managed or operated by a Qualified Manager.

       

      “Closing
        Date”
means
        December 1, 2006.

       

      “Code”
means
        the U.S. Internal Revenue Code of 1986.

       

      “Collateral”
means
        all property and interests in property and proceeds thereof now owned or
        hereafter acquired by any Borrower in or upon which a Lien is granted or
        purported to be granted pursuant to any Loan Document.

       

      “Commitment”
means,
        with respect to each Lender, the commitment of such Lender to make Term Loans
        to
        the Borrowers, which commitment is in the amount set forth opposite such
        Lender’s name on Schedule I
        under
        the caption “Commitment”,
        as
        amended to reflect Assignments and as such amount may be reduced pursuant
        to
        this Agreement. The aggregate amount of the Commitments on the date hereof
        equals $167,000,000.

       

      “Compliance
        Certificate”
means
        a
        certificate substantially in the form of Exhibit C.

       

      “Consolidated”
means,
        with respect to any Person, the accounts of such Person and its Subsidiaries
        consolidated in accordance with GAAP. 

       

      “Consolidated
        Current Assets”
means,
        at any date, the total Consolidated current assets of the Parent at such
        date
        other than cash, Cash Equivalents and any Indebtedness owing to the Parent
        or
        any of its Subsidiaries by Affiliates of the Parent.

       

      “Consolidated
        Current Liabilities”
means,
        at any date, all liabilities of the Parent and its Subsidiaries at such date
        that should be classified as current liabilities on a Consolidated balance
        sheet
        of the Parent; provided,
        however,
        that
“Consolidated
        Current Liabilities”
shall
        exclude the principal amount of the Loans then outstanding.

       


      
        
          
          

        

        
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      “Consolidated
        EBITDA”
means,
        for any period, (a) the Consolidated Net Income of the Parent for such period
        plus
        (b) the
        sum of, in each case to the extent included in the calculation of such
        Consolidated Net Income but without duplication, (i) any provision for
        United States federal income taxes or other taxes measured by net income,
        (ii)
        Consolidated Interest Expense, amortization of debt
        discount and commissions and other fees and charges associated with Indebtedness
        (except amortization and expenses related to the consummation of Term Loan
        on
        the Closing Date and the Related Transactions and the payment of all fees,
        costs
        and expenses associated with the foregoing), (iii) Consolidated Rent Expense,
        (iv) an amount equal to any Management Fee actually paid, (v) any loss from
        extraordinary items, (vi) any depreciation, depletion and amortization expense,
        (vii) any aggregate net loss on the Transfer of property (other than accounts
        (as defined under the applicable UCC) and inventory) outside the ordinary
        course
        of business and (viii) any other non-cash expenditure, charge or loss for
        such period (other than any non-cash expenditure, charge or loss relating
        to
        write-offs, write-downs or reserves with respect to accounts and inventory),
        including the amount of any compensation deduction as the result of any grant
        of
        Equity Interests or Equity Equivalents to employees, officers, directors
        or
        consultants and minus
        (c) the
        sum of, in each case to the extent included in the calculation of such
        Consolidated Net Income and without duplication, (i) any credit for United
        States federal income taxes or other taxes measured by net income, (ii) any
        interest income, (iii) a capital replacement reserve in an amount per annum
        equal to $300 per bed, (iv) management fees, which for the purposes of this
        definition shall be deemed to be an amount per annum equal to five percent
        (5%)
        of the aggregate total operating revenue generated from the Facilities, for
        the
        full twelve (12) month period immediately preceding the date of determination,
        (v) the value of any impact of definitive Medicare/Medicaid changes imposed
        by
        any Governmental Authority, as reasonably determined by the Administrative
        Agent, (vi) any gain from extraordinary items and any other non-recurring
        gain,
        (vii) any aggregate net gain from the Transfer of property (other than accounts
        (as defined in the applicable UCC) and inventory) out of the ordinary course
        of
        business by the Parent, (viii) any other non-cash gain, including any reversal
        of a charge referred to in clause
        (b)(viii)
        above by
        reason of a decrease in the value of any Equity Interest or Equity Equivalent,
        and (vi) any other cash payment in respect of expenditures, charges and losses
        that have been added to Consolidated EBITDA of the Parent pursuant to
clause
        (b)(viii)
        above in
        any prior period; provided,
        however,
        if the
        actual occupancy of all of the Facilities, taken as a whole, exceeds 95%,
        Consolidated Adjusted EBITDA shall be proportionately reduced assuming an
        occupancy of 95%.

       

      “Consolidated
        Interest Coverage Ratio”
means,
        for any period, the ratio of (a) Consolidated EBITDA for such period to (b)
        Consolidated Interest Expense for such period.

       

      “Consolidated
        Interest Expense”
means,
        for any period, (a) Consolidated total interest expense of the Parent and
        its
        Subsidiaries for such period and including, in any event, (i) interest
        capitalized during such period and net costs under Interest Rate Contracts
        for
        such period and (ii) all fees, charges, commissions, discounts and other
        similar
        obligations (other than reimbursement obligations) with respect to letters of
        credit, bank guarantees, banker’s acceptances, surety bonds and performance
        bonds (whether or not matured) payable by such Person and its Subsidiaries
        during such period minus
        (b) the
        sum of (i) Consolidated net gains of the Parent and its Subsidiaries under
        Interest Rate Contracts for such period and (ii) Consolidated interest
        income of the Parent and its Subsidiaries for such period.

       

      “Consolidated
        Project Yield”
means,
        for any period, the ratio of (a) Consolidated EBITDA for such period to (b)
        the
        Consolidated Total Debt for such period.

       


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      


      “Consolidated
        Net Income”
means,
        for any period, the Consolidated net income (or loss) of the Parent and its
        Subsidiaries for such period; provided,
        however,
        that
        the following shall be excluded: (a) the net income of any other Person in
        which
        the Parent or one of its Subsidiaries has a joint interest with a third-party
        (which interest does not cause the net income of such other Person to be
        Consolidated into the net income of the Parent), except to the extent of
        the
        amount of dividends or distributions paid to such Person or Subsidiary, (b)
        the
        net income of any Subsidiary of the Parent that is, on the last day of such
        period, subject to any restriction or limitation on the payment of dividends
        or
        the making of other distributions, to the extent of such restriction or
        limitation, except restrictions or limitations set forth herein, and (c)
        the net
        income of any other Person arising prior to such other Person becoming a
        Subsidiary of the Parent or merging or consolidating into the Parent or its
        Subsidiaries.

       

      “Consolidated
        Rent Expense”
means
        the Consolidated rent expense of the Parent and its Subsidiaries for such
        period.

       

      “Consolidated
        Total Debt”
of
        any
        Person means all Indebtedness of a type described in clause (a),
        (b),
        (c)(i),
        (d)
        or
(f)
        of the
        definition thereof and all Guaranty Obligations with respect to any such
        Indebtedness, in each case of such Person and its Subsidiaries on a Consolidated
        basis.

       

      “Constituent
        Documents”
means,
        with respect to any Person, collectively and, in each case, together with
        any
        modification of any term thereof, (a) the articles of incorporation, certificate
        of incorporation, constitution or certificate of formation of such Person,
        (b)
        the bylaws, operating agreement or joint venture agreement of such Person,
        (c)
        any other constitutive, organizational or governing document of such Person,
        whether or not equivalent, and (d) any other document setting forth the manner
        of election or duties of the directors, officers or managing members of such
        Person or the designation, amount or relative rights, limitations and
        preferences of any Equity Interest of such Person.

       

      “Contractual
        Obligation”
means
        with respect to any Person, any provision of any Security issued by such
        Person
        or of any document or undertaking to which such Person is a party or by which
        it
        or any of its property is bound or to which any of its property is subject,
        in
        each case, other than a Loan Document.

       

      “Control
        Agreement”
means,
        with respect to any deposit account, any securities account, commodity account,
        securities entitlement or commodity contract, an agreement, in form and
        substance satisfactory to the Administrative Agent, among the Administrative
        Agent, the financial institution or other Person at which such account is
        maintained or with which such entitlement or contract is carried and the
        Borrower maintaining such account, effective to grant “control” (as defined
        under the applicable UCC) over such account to the Administrative
        Agent.

       

      “Controlled
        Deposit Account”
means
        each deposit account (including all funds on deposit therein) that is the
        subject of an effective Control Agreement and that is maintained by any Borrower
        with a financial institution approved by the Administrative Agent.

       

      “Controlled
        Securities Account”
means
        each securities account or commodity account (including all financial assets
        held therein and all certificates and instruments, if any, representing or
        evidencing such financial assets) that is the subject of an effective Control
        Agreement and that 

       


      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      


      is
        maintained by any Borrower with a securities intermediary or commodity
        intermediary approved by the Administrative Agent.

       

      “Copyrights”
means
        all rights, title and interests (and all related IP Ancillary Rights) arising
        under any Requirement of Law in or relating to copyrights and all mask work,
        database and design rights, whether or not registered or published, all
        registrations and recordations thereof and all applications in connection
        therewith.

       

      “Corporate
        Chart”
means
        a
        document in form reasonably acceptable to the Administrative Agent, and the
        form
        delivered to Administrative Agent prior to the date hereof and attached as
        Exhibit D hereto, setting forth, as of a date set forth therein, for each
        Person
        that is a Borrower, Emeritus and Blackstone and any direct or indirect
        Subsidiary of Emeritus and Blackstone that owns or holds any Equity Interest
        in
        any Borrower, but excluding any limited partners of Blackstone or its
        Affiliates, (a) the full legal name of such Person, (b) the jurisdiction
        of
        organization and any organizational number and tax identification number
        of such
        Person, and (c) the number of shares or percentage, as the case may be, of
        each
        class of Equity Interests of such Person, and, with respect to Emeritus only,
        the authorized, number outstanding and number and percentage of such outstanding
        shares for each such class owned, directly or indirectly, by any Borrower,
        such
        Subsidiary, Emeritus or Blackstone.

       

      “Customary
        Permitted Liens”
means,
        with respect to any Person, any of the following:

       

      (a) Liens
        (i)
        with respect to the payment of taxes, assessments or other governmental charges
        or (ii) of suppliers, carriers, materialmen, warehousemen, workmen or mechanics
        and other similar Liens, in each case imposed by law or arising in the ordinary
        course of business, and, for each of the Liens in clauses
        (i)
        and
(ii)
        above
        for amounts that are not yet due or that are being contested in good faith
        by
        appropriate proceedings diligently conducted and with respect to which, if
        being
        contested, adequate reserves or other appropriate provisions are maintained
        on
        the books of such Person in accordance with GAAP;

       

      (b) Liens
        of
        a collection bank on items in the course of collection arising under Section
        4-208 of the UCC as in effect in the State of New York or any similar section
        under any applicable UCC or any similar Requirement of Law of any foreign
        jurisdiction;

       

      (c) pledges
        or cash deposits made in the ordinary course of business (i) in connection
        with workers’ compensation, unemployment insurance or other types of social
        security benefits (other than any Lien imposed by ERISA), (ii) to secure
        the performance of bids, tenders, leases (other than Capital Leases) sales
        or
        other trade contracts (other than for the repayment of borrowed money) or
        (iii) made in lieu of, or to secure the performance of, surety, customs,
        reclamation or performance bonds (in each case not related to judgments or
        litigation);

       

      (d) judgment
        liens (other than for the payment of taxes, assessments or other governmental
        charges) securing judgments and other proceedings not constituting an Event
        of
        Default under Section 9.1(e)
        and
        pledges or cash deposits made in lieu of, or to secure the performance of,
        judgment or appeal bonds in respect of such judgments and
        proceedings;

       

      (e) Liens
        (i)
        arising by reason of zoning restrictions, easements, licenses, reservations,
        restrictions, covenants, rights-of-way, encroachments, minor defects or
        irregularities in title (including leasehold title) and other similar
        encumbrances on the use of real property or 

       


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      


      (ii)
        consisting of leases, licenses or subleases granted by a lessor, licensor
        or
        sublessor on its property (in each case other than Capital Leases) otherwise
        permitted under Section 8.4(b)
        that,
        for each such Liens, do not, in the aggregate, materially (x) impair the
        value
        or marketability of such real property or (y) interfere with the ordinary
        conduct of the business conducted and proposed to be conducted at such real
        property; and

       

      (f) the
        title
        and interest of a lessor or sublessor in and to personal property leased
        or
        subleased (other than through a Capital Lease), in each case extending only
        to
        such personal property.

       

      “Default”
means
        any Event of Default and any event that, with the passing of time or the
        giving
        of notice or both, would become an Event of Default.

       

      “Disclosure
        Documents”
means,
        collectively, (a) all confidential information memoranda and related materials
        prepared in connection with the syndication of the Facilities and (b) all
        other
        documents filed by any Borrower with the United States Securities and Exchange
        Commission.

       

      “Dollars”
and
        the
        sign “$”
each
        mean the lawful money of the United States of America.

       

      “Domestic
        Person”
means
        any “United
        States person”
under
        and as defined in Section 770l(a)(30) of the Code.

       

      “Electronic
        Fax”
means
        any system used to receive or transmit faxes electronically.

       

      “Electronic
        Signature”
means
        the process of attaching to or logically associating with an Electronic
        Transmission an electronic symbol, encryption, digital signature or process
        (including the name or an abbreviation of the name of the party transmitting
        the
        Electronic Transmission) with the intent to sign, authenticate or accept
        such
        Electronic Transmission.

       

      “Electronic
        System”
means
        any electronic system, including Intralinks®
        and any
        other Internet or extranet-based site, whether such electronic system is
        owned,
        operated or hosted by the Administrative Agent, any of its Related Persons
        or
        any other Person, providing for access to data protected by passcodes or
        other
        security system.

       

      “Electronic
        Transmission”
means
        each document, instruction, authorization, file, information and any other
        communication transmitted, posted or otherwise made or communicated by
        electronic mail or Electronic Fax, or otherwise to or from an Electronic
        System
        or other equivalent service.

       

      “Emeritus”
means
        Emeritus Corporation, a Washington corporation.

       

      “Environmental
        Indemnity”
means
        one or more agreements pursuant to which Emeritus and the Borrowers provide
        an
        environmental indemnity, (i) recourse to Emeritus with such recourse limited
        to
        the top 10% of the Loan Amount ($16,700,000) and (ii) which indemnity is
        fully
        recourse to the Borrowers.

       

      “Environmental
        Laws”
means
        all Requirements of Law and Permits imposing liability or standards of conduct
        for or relating to the regulation and protection of human health, safety,
        the
        environment and natural resources, including CERCLA, the SWDA, the Hazardous
        Materials 

       


      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      


      Transportation
        Act (49 U.S.C. §§ 5101 et seq.), the Federal Insecticide, Fungicide, and
        Rodenticide Act (7 U.S.C. §§ 136 et seq.), the Toxic Substances Control Act (15
        U.S.C. §§ 2601 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the
        Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the
        Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), the Safe Drinking
        Water Act (42 U.S.C. §§ 300(f) et seq.), all regulations promulgated under
        any of the foregoing, all analogous Requirements of Law and Permits and any
        environmental transfer of ownership notification or approval statutes, including
        the Industrial Site Recovery Act (N.J. Stat. Ann. §§ 13:1K-6 et
        seq.).

       

      “Environmental
        Liabilities”
means
        all Liabilities (including costs of Remedial Actions, natural resource damages
        and costs and expenses of investigation and feasibility studies) that may
        be
        imposed on, incurred by or asserted against any Borrower as a result of,
        or
        related to, any claim, suit, action, investigation, proceeding or demand
        by any
        Person, whether based in contract, tort, implied or express warranty, strict
        liability, criminal or civil statute or common law or otherwise, arising
        under
        any Environmental Law or in connection with any Release and resulting from
        the
        ownership, lease, sublease or other operation or occupation of property by
        any
        Borrower, whether on, prior or after the date hereof.

       

      “Equity
        Equivalents”
means
        all securities convertible into or exchangeable for any Equity Interest or
        any
        other Equity Equivalent and all warrants, options or other rights to purchase,
        subscribe for or otherwise acquire any Equity Interest or any other Equity
        Equivalent, whether or not presently convertible, exchangeable or
        exercisable.

       

      “Equity
        Interest”
means
        all shares of capital stock (whether denominated as common stock or preferred
        stock), equity interests, beneficial, partnership or membership interests,
        joint
        venture interests, participations or other ownership or profit interests
        in or
        equivalents (regardless of how designated) of or in a Person (other than
        an
        individual), whether voting or non-voting.

       

      “ERISA”
means
        the United States Employee Retirement Income Security Act of 1974.

       

      “ERISA
        Affiliate”
means,
        collectively, any Borrower, and any Person under common control, or treated
        as a
        single employer, with any Borrower, within the meaning of Section 414(b),
        (c),
        (m) or (o) of the Code.

       

      “ERISA
        Event”
means
        any of the following: (a) a reportable event described in
        Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been
        duly waived under the applicable regulations, Section 4043(c) of ERISA) with
        respect to a Title IV Plan, (b) the withdrawal of any ERISA Affiliate from
        a Title IV Plan subject to Section 4063 of ERISA during a plan year in which
        it
        was a substantial employer, as defined in Section 4001(a)(2) of ERISA,
        (c) the complete or partial withdrawal of any ERISA Affiliate from any
        Multiemployer Plan, (d) with respect to any Multiemployer Plan, the filing
        of a notice of reorganization, insolvency or termination (or treatment of
        a plan
        amendment as termination) under Section 4041A of ERISA, (e) the filing of
        a
        notice of intent to terminate a Title IV Plan (or treatment of a plan amendment
        as termination) under Section 4041 of ERISA, (f) the institution of proceedings
        to terminate a Title IV Plan or Multiemployer Plan by the PBGC, (g) the failure
        to make any required contribution to any Title IV Plan or Multiemployer Plan
        when due, (h) the imposition of a lien under Section 412 of the Code or Section
        302 or 4068 of ERISA on any property (or rights to property, whether real
        or
        personal) of any ERISA Affiliate, (i) the failure of a Benefit Plan or any
        trust
        thereunder intended to qualify for tax exempt status under Section 401 or
        501 of
        the Code or 

       


      
        
          
          

        

        
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      other
        Requirements of Law to qualify thereunder and (j) any other event or condition
        that might reasonably be expected to constitute grounds under Section 4042
        of
        ERISA for the termination of, or the appointment of a trustee to administer,
        any
        Title IV Plan or Multiemployer Plan or for the imposition of any liability
        upon
        any ERISA Affiliate under Title IV of ERISA other than for PBGC premiums
        due but
        not delinquent.

       

      “Eurodollar
        Base Rate”
means,
        with respect to any Interest Period for any Eurodollar Rate Loan, the rate
        determined by the Administrative Agent to be the offered rate for deposits
        in
        Dollars for the applicable Interest Period appearing on the Dow Jones Markets
        Telerate Page 3750 as of 11:00 a.m. (London time) on the second full
        Business Day next preceding the first day of each Interest Period. In the
        event
        that such rate does not appear on the Dow Jones Markets Telerate Page 3750
        (or
        otherwise on the Dow Jones Markets screen) at such time, the “Eurodollar
        Base Rate”
shall
        be determined by reference to such other comparable publicly available service
        for displaying the offered rate for deposit in Dollars in the London interbank
        market as may be selected by the Administrative Agent and, in the absence
        of
        availability, such other method to determine such offered rate as may be
        selected by the Administrative Agent in its sole discretion.

       

      “Eurodollar
        Rate”
means,
        with respect to any Interest Period and for any Eurodollar Rate Loan, an
        interest rate per annum determined as the ratio of (a) the Eurodollar Base
        Rate
        with respect to such Interest Period for such Eurodollar Rate Loan to (b)
        the
        difference between the number one and the Eurodollar Reserve Requirements
        with
        respect to such Interest Period and for such Eurodollar Rate Loan.

       

      “Eurodollar
        Rate Loan”
means
        any Loan that bears interest based on the Eurodollar Rate.

       

      “Eurodollar
        Reserve Requirements”
means,
        with respect to any Interest Period and for any Eurodollar Rate Loan, a rate
        per
        annum equal to the aggregate, without duplication, of the maximum rates
        (expressed as a decimal number) of reserve requirements in effect 2 Business
        Days prior to the first day of such Interest Period (including basic,
        supplemental, marginal and emergency reserves) under any regulations of the
        Federal Reserve Board or other Governmental Authority having jurisdiction
        with
        respect thereto dealing with reserve requirements prescribed for eurocurrency
        funding (currently referred to as “eurocurrency liabilities” in Regulation D of
        the Federal Reserve Board) maintained by a member bank of the United States
        Federal Reserve System.

       

      “Event
        of Default”
has
        the
        meaning specified in Section 9.1.

       

      “Excess
        Cash Escrow”
        has the
        meaning specified in Section
        2.2(a).

       

      “Excess
        Cash Flow”
means,
        for any period, (a) Consolidated EBITDA for such period, minus
        (b)
        without duplication, (i) any principal payments made in cash on the Loans
        during
        such period other than any mandatory prepayment required pursuant to
Section 2.4(a)
        because
        of the existence of Excess Cash Flow paid during such period but applicable
        to
        the prior period, (ii) any scheduled or other cash principal payment made
        by any Borrower during such period on any Indebtedness, (iii) any Capital
        Expenditure made by any Borrower during such period to the extent permitted
        by
        this Agreement, excluding (A) any long-term Indebtedness other than the
        Obligations and (B) any Capital Expenditure to the extent reimbursed from
        the Capital Improvement Holdback, (iv) the Consolidated Interest Expense
        for
        such period, (v) any cash losses from extraordinary items, (vi) any cash
        payment
        made during such period by any Borrower 

       


      
        
          
          

        

        
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      to
        satisfy obligations for United States federal income taxes or other taxes
        measured by net income and (vii) any increase in the Working Capital of Parent
        during such period (measured on a Consolidated basis as the excess of such
        Working Capital at the end of such period over such Working Capital at the
        beginning of such period) and plus
        (c)
        without duplication, (i) to the extent included in the calculation of
        Consolidated EBITDA pursuant to clause
        (b)(i)
        of the
        definition thereof, any provision for United States federal income taxes
        or
        other taxes measured by net income, (ii) any decrease in the Working
        Capital of Parent during such period (measured on a Consolidated basis as
        the
        excess of such Working Capital at the beginning of such period over such
        Working
        Capital at the end thereof), and (iii) provided no Event of Default as set
        forth
        in Section
        9.1(a)
        shall
        have occurred and is continuing, management fees, which for the purposes
        of this
        definition shall be deemed to be an amount per annum equal to five percent
        (5%)
        of the aggregate total operating revenue generated from the Facilities for
        the
        full twelve (12) month period immediately preceding the date of
        determination.

       

      “Excluded
        Property”
means
        each healthcare facility (and its allocated loan amount) identified on
Schedule 8.7.

       

      “Facilities”
means,
        collectively, all long term care facilities, nursing homes, rehabilitation
        facilities, assisted living facilities, independent living facilities, hospice
        facilities or other healthcare facilities owned and operated by any Borrower,
        as
        listed on Schedule
        4.16
        hereto.

       

      “Federal
        Funds Rate”
means,
        for any period, a fluctuating interest rate per annum equal for each day
        during
        such period to the weighted average of the rates on overnight federal funds
        transactions with members of the Federal Reserve System arranged by federal
        funds brokers, as determined by the Administrative Agent in its sole
        discretion.

       

      “Federal
        Reserve Board”
means
        the Board of Governors of the United States Federal Reserve System and any
        successor thereto.

       

      “Fee
        Letter”
means
        the letter agreement, dated as of the date hereof, addressed to the Borrowers
        from the Administrative Agent and accepted by the Borrowers, with respect
        to
        certain fees to be paid from time to time to the Administrative Agent and
        its
        Related Persons.

       

      “Financial
        Statement”
means
        each financial statement delivered pursuant to Section 4.4
        or
6.1.

       

      “First
        Extension Notice”
has
        the
        meaning specified in Section
        2.2(b).

       

      “First
        Extension Period”
has
        the
        meaning specified in Section
        2.2(b).

       

      “Fiscal
        Quarter”
means
        each 3 calendar month period ending on March 31, June 30, September 30 or
        December 31.

       

      “Fiscal
        Year”
means
        the twelve month period ending on December 31.

       

      “GAAP”
means
        generally accepted accounting principles in the United States of America,
        as in
        effect from time to time, set forth in the opinions and pronouncements of
        the
        Accounting Principles Board and the American Institute of Certified Public
        Accountants, in the statements and pronouncements of the Financial Accounting
        Standards Board and in such other 

       


      
        
          
          

        

        
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      statements
        by such other entity as may be in general use by significant segments of
        the
        accounting profession that are applicable to the circumstances as of the
        date of
        determination. Subject to Section 1.3,
        all
        references to “GAAP”
shall
        be to GAAP applied consistently with the principles used in the preparation
        of
        the Financial Statements described in Section 4.4(a).

       

      “GE
        Capital”
has
        the
        meaning specified in the preamble hereto.

       

      “Governmental
        Authority”
means
        any nation, sovereign or government, any state or other political subdivision
        thereof, any agency, authority or instrumentality thereof and any entity
        or
        authority lawfully exercising executive, legislative, taxing, judicial,
        regulatory or administrative functions of or pertaining to government, including
        any central bank, stock exchange, regulatory body, arbitrator, public sector
        entity, supra-national entity (including the European Union and the European
        Central Bank) and any self-regulatory organization (including the National
        Association of Insurance Commissioners).

       

      “Guaranty
        Obligation”
means,
        as applied to any Person, any direct or indirect liability, contingent or
        otherwise, of such Person for any Indebtedness, lease, dividend or other
        obligation (the “primary
        obligation”)
        of
        another Person (the “primary
        obligor”),
        if
        the purpose or intent of such Person in incurring such liability, or the
        economic effect thereof, is to guarantee such primary obligation or provide
        support, assurance or comfort to the holder of such primary obligation or
        to
        protect or indemnify such holder against loss with respect to such primary
        obligation, including (a) the direct or indirect guaranty, endorsement (other
        than for collection or deposit in the ordinary course of business), co-making,
        discounting with recourse or sale with recourse by such Person of any primary
        obligation, (b) the incurrence of reimbursement obligations with respect
        to any
        letter of credit or bank guarantee in support of any primary obligation,
        (c) the
        existence of any Lien, or any right, contingent or otherwise, to receive
        a Lien,
        on the property of such Person securing any part of any primary obligation
        and
        (d) any liability of such Person for a primary obligation through any
        Contractual Obligation (contingent or otherwise) or other arrangement (i)
        to
        purchase, repurchase or otherwise acquire such primary obligation or any
        security therefor or to provide funds for the payment or discharge of such
        primary obligation (whether in the form of a loan, advance, stock purchase,
        capital contribution or otherwise), (ii) to maintain the solvency, working
        capital, equity capital or any balance sheet item, level of income or cash
        flow,
        liquidity or financial condition of any primary obligor, (iii) to make
        take-or-pay or similar payments, if required, regardless of non-performance
        by
        any other party to any Contractual Obligation, (iv) to purchase, sell or
        lease
        (as lessor or lessee) any property, or to purchase or sell services, primarily
        for the purpose of enabling the primary obligor to satisfy such primary
        obligation or to protect the holder of such primary obligation against loss
        or
        (v) to supply funds to or in any other manner invest in, such primary obligor
        (including to pay for property or services irrespective of whether such property
        is received or such services are rendered); provided,
        however,
        that
“Guaranty
        Obligations”
shall
        not include (x) endorsements for collection or deposit in the ordinary course
        of
        business and (y) product warranties given in the ordinary course of business.
        The outstanding amount of any Guaranty Obligation shall equal the outstanding
        amount of the primary obligation so guaranteed or otherwise supported or,
        if
        lower, the stated maximum amount for which such Person may be liable under
        such
        Guaranty Obligation.

       

      “Hazardous
        Material”
means
        any substance, material or waste that is classified, regulated or otherwise
        characterized under any Environmental Law as hazardous, toxic, a contaminant
        or
        a 

       


      
        
          
          

        

        
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      pollutant
        or by other words of similar meaning or regulatory effect, including petroleum
        or any fraction thereof, asbestos, polychlorinated biphenyls and radioactive
        substances.

       

      “Healthcare
        Laws”
has
        the
        meaning specified in Section
        7.2.
        

       

      “Hedging
        Agreement”
means
        any Interest Rate Contract, foreign exchange, swap, option or forward contract,
        spot, cap, floor or collar transaction, any other derivative instrument and
        any
        other similar speculative transaction and any other similar agreement or
        arrangement designed to alter the risks of any Person arising from fluctuations
        in any underlying variable.

       

      “HIPAA”
has
        the
        meaning specified in Section
        7.2.
        

       

      “HIPAA
        Compliance Date”
has
        the
        meaning specified in Section
        7.2.
        

       

      “HIPAA
        Compliance Plan”
has
        the
        meaning specified in Section
        7.2.
        

       

      “HIPAA
        Compliant”
has
        the
        meaning specified in Section
        7.2.
        

       

      “Indebtedness”
of
        any
        Person means, without duplication, any of the following, whether or not matured:
        (a) all indebtedness for borrowed money, (b) all obligations evidenced by
        notes,
        bonds, debentures or similar instruments, (c) all reimbursement and all
        obligations with respect to (i) letters of credit, bank guarantees or bankers’
acceptances or (ii) surety, customs, reclamation or performance bonds (in
        each
        case not related to judgments or litigation) other than those entered into
        in
        the ordinary course of business, (d) all obligations to pay the deferred
        purchase price of property or services, other than trade payables incurred
        in
        the ordinary course of business, (e) all obligations created or arising under
        any conditional sale or other title retention agreement, regardless of whether
        the rights and remedies of the seller or lender under such agreement in the
        event of default are limited to repossession or sale of such property, (f)
        all
        obligations, whether or not contingent, to purchase, redeem, retire, defease
        or
        otherwise acquire for value any of its own Equity Interests or Equity
        Equivalents (or any Equity Interest or Equity Equivalent of a direct or indirect
        parent entity thereof) prior to the date that is 180 days after the Scheduled
        Maturity Date, valued at, in the case of redeemable preferred Equity Interest,
        the greater of the voluntary liquidation preference and the involuntary
        liquidation preference of such Equity Interest plus accrued and unpaid
        dividends, (g) all payments that would be required to be made in respect
        of any
        Hedging Agreement in the event of a termination (including an early termination)
        on the date of determination and (h) all Guaranty Obligations for obligations
        of
        any other Person constituting Indebtedness of such other Person; provided,
        however,
        that
        the items in each of clauses
        (a)
        through
(h)
        above
        shall constitute “Indebtedness”
of
        such
        Person solely to the extent, directly or indirectly, (x) such Person is liable
        for any part of any such item, (y) any such item is secured by a Lien on
        such
        Person’s property or (z) any other Person has a right, contingent or otherwise,
        to cause such Person to become liable for any part of any such item or to
        grant
        such a Lien.

       

      “Indemnified
        Matter”
has
        the
        meaning specified in Section 11.4.

       

      “Indemnitee”
has
        the
        meaning specified in Section 11.4.

       

      “Independent
        Director”,
        “Independent
        Manager”,
        or
“Independent
        Member”
shall
        mean a Person who is not and will not be while serving and has never been
        (i) a member, Partner, Equity Interest holder, manager, director, employee,
        attorney, or counsel of any Borrower or its 

       


      
        
          
          

        

        
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      Affiliates,
        (ii) a customer, supplier or other Person who derives more than 1% of its
        purchases or revenues from its activities with any Borrower or its Affiliates,
        (iii) a direct or indirect legal or beneficial owner in such entity or any
        of its Affiliates, (iv) a member of the immediate family of any member,
        manager, employee, attorney, customer, supplier or other Person referred
        to
        above, or (v) a person Controlling or under the Common Control of anyone
        listed in (i) through (iv) above. A Person that otherwise satisfies
        the foregoing shall not be disqualified from serving as an Independent Director
        or Independent Manager or Independent Member if such individual is at the
        time
        of initial appointment, or at any time while serving as such, is an Independent
        Director or Independent Manager or Independent Member, as applicable, of
        a
        Single Purpose Entity affiliated with any Borrower. Additionally, a natural
        person who satisfies the foregoing definition other than clause (ii) above
        shall
        not be disqualified from serving as an Independent Director, Independent
        Manager
        or Independent Manager if such individual is an independent director, manager
        or
        member provided by a nationally-recognized company that provides professional
        independent directors, managers and members and that also provides other
        corporate services in the ordinary course of its business. For the purpose
        of
        this definition, “Control”
shall
        mean (i) the possession, directly or indirectly, of the power to direct or
        cause
        the direction of the management and policies of a Person, whether through
        ownership of voting interests, by contract or otherwise and (ii) the ownership,
        direct or indirect, of no less than 51% of the voting interests of such Person,
        and the terms Controlled, Controlling and Common Control shall have correlative
        meanings.

       

      “Initial
        Projections”
means
        those financial Projections, dated September 1, 2006, covering the Fiscal
        Years
        ending in 2006 through 2009 and delivered to the Administrative Agent by
        the
        Parent prior to the date hereof.

       

      “Intellectual
        Property”
means
        all rights, title and interests in or relating to intellectual property and
        industrial property arising under any Requirement of Law and all IP Ancillary
        Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet
        Domain Names, Trade Secrets and IP Licenses.

       

      “Interest
        Holdback”
has
        the
        meaning given such term in Section
        2.1(b)(i).

       

      “Interest
        Period”
means,
        with respect to any Eurodollar Rate Loan, the period commencing on the Closing
        Date or on the day after the last day of the immediately preceding Interest
        Period and, in each case, except with respect to clause (c) below, ending
        on the
        day before the 1 month anniversary of the applicable commencement date;
provided,
        however,
        that
        (a) if any Interest Period would otherwise end on a day that is not a
        Business Day, such Interest Period shall be extended to the next succeeding
        Business Day, unless the result of such extension would be to extend such
        Interest Period into the next calendar month, in which case such Interest
        Period
        shall end on the immediately preceding Business Day, (b) any Interest Period
        that begins on the last Business Day of a calendar month (or on a day for
        which
        there is no numerically corresponding day in the calendar month at the end
        of
        such Interest Period) shall end on the last Business Day of the immediately
        succeeding a calendar month, (c) no Interest Period shall end after the
        Scheduled Maturity Date.

       

      “Interest
        Rate Contracts”
means
        all interest rate swap agreements, interest rate cap agreements, interest
        rate
        collar agreements and interest rate insurance.

       


      
        
          
          

        

        
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      “Internet
        Domain Names”
means
        all rights, title and interests (and all related IP Ancillary Rights) arising
        under any Requirement of Law in or relating to Internet domain
        names.

       

      “Investment”
means,
        with respect to any Person, directly or indirectly, (a) to own, purchase
        or
        otherwise acquire, in each case whether beneficially or otherwise, any
        investment in, including any interest in, any Security of any other Person
        (other than any evidence of any Obligation), (b) to purchase or otherwise
        acquire, whether in one transaction or in a series of transactions, all or
        a
        significant part of the property of any other Person or a business conducted
        by
        any other Person or all or substantially all of the assets constituting the
        business of a division, branch, brand or other unit operation of any other
        Person, (c) to incur, or to remain liable under, any Guaranty Obligation
        for
        Indebtedness of any other Person, to assume the Indebtedness of any other
        Person
        or to make, hold, purchase or otherwise acquire, in each case directly or
        indirectly, any deposit, loan, advance, commitment to lend or advance, or
        other
        extension of credit (including by deferring or extending the date of, in
        each
        case outside the ordinary course of business, the payment of the purchase
        price
        for Transfers of property or services to any other Person, to the extent
        such
        payment obligation constitutes Indebtedness of such other Person), excluding
        deposits with financial institutions available for withdrawal on demand,
        prepaid
        expenses, accounts receivable and similar items created in the ordinary course
        of business, (d) to make, directly or indirectly, any contribution to the
        capital of any other Person or (e) to Transfer any property for less than
        fair
        market value (including a disposition of cash or Cash Equivalents in exchange
        for consideration of lesser value); provided,
        however,
        that
        such Investment shall be valued at the difference between the value of the
        consideration for such Transfer and the fair market value of the property
        Transferred.

       

      “IP
        Ancillary Rights”
means,
        with respect to any other Intellectual Property, as applicable, all foreign
        counterparts to, and all divisionals, reversions, continuations,
        continuations-in-part, reissues, reexaminations, renewals and extensions
        of,
        such Intellectual Property and all income, royalties, proceeds and Liabilities
        at any time due or payable or asserted under or with respect to any of the
        foregoing or otherwise with respect to such Intellectual Property, including
        all
        rights to sue or recover at law or in equity for any past, present or future
        infringement, misappropriation, dilution, violation or other impairment thereof,
        and, in each case, all rights to obtain any other IP Ancillary
        Right.

       

      “IP
        License”
means
        all Contractual Obligations (and all related IP Ancillary Rights), whether
        written or oral, granting any right title and interest in or relating to
        any
        Intellectual Property.

       

      “IRS”
means
        the Internal Revenue Service of the United States and any successor
        thereto.

       

      “Leases”
means
        all leases and subleases or similar document affecting the use, enjoyment
        or
        occupancy of the Real Property, including without limitation, resident care
        agreements and service agreements that include an occupancy agreement, whether
        now existing or hereafter arising.

       

      “Lender”
means
        any financial institution or other Person that (a) is listed on the
        signature pages hereof as a “Lender”
or
        (b)
        from time to time becomes a party hereto by execution of an Assignment, in
        each
        case together with its successors.

       


      
        
          
          

        

        
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      “Liabilities”
means
        all claims, actions, suits, judgments, actual damages (not consequential
        damages), actual losses, liability, obligations, responsibilities, fines,
        penalties, sanctions, costs, fees, taxes, commissions, charges, disbursements
        and expenses, in each case of any kind or nature (including interest accrued
        thereon or as a result thereto and fees, charges and disbursements of financial,
        legal and other advisors and consultants), whether joint or several, whether
        or
        not indirect, contingent, consequential, actual, punitive, treble or
        otherwise.

       

      “Licenses”
has
        the
        meaning specified in Section
        7.2.

       

      “Lien”
means
        any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
        arrangement, encumbrance, easement (or other Agreement granting rights or
        restricting the use of any Real Property or Facility), lien (statutory or
        other), security interest or other security arrangement and any other
        preference, priority or preferential arrangement of any kind or nature
        whatsoever, including any conditional sale contract or other title retention
        agreement, the interest of a lessor under a Capital Lease and any synthetic
        or
        other financing lease having substantially the same economic effect as any
        of
        the foregoing.

       

      “Limited
        Recourse Guaranty”
means
        that certain Limited Guaranty, dated as of December 1, 2006, between Emeritus
        and Administrative Agent, as it may be amended, restated or modified from
        time
        to time, pursuant to which the Loan is (i) fully recourse for losses
        attributable to (A) fraud or intentional misrepresentation by Borrowers under
        and in connection with the Loan Documents; (B) Borrowers’ misappropriation or
        intentional misapplication of rents received by Borrowers in violation of
        the
        Loan Documents; (C) Borrowers’ intentional misapplication or misappropriation of
        security deposits or rents collected in advance; (D) Borrowers’ misappropriation
        or intentional misapplication of insurance proceeds or condemnation awards
        in
        violation of the Loan Documents; (E) Borrowers’ failure to pay real estate taxes
        (except to the extent that sums sufficient to pay such amounts have been
        deposited in escrow with Lender pursuant to the terms of the Loan Documents),
        but only to the extent that the Facilities are generating income sufficient
        to
        permit Borrowers to pay the same when due; (F) any act of actual intentional
        physical waste by Borrowers; (G) the failure of Borrowers to keep each Facility
        insured in accordance with the terms of the Loan Documents; and (H) Borrowers’
failure to comply with the single purpose entity provisions contained in
        the
        Loan Documents; (ii) fully recourse for (x) any Borrower’s voluntary (or
        involuntary that is not duly contested by the Borrower) bankruptcy or assignment
        for the benefit of creditors, or similar event or proceedings; and (y)
        Borrowers’ failure to comply with the transfer provisions contained in the Loan
        Documents. 

       

      “Loan”
means
        any loan made or deemed made by any Lender hereunder.

       

      “Loan
        Documents”
means,
        collectively, this Agreement, any Notes, the Security Agreement, the Mortgages,
        the Control Agreements, the Fee Letter, the Secured Hedging Agreements, the
        Limited Recourse Guaranty, Environmental Indemnities and, when executed,
        each
        document executed by a Borrower and delivered to the Administrative Agent,
        any
        Lender in connection with or pursuant to any of the foregoing or the
        Obligations, together with any modification of any term, or any waiver with
        respect to, any of the foregoing.

       

      “Management
        Agreement”
means
        each property management agreement, dated on or before the date hereof, between
        the applicable SPE, as owner, and Emeritus or a replacement Qualified Manager
        (or an interim manager with respect to any Facility acquired pursuant to
        a


       


      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      


      sale/leaseback
        or similar temporary arrangement), as manager, in form and substance reasonably
        acceptable to the Administrative Agent, as it may be amended, supplemented,
        restated or otherwise modified from time to time with the prior consent of
        the
        Administrative Agent.

       

      “Management
        Fee”
means
        any and all fees, expenses and other monies due and payable (other than
        reimbursement of reasonable out-of-pocket third party expenses as contemplated
        by the applicable Management Agreement), from time to time, by any Borrower
        to
        the manager under the applicable Management Agreement, which shall not, in
        the
        aggregate, exceed 5% of the gross operating revenue of the Facilities per
        Fiscal
        Year. 

       

      “Material
        Adverse Effect”
means
        an effect that results in or causes, or could reasonably be expected to result
        in or cause, a material adverse change in any of (a) the condition (financial
        or
        otherwise), business, performance, prospects, operations or property of the
        Borrowers, taken as a whole, (b) the ability of any Borrower to perform its
        obligations in any material respect under any Loan Document and (c) the validity
        or enforceability of any Loan Document or the rights and remedies of the
        Administrative Agent, the Lenders and the other Secured Parties under any
        Loan
        Document.

       

      “Material
        Environmental Liabilities”
means
        Environmental Liabilities exceeding $100,000 in the aggregate.

       

      “Maturity
        Date”
means,
        subject to certain extension options set forth in Section
        2.2(b),
        the
        earlier to occur of (i) Scheduled Maturity Date, (ii) the date on which the
        Obligations otherwise become due as a result of acceleration of the Obligations
        as provided for under this Agreement or any other Loan Document, and (iii)
        the
        effective date of any earlier termination of this Agreement in accordance
        with
        its terms.

       

      “MLC”
means
        Merrill Lynch Capital, a Division of Merrill Lynch Business Financial
        Services Inc. 

       

      “Moody’s”
means
        Moody’s Investors Service, Inc.

       

      “Mortgage”
means
        any mortgage, deed of trust or other document executed or required herein
        to be
        executed by any Borrower and granting a security interest over real property
        in
        favor of the Administrative Agent as security for the Obligations.

       

      “Mortgage
        Supporting Documents”
means,
        with respect to any Mortgage for a parcel of real property, each document
        (including assignments of leases and rents, subordination agreements, title
        policies or marked-up unconditional insurance binders (in each case, together
        with copies of all documents referred to therein), maps, ALTA (or TLTA, if
        applicable), environmental assessments, As-Built Surveys, and evidence regarding
        recording and payment of fees, insurance premium and taxes) that the
        Administrative Agent may reasonably request, to create, register, perfect,
        maintain, evidence the existence, substance, form or validity of or enforce
        a
        valid lien on such parcel of real property in favor of the Administrative
        Agent
        for the benefit of the Secured Parties, subject only to such Liens as the
        Administrative Agent may approve, provided that any Mortgage Supporting
        Documents related to any Permitted Acquisition that are substantially similar
        in
        form and content to those delivered in connection with the initial funding
        of
        the Loan, modified to reflect the particulars of the applicable Facility,
        shall
        be deemed approved by Lender.

       


      
        
          
          

        

        
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      “Multiemployer
        Plan”
means
        any multiemployer plan, as defined in Section 400l(a)(3) of ERISA, to which
        any ERISA Affiliate incurs or otherwise has any obligation or
        liability.

       

      “Net
        Cash Proceeds”
means
        proceeds received in cash from any Transfer of, or Property Loss Event with
        respect to, any real or personal property, net of (a) actual third-party
        out-of-pocket costs, fees and expenses paid or required to be paid in connection
        therewith and (b) taxes paid or reasonably estimated to be payable as a result
        thereof .

       

      “Non-Funding
        Lender”
has
        the
        meaning specified in Section 2.1(a).

       

      “Non-U.S.
        Lender Party”
means
        each of the Administrative Agent, each Lender, each SPV and each participant,
        in
        each case that is not a Domestic Person.

       

      “Note”
means
        a
        promissory note of the Borrowers, in substantially the form of Exhibit E, payable
        to the order of a Lender in a principal amount equal to the amount of such
        Lender’s Commitment.

       

      “Notice
        of Borrowing”
has
        the
        meaning specified in Section 2.1(a).

       

      “Obligations”
means,
        with respect to any Borrower, all amounts, obligations, liabilities, covenants
        and duties of every type and description owing by such Borrower to the
        Administrative Agent, any Lender, any other Indemnitee, any participant,
        any SPV
        or, in the case of any Secured Hedging Agreement, any Affiliate of any of
        them
        arising out of, under, or in connection with, any Loan Document, whether
        direct
        or indirect (regardless of whether acquired by assignment), absolute or
        contingent, due or to become due, whether liquidated or not, now existing
        or
        hereafter arising and however acquired, and whether or not evidenced by any
        instrument or for the payment of money, including, without duplication, (a)
        if
        such Borrower is the Borrower, all Loans, (b) all interest, whether or not
        accruing after the filing of any petition in bankruptcy or after the
        commencement of any insolvency, reorganization or similar proceeding, and
        whether or not a claim for post-filing or post-petition interest is allowed
        in
        any such proceeding, and (c) all other fees, expenses (including fees, charges
        and disbursement of counsel), interest, commissions, charges, costs,
        disbursements, indemnities and reimbursement of amounts paid and other sums
        chargeable to such Borrower under any Loan Document.

       

      “Original
        Credit Agreement”
has
        the
        meaning specified in the preamble hereto.

       

      “Other
        Taxes”
has
        the
        meaning specified in Section 2.11(c).

       

      “Parent”
has
        the
        meaning specified in the preamble hereto. 

       

      “Patents”
means
        all rights, title and interests (and all related IP Ancillary Rights) arising
        under any Requirement of Law in or relating to letters patent and applications
        therefor.

       

      “PBGC”
means
        the United States Pension Benefit Guaranty Corporation and any successor
        thereto.

       

      “Permit”
means,
        with respect to any Person, any permit, approval, authorization, license,
        registration, certificate (including certificates of need and certificates
        of
        occupancy), concession, grant, franchise, variance or permission from, and
        any
        other Contractual Obligations with, any 

       


      
        
          
          

        

        
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      Governmental
        Authority, in each case whether or not having the force of law and applicable
        to
        or binding upon such Person or any of its property or to which such Person
        or
        any of its property is subject.

       

      “Permitted
        Acquisition”
means
        any acquisition of any Excluded Property; provided
        such
        acquisition satisfies each of the following conditions: (a) the aggregate
        amounts payable in connection with such acquisition (in each case, excluding
        all
        related transaction costs) shall not exceed the allocated purchase price
        as set
        forth on Schedule 8.7
        for the
        respective Excluded Property, (b) such acquisition shall occur on or before
        the
        earlier of (i) 30 days following the Westlake Facility Closing Date, as such
        term is defined in the Acquisition Agreement and (ii) the six (6) month
        anniversary of the Closing Date, (c) the Administrative Agent and MLC shall
        have
        received reasonable advance notice of such Permitted Acquisition including
        a
        reasonably detailed description thereof at least 5 Business Days prior to
        the
        consummation of such acquisition (or such later date as may be agreed by
        the
        Administrative Agent and MLC), (d) as of the date of consummation of any
        transaction as part of such acquisition and after giving effect to all
        transactions to occur on such date as part of such acquisition, all conditions
        set forth in Section 3.1(a)
        shall be
        satisfied in all material respects or duly waived and, after giving effect
        to
        such Permitted Acquisition, Parent shall be in compliance with the financial
        covenants set forth in Article V
        on a Pro
        Forma Basis as of the relevant period, and (e) there shall be no Event of
        Default then existing under this Agreement. Upon the closing of such Permitted
        Acquisition, Schedule
        4.16
        shall be
        deemed updated to include such Excluded Facility. 

       

      “Permitted
        Acquisition Closing Date”
has
        the
        meaning given such term in Section
        2.1(a).

       

      “Permitted
        Investors”
means,
        collectively Emeritus and Blackstone, or any direct or indirect Subsidiary
        thereof. 

       

      “Permitted
        Indebtedness”
means
        any Indebtedness of any Borrower that is not prohibited by Section 8.1
        or any
        other provision of any Loan Document.

       

      “Permitted
        Investment”
means
        any Investment of any Borrower that is not prohibited by Section 8.3
        or any
        other provision of any Loan Document.

       

      “Permitted
        Lien”
means
        any Lien on or with respect to the property of any Borrower that is not
        prohibited by Section 8.2
        or any
        other provision of any Loan Document.

       

      “Permitted
        Refinancing”
means
        Indebtedness constituting a refinancing or extension of Permitted Indebtedness
        that (a) has an aggregate outstanding principal amount not greater than the
        aggregate principal amount of such Permitted Indebtedness outstanding at
        the
        time of such refinancing or extension, (b) has a weighted average maturity
        (measured as of the date of such refinancing or extension) and maturity no
        shorter than that of such Permitted Indebtedness, (c) is not secured by any
        property or any Lien other than those securing such Permitted Indebtedness
        and
        (d) is otherwise on terms no less favorable to the Borrowers, taken as a
        whole,
        than those of such Permitted Indebtedness; provided,
        however,
        that,
        notwithstanding the foregoing, (x) the terms of such Permitted Indebtedness
        may
        be modified as part of such Permitted Refinancing if such modification would
        have been permitted pursuant to Section 8.11
        and (y)
        no Guaranty Obligation for such Indebtedness shall constitute part of such
        Permitted Refinancing unless similar Guaranty Obligations with respect to
        such
        Permitted Indebtedness existed and constituted Permitted Indebtedness prior
        to
        such refinancing or extension.

       


      
        
          
          

        

        
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      “Permitted
        Reinvestment”
means,
        with respect to the Net Cash Proceeds of any Transfer or Property Loss Event,
        to
        acquire (or make Capital Expenditures to finance the acquisition, repair,
        improvement or construction of), to the extent otherwise permitted hereunder,
        property useful in the business of any Borrower (including through a Permitted
        Acquisition) or, if such Property Loss Event involves loss or damage to
        property, to repair such loss or damage.

       

      “Person”
means
        any individual, partnership, corporation (including a business trust and
        a
        public benefit corporation), joint stock company, estate, association, firm,
        enterprise, trust, limited liability company, unincorporated association,
        joint
        venture and any other entity or Governmental Authority.

       

      “Pro
        Forma Basis”
means,
        with respect to any determination for any period and any Pro Forma Transaction,
        that such determination shall be made by giving pro
        forma
        effect
        to each such Pro Forma Transaction, as if each such Pro Forma Transaction
        had
        been consummated on the first day of such period, based on historical results
        accounted for in accordance with GAAP and, to the extent applicable, reasonable
        assumptions that are specified in detail in the relevant Compliance Certificate,
        Financial Statement or other document provided to the Administrative Agent
        or
        any Lender in connection herewith in accordance with Regulation S-X of the
        Securities Act of 1933.

       

      “Pro
        Forma Transaction”
means
        any transaction consummated as part of the Acquisition or any Permitted
        Acquisition, together with each other transaction relating thereto and
        consummated in connection therewith, including any incurrence or repayment
        of
        Indebtedness.

       

      “Projections”
means,
        collectively, the Initial Projections and any document delivered pursuant
        to
Section 6.1(f).

       

      “Property
        Loss Event”
means,
        with respect to any property, any loss of or damage to such property or any
        taking of such property or condemnation thereof.

       

      “Pro
        Rata Outstandings”,
        of any
        Lender at any time, means the outstanding principal amount of the Term Loans
        owing to such Lender.

       

      “Pro
        Rata Share”
means,
        with respect to any Lender at any time, the percentage obtained by dividing
        (a)
        the sum of the Commitments (or, if such Commitments are terminated, the Pro
        Rata
        Outstandings therein) of such Lender then in effect by (b) the sum of the
        Commitments (or, if such Commitments are terminated, the Pro Rata Outstandings
        therein) of all Lenders then in effect; provided,
        however,
        that,
        if there are no Commitments and no Pro Rata Outstandings, such Lender’s Pro Rata
        Share shall be determined based on the Pro Rata Share most recently in effect,
        after giving effect to any subsequent assignment and any subsequent non-pro
        rata
        payments of any Lender pursuant to Section 2.12.

       

      “Qualified
        Manager”
means
        a
        reputable and experienced professional management organization that (a) manages,
        together with its affiliates, at least ten (10) senior housing facilities
        and
        with no less than an aggregate of 1500 units in such senior housing facilities
        of similar quality to the applicable Facility in the State in which the
        applicable Facility is located and (b) is approved by the Lenders in accordance
        with their reasonable standards with respect to (i) previous relationships
        between such Lender and the proposed manager and its principals, (ii) the
        reputation for integrity, honesty and veracity of the proposed manager and
        its
        principals, owners, officers and directors, and (ii) OFAC, money-laundering,
        anti-terrorism, SEC, healthcare laws 

       


      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      


      and
        regulations, and other similar regulations and activities, which approval
        shall
        not be unreasonably withheld, conditioned or delayed (provided that the
        Borrowers provide timely information reasonably requested by Lenders with
        respect to such proposed manager), it being understood that Emeritus shall
        be
        deemed to be a Qualified Manager.

       

      “Real
        Property”
means
        any “property” (including improvements thereon) subject to, and described in, a
        Mortgage from any Borrower in favor of the Administrative Agent.

       

      “Register”
has
        the
        meaning specified in Section 2.8(b).

       

      “Reinvestment
        Prepayment Amount”
means,
        with respect to any Net Cash Proceeds on the Reinvestment Prepayment Date
        therefor, the amount of such Net Cash Proceeds less
        any
        amount paid or required to be paid by any Borrower to make Permitted
        Reinvestments with such Net Cash Proceeds pursuant to a Contractual Obligation
        entered into prior to such Reinvestment Prepayment Date with any Person that
        is
        not an Affiliate of any Borrower.

       

      “Reinvestment
        Prepayment Date”
means,
        with respect to any portion of any Net Cash Proceeds of any Transfer or Property
        Loss Event, the earliest of (a) the 180th
        day
        after the completion of the portion of such Transfer or Property Loss Event
        corresponding to such Net Cash Proceeds, (b) the date that is 5 Business
        Days
        after the date on which any Borrower shall have notified the Administrative
        Agent of such Borrower’s determination not to make Permitted Reinvestments with
        such Net Cash Proceeds, (c) the occurrence of any Event of Default set forth
        in
Section 9.1(e)(ii)
        and (d)
        5 Business Days after the delivery of a notice by the Administrative Agent
        to
        the Parent during the continuance of any other Event of Default.

       

      “Related
        Documents”
means,
        collectively, the Acquisition Agreement, each document executed in connection
        with the Required Investors’ Equity Investment and each other document executed
        with respect to the foregoing.

       

      “Related
        Person”
means,
        with respect to any Person, each Affiliate of such Person and each director,
        officer, employee, agent, trustee, representative, attorney, accountant and
        each
        insurance, environmental, legal, financial and other advisor (including those
        retained in connection with the satisfaction or attempted satisfaction of
        any
        condition set forth in Article III)
        and
        other consultants and agents of or to such Person or any of its Affiliates,
        together with, if such Person is the Administrative Agent, each other Person
        or
        individual designated, nominated or otherwise mandated by or helping the
        Administrative Agent pursuant to and in accordance with Section 10.4
        or any
        comparable provision of any Loan Document.

       

      “Related
        Transactions”
means,
        collectively, the consummation of the Acquisition, the consummation of the
        Required Investors’ Equity Investment, the execution and delivery of all Related
        Documents and the payment of all related fees, costs and expenses.

       

      “Release”
means
        any release, threatened release, spill, emission, leaking, pumping, pouring,
        emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal,
        dumping, leaching or migration of Hazardous Material into or through the
        environment.

       

      “Remedial
        Action”
means
        all actions required to (a) clean up, remove, treat or in any other way address
        any Hazardous Material in the indoor or outdoor environment, (b) prevent
        or
        minimize any Release so that a Hazardous Material does not migrate or endanger
        or threaten to 

       


      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      


      endanger
        public health or welfare or the indoor or outdoor environment or (c) perform
        pre-remedial studies and investigations and post-remedial monitoring and
        care
        with respect to any Hazardous Material.

       

      “Required
        Investors’ Equity Investment”
means
        the cash equity contribution from the Permitted Investors and certain
        co-investors disclosed to the Administrative Agent and the Lenders to the
        Borrowers in Dollars in an aggregate amount equal to $35,320,000.

       

      “Required
        Lenders”
means,
        at any time, Lenders having at such time in excess of 66 2/3% of the
        aggregate Term Loan Commitments (or, if such Commitments are terminated,
        the Pro
        Rata Outstandings) then in effect, ignoring, in such calculation, the
        Commitments and Pro Rata Outstandings of any Non-Funding Lender.

       

      “Requirements
        of Law”
means,
        with respect to any Person, collectively, the common law and all federal,
        state,
        local, foreign, multinational or international laws, statutes, codes, treaties,
        standards, rules and regulations, guidelines, ordinances, orders, judgments,
        writs, injunctions, decrees (including administrative or judicial precedents
        or
        authorities) and the interpretation or administration thereof by, and other
        determinations, directives, requirements or requests of, any Governmental
        Authority published or otherwise publicly-announced or of which Borrowers
        have
        received notice or have actual knowledge, in each case whether or not having
        the
        force of law and that are applicable to or binding upon such Person or any
        of
        its property or to which such Person or any of its property is
        subject.

       

      “Responsible
        Officer”
means,
        with respect to any Person, any of the president, chief executive officer,
        treasurer, assistant treasurer, controller, managing member or general partner
        of such Person, or its member or general partner, or its member’s or general
        partner’s member or general partner, as the case may be, but, in any event, with
        respect to financial matters, any such natural person that is responsible
        for
        preparing and approving the Financial Statements delivered hereunder and,
        with
        respect to the Corporate Chart and other documents delivered pursuant to
        Section 6.1(e),
        documents delivered on the Closing Date and documents delivered pursuant
        to
Section 7.10,
        the
        secretary or assistant secretary of such Person or any other such natural
        person
        responsible for maintaining the corporate and similar records of such
        Person.

       

      “Restatement
        Closing Date”
means
        December 11, 2006.

       

      “Restricted
        Payment”
means
        (a) any dividend, return of capital, distribution or any other payment or
        Transfer of property for less than fair market value, whether direct or indirect
        (including through the use of Hedging Agreements, the making, repayment,
        cancellation or forgiveness of Indebtedness and similar Contractual Obligations)
        and whether in cash, securities or other property, on account of any Equity
        Interest or Equity Equivalent of any Borrower, in each case now or hereafter
        outstanding, including with respect to a claim for rescission of a Transfer
        of
        such Equity Interest or Equity Equivalent and (b) any redemption, retirement,
        termination, defeasance, cancellation, purchase or other acquisition for
        value,
        whether direct or indirect (including through the use of Hedging Agreements,
        the
        making, repayment, cancellation or forgiveness of Indebtedness and similar
        Contractual Obligations), of any Equity Interest or Equity Equivalent of
        any
        Borrower, now or hereafter outstanding, and any payment or other transfer
        setting aside funds for any such redemption, retirement, termination,
        cancellation, purchase or other acquisition, whether directly or indirectly
        and
        whether to a sinking fund, a similar fund or otherwise.

       


      
        
          
          

        

        
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      “S&P”
means
        Standard & Poor’s Rating Services.

       

      “Scheduled
        Maturity Date”
means
        the 5th
        anniversary of the Closing Date.

       

      “Second
        Extension Notice”
has
        the
        meaning specified in Section
        2.2(b).

       

      “Second
        Extension Period”
has
        the
        meaning specified in Section
        2.2(b).

       

      “Secured
        Hedging Agreements”
means
        any Hedging Agreement that is entered into by any Borrower and any Person
        that,
        at the time such Person entered into such Hedging Agreement, was the
        Administrative Agent, a Lender or an Affiliate of a Lender.

       

      “Secured
        Parties”
means
        the Lenders, the Administrative Agent, each other Indemnitee and any other
        holder of any Obligation of any Borrower.

       

      “Security”
means
        all Equity Interests, Equity Equivalents, voting trust certificates, bonds,
        debentures, instruments and other evidence of Indebtedness, whether or not
        secured, convertible or subordinated, all certificates of interest, share
        or
        participation in, all certificates for the acquisition of, and all warrants,
        options and other rights to acquire, any Security.

       

      “Security
        Agreement”
means
        that certain Pledge and Security Agreement, dated as of December 1, 2006,
        among
        the Administrative Agent and each Borrower from time to time party thereto
        as it
        may be amended, restated or otherwise modified from time to time. 

       

      “Seller”
means,
        collectively, PITA General Corporation, a Illinois corporation, AHC Tenants,
        Inc, a Delaware corporation, and their Affiliates.

       

      “Single
        Purpose Entity”
        shall
        mean a Person, other than an individual, which (i) is formed or organized
        solely for the purpose of owning, holding, developing, using, operating and
        financing, directly a Facility, or, in the case of Parent, indirectly, an
        ownership interest in a Facility, (ii) does not engage in any business
        unrelated to such Facility or with respect to the Parent, indirectly, all
        of the
        Facilities and the ownership, development, use, operation and financing thereof,
        (iii) has not and will not have any assets other than those related to its
        interest in such Facility or with respect to the Parent, indirectly, all
        of the
        Facilities or the operation, management and financing thereof or any
        Indebtedness other than the Permitted Indebtedness, (iv) except if
        Consolidated with other Borrowers, maintains its own separate books and records
        and its own accounts, in each case, which are separate and apart from the
        books
        and records and accounts of any other Person, (v) holds itself out as being
        a Person, separate and apart from any other Person, (vi) does not and will
        not commingle its funds or assets with those of any other Person,
        (vii) conducts its own business in its own name, (viii) except if
        Consolidated with other Borrowers, maintains separate financial statements,
        (ix) pays its own liabilities out of its own funds, (x) observes all
        limited liability company formalities, (xi) pays the salaries of its own
        employees, if any, and maintains a sufficient number of employees, if any,
        in
        light of its contemplated business operations, (xii) except
        as
        expressly permitted under the Loan Documents, or to the other Borrowers with
        respect to the Loan, does not guarantee or otherwise obligate itself with
        respect to the debts of any other Person (other than by endorsements of
        negotiable instruments for deposit or collection in the ordinary course of
        business) or hold out its credit as being available to satisfy the obligations
        of any other Person, (xiii) does not acquire obligations or securities of
        its partners, members or shareholders, (xiv) allocates fairly and
        reasonably shared 

       


      
        
          
          

        

        
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      expenses,
        including, without limitation, any overhead for shared office space, if any,
        (xv) uses separate stationery, invoices, and checks, (xvi) maintains
        an arm’s length relationship with its Affiliates, (xvii) other than
        pursuant to the Loan Documents does not and will not pledge its assets for
        the
        benefit of any other Person or make any loans or advances to any other Person,
        (xviii) does and will continue to use commercially reasonable efforts to
        correct any known misunderstanding regarding its separate identity,
        (xix) maintains adequate capital in light of its contemplated business
        operations; provided,
        however,
        this
        provision shall not require any member of any Borrower, or any other party,
        to
        make any capital contributions to any Borrower, and (xx) has not and will
        not engage in, seek, or consent to the dissolution, winding up, liquidation,
        consolidation or merger and except as otherwise permitted in this Agreement,
        has
        not and will not engage in, seek or consent to any asset sale, transfer or
        partnership, membership or shareholder interests, or amendments of its
        Constituent Documents. In addition, if such Person is a partnership,
        (1) all general partners of such Person shall be Single Purpose Entities
        (owning nothing other than its general partnership interests); and (2) if
        such Person has more than one general partner, then the Constituent Documents
        shall provide that such Person shall continue (and not dissolve) for so long
        as
        a solvent general partner exists. In addition, if such Person is a corporation,
        then, at all times: (a) such Person shall have at least one (1) Independent
        Director and (b) the board of directors of such Person may not take any
        action requiring the unanimous affirmative vote of 100% of the members of
        the
        board of directors unless all of the directors, including the Independent
        Directors, shall have participated in such vote. In addition, if such Person
        is
        a limited liability company, (A) such Person shall have at least one (1)
        Independent Manager or Independent Member, (B) if such Person is managed by
        a board of managers, the board of managers of such Person may not take any
        action requiring the unanimous affirmative vote of 100% of the members of
        the
        board of managers unless all of the managers, including the Independent
        Managers, shall have participated in such vote, (C) if such Person is not
        managed by a board of managers, the members of such Person may not take any
        action requiring the affirmative vote of 100% of the members of such Person
        unless all of the members, including the Independent Members, shall have
        participated in such vote, (D) except in the case of the Parent, each managing
        member shall be a Single Purpose Entity and, in the case of the Parent, shall
        own nothing other than the Equity Interests in the SPEs, and (E) its
        Constituent Documents shall provide that until all of the Indebtedness and
        Obligations are paid in full such entity will not dissolve. In addition,
        the
        Constituent Documents of such Person shall provide that such Person without
        the
        unanimous consent of all of the partners, managers, directors or members,
        as
        applicable, shall not with respect to itself or to any other Person in which
        it
        has a direct or indirect legal or beneficial interest (A) seek or consent
        to the appointment of a receiver, liquidator, assignee, trustee, sequestrator,
        custodian or other similar official for the benefit of the creditors of such
        Person or all or any portion of such Person’s properties, (B) take any
        action that could reasonably be expected to cause such Person to become
        insolvent, petition or otherwise institute insolvency proceedings or otherwise
        seek any relief under any laws relating to the relief from debts or the
        protection of debtors generally, “or” (C) take any action that would cause such
        Person not to satisfy the requirements set forth herein for a Single Purpose
        Entity.

       

      “Solvent”
means,
        with respect to any Person as of any date of determination, that, as of such
        date, (a) the value of the assets of such Person (both at fair value and
        present
        fair saleable value) is greater than the total amount of liabilities (including
        contingent and unliquidated liabilities) of such Person, (b) such Person
        is able
        to pay its aggregate liabilities of such Person, as such liabilities mature
        and
        (c) such Person does not have unreasonably small capital in light of its
        intended operations. In computing the amount of contingent or unliquidated
        liabilities at any time, such liabilities shall be computed at the amount
        that,
        in light of all the facts and 

       


      
        
          
          

        

        
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      circumstances
        existing at such time, represents the amount that can reasonably be expected
        to
        become an actual or matured liability.

       

      “SPE”
has
        the
        meaning specified in the preamble hereto.

       

      “SPV”
means
        any special purpose funding vehicle identified as such in a writing by any
        Lender to the Administrative Agent.

       

      “Subordinated
        Debt”
means
        any Indebtedness that is subordinated to the payment in full of the Obligations
        on terms and conditions satisfactory to the Administrative Agent.

       

      “Subsidiary”
means,
        with respect to any Person, any corporation, partnership, joint venture,
        limited
        liability company, association or other entity, the management of which is,
        directly or indirectly, controlled by, or of which an aggregate of more than
        50%
        of the outstanding Voting Interest is, at the time, owned or controlled directly
        or indirectly by, such Person or one or more Subsidiaries of such
        Person.

       

      “Substitute
        Lender”
has
        the
        meaning specified in Section 2.12(a).

       

      “SWDA”
means
        the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.).

       

      “Tax
        Affiliate”
means,
        (a) any Borrower and (b) any Affiliate of any Borrower with which any Borrower
        files or is eligible to file consolidated, combined or unitary tax
        returns.

       

      “Tax
        Return”
has
        the
        meaning specified in Section 4.8.

       

      “Taxes”
has
        the
        meaning specified in Section 2.11(a).

       

      “Term
        Loan”
has
        the
        meaning specified in Section 2.1(a).

       

      “Terrorism”
has
        the
        meaning specified in Section
        7.5(b).

       

      “Third-Party
        Payor Program”
has
        the
        meaning specified in Section 4.1(b).

       

      “Title
        IV Plan”
means
        a
        pension plan subject to Title IV of ERISA, other than a Multiemployer Plan,
        to
        which any ERISA Affiliate incurs or otherwise has any obligation or
        liability.

       

      “Trademarks”
means
        all rights, title and interests (and all related IP Ancillary Rights) arising
        under any Requirement of Law in or relating to trademarks, trade names,
        corporate names, company names, business names, fictitious business names,
        trade
        styles, service marks, logos and other source or business identifiers and,
        in
        each case, all goodwill associated therewith, all registrations and recordations
        thereof and all applications in connection therewith.

       

      “Trade
        Secrets”
means
        all right, title and interest (and all related IP Ancillary Rights) arising
        under any Requirement of Law in or relating to trade secrets.

       

      “Transfer”
means,
        with respect to any property, to sell, convey, transfer, assign, license,
        lease
        or otherwise dispose of, any interest therein or to permit any Person to
        acquire
        any such interest, including, in each case, through a sale, factoring at
        maturity, collection of or other 

       


      
        
          
          

        

        
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      disposal,
        with or without recourse, of any notes or accounts receivable. Conjugated
        forms
        thereof and the noun “Transfer”
have
        correlative meanings.

       

      “UCC”
means
        the Uniform Commercial Code of any applicable jurisdiction and, if the
        applicable jurisdiction shall not have any Uniform Commercial Code, the Uniform
        Commercial Code as in effect in the State of New York.

       

      “United
        States”
means
        the United States of America.

       

      “U.S.
        Lender Party”
means
        each of the Administrative Agent, each Lender, each SPV and each participant,
        in
        each case that is a Domestic Person.

       

      “Voting
        Interest”
means
        Equity Interests of any Person having ordinary power to vote in the election
        of
        members of the board of directors, managers, trustees or other controlling
        Persons, of such Person (irrespective of whether, at the time, Equity Interests
        of any other class or classes of such entity shall have or might have voting
        power by reason of the occurrence of any contingency).

       

      “Westlake”
means
        that certain healthcare facility known as The Gardens at Westlake and formerly
        known as Cypress Gardens at Westlake and located at 27569 Detroit Road,
        Westlake, Ohio.

       

      “Whittier
        Residence”
means
        that certain single family home located at the Facility known as The Gardens
        at
        Whittier and formerly known as Cypress Gardens at Whittier located in Whittier
        California.

       

      “Withdrawal
        Liability”
means,
        at any time, any liability incurred (whether or not assessed) by any ERISA
        Affiliate and not yet satisfied or paid in full at such time with respect
        to any
        Multiemployer Plan pursuant to Section 4201 of ERISA.

       

      “Working
        Capital”
means,
        for any Person at any date, its Consolidated Current Assets at such date
        minus
        its
        Consolidated Current Liabilities at such date.

       

       

      Section
        1.2  UCC
        Terms.
        The
        following terms have the meanings given to them in the applicable UCC:
“commodity account”, “commodity contract”, “commodity intermediary”, “deposit
        account”, “entitlement holder”, “entitlement order”, “equipment”, “financial
        asset”, “general intangible”, “goods”, “instruments”, “inventory”, “securities
        account”, “securities intermediary” and “security entitlement”.

       

       

      Section
        1.3  Accounting
        Terms and Principles.
        (a)
        GAAP. All accounting determinations required to be made pursuant hereto shall,
        unless expressly otherwise provided herein, be made in accordance with
        GAAP.
        No
        change in the accounting principles used in the preparation of any Financial
        Statement hereafter adopted by Parent shall be given effect if such change
        would
        affect a calculation that measures compliance with any provision of
        Article V or VIII unless the Borrowers, the Administrative Agent and the
        Required Lenders agree to modify such provisions to reflect such changes
        in GAAP
        and, unless such provisions are modified, all Financial Statements, Compliance
        Certificates and similar documents provided hereunder shall be provided together
        with a reconciliation between the calculations and amounts set forth therein
        before and after giving effect to such change in GAAP. 

       

       

      
        
           

        

        
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      Section
        1.4  Payments.
        The
        Administrative Agent may set up standards and procedures to determine or
        redetermine the equivalent in Dollars of any amount expressed in any currency
        other than Dollars and otherwise may, but shall not be obligated to, rely
        on any
        determination made by any Borrower. Any such determination or redetermination
        by
        the Administrative Agent shall be conclusive and binding for all purposes,
        absent manifest error. No determination or redetermination by any Secured
        Party
        or Borrower and no other currency conversion shall change or release any
        obligation of any Borrower or of any Secured Party (other than the
        Administrative Agent and its Related Persons) under any Loan Document, each
        of
        which agrees to pay separately for any shortfall remaining after any conversion
        and payment of the amount as converted. The Administrative Agent may round
        up or
        down to the nearest 1,000th,
        and may
        set up appropriate mechanisms to round up or down to the nearest
        1,000th.

       

       

      Section
        1.5  Interpretation.
        (a)
        Certain Terms. Except as set forth in any Loan Document, all accounting terms
        not specifically defined herein shall be construed in accordance with GAAP
        (except for the term “property”, which shall be interpreted as broadly as
        possible, including, in any case, cash, securities, other assets, rights
        under
        Contractual Obligations and Permits and any right or interest in any property).
        The terms “herein”, “hereof” and similar terms refer to this Agreement as a
        whole. In the computation of periods of time from a specified date to a later
        specified date in any Loan Document, the terms “from” means “from and including”
and the words “to” and “until” each mean “to but excluding” and the word
“through” means “to and including.” In any other case, the term “including” when
        used in any Loan Document means “including without limitation.” The term
“documents” means all writings, however evidenced and whether in physical or
        electronic form, including all documents, instruments, agreements, notices,
        demands, certificates, forms, financial statements, opinions and reports.
        The
        term “incur” means incur, create, make, issue, assume or otherwise become
        directly or indirectly liable in respect of or responsible for, in each case
        whether directly or indirectly, and the terms “incurrence” and “incurred” and
        similar derivatives shall have correlative meanings.
        The word
“will” shall be construed to have the same meaning and effect as the word
“shall”. The definitions in this Agreement shall apply equally to singular and
        plural forms of the defined terms and, whenever the context may require,
        any
        pronoun shall include the corresponding masculine feminine and neuter
        forms.

       

      (b) Certain
        References.
        Unless
        otherwise expressly indicated, references (i) in this Agreement to an
        Exhibit, Schedule, Article, Section or clause refer to the appropriate Exhibit
        or Schedule to, or Article, Section or clause in, this Agreement and (ii)
        in any
        Loan Document, to (A) any agreement shall include, without limitation, all
        exhibits, schedules, appendixes and annexes to such agreement and, unless
        the
        prior consent of any Secured Party required therefor is not obtained, any
        modification to any term of such agreement, (B) any statute shall be to such
        statute as modified from time to time and to any successor legislation thereto,
        in each case as in effect at the time any such reference is operative and
        (C) any time of day shall be a reference to New York time. Titles of
        articles, sections, clauses, exhibits, schedules and annexes contained in
        any
        Loan Document are without substantive meaning or content of any kind whatsoever
        and are not a part of the agreement between the parties hereto. Unless otherwise
        expressly indicated, the meaning of any term defined (including by reference)
        in
        any Loan Document shall be equally applicable to both the singular and plural
        forms of such term.

       

       

      
        
           

        

        
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      ARTICLE
        II  

       

       

      


       

       

      THE
        FACILITIES

       

       

      Section
        2.1  Term
        Loan Commitment, Borrowing Procedures and Escrow Requirement.
        (a)
        Term Loan Commitment and Borrowing Procedures. (i) On the terms and subject
        to the conditions contained in this Agreement, each Lender severally, but
        not
        jointly, agrees to make loans (each a “Term Loan”) in Dollars to the Borrowers
        in a maximum amount not to exceed such Lender’s Term Loan Commitment, and the
        aggregate of all Commitments in a maximum aggregate amount not to exceed
        $167,000,000. An initial advance was made by Administrative Agent on the
        Closing
        Date in an amount equal to $139,940,000. Upon any Permitted Acquisition,
        subject
        to the Interest Holdback and the Capital Improvement Holdback, advances shall
        be
        made in an amount not to exceed the amount set forth on Schedule 8.7 for
        each
        respective healthcare facility being acquired.
        Advances related to the Interest Holdback and the Capital Improvement Holdback
        shall be made pursuant to Section 2.1(b)(i). Amounts of Term Loans repaid
        may
        not be reborrowed.
        Amounts
        over-advance shall be immediately repaid by Borrowers. 

       

      (ii)  Borrowing
        Procedures.
        Each
        advance under the Term Loan shall be made on notice given by the Borrowers
        to
        the Administrative Agent not later than 11:00 a.m. on the third Business
        Day prior to the date of the proposed advance. Each such notice may be made
        in a
        writing substantially in the form of Exhibit F
        (a
“Notice
        of Borrowing”)
        duly
        completed or by telephone if confirmed promptly. Loans shall be made as
        Eurodollar Rate Loans. 

       

      The
        Administrative Agent shall give to each Lender prompt notice of the
        Administrative Agent’s receipt of a Notice of Borrowing and including the
        applicable interest rate not later than 11:00 a.m. on the second Business
        Day prior to the proposed advance. Each Lender shall, before 11:00 a.m. on
        the date of the proposed Borrowing, make available to the Administrative
        Agent
        at its address referred to in Section 11.11,
        such
        Lender’s Pro Rata Share of such proposed Borrowing. Upon fulfillment or due
        waiver (i) on the Closing Date, or (ii) on the date of the closing of any
        Permitted Acquisition (a “Permitted
        Acquisition Closing Date”),
        of
        the applicable conditions set forth in Section 3.1,
        the
        Administrative Agent shall make such funds available to the
        Borrower.

       

      Non-Funding
        Lenders.
        Unless
        the Administrative Agent shall have received notice from any Lender prior
        to the
        date such Lender is required to make any payment hereunder with respect to
        any
        Loan that such Lender will not make such payment (or any portion thereof)
        available to the Administrative Agent, the Administrative Agent may assume
        that
        such Lender has made such payment available to the Administrative Agent on
        the
        date such payment is required to be made in accordance with this Article II
        and the
        Administrative Agent may, in reliance upon such assumption, make available
        to
        the Borrower on such date a corresponding amount. Any Lender that shall not
        have
        made available to the Administrative Agent any portion of any payment described
        above (any such Lender, a “Non-Funding
        Lender”)
        agrees
        to pay such amount to the Administrative Agent on demand together with interest
        thereon (such amount plus such interest, the “Non-Funded
        Amount”),
        for
        each day from the date such amount is made available to the Borrower until
        the
        date such amount is repaid to the Administrative Agent (either by such
        Non-Funding Lender or by a Substitute Lender under Section
        2.12),
        at the
        Federal Funds 

       


      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      


      Rate
        for
        the first Business Day and thereafter at the interest rate applicable at
        the
        time to such Term Loan. Such repayment shall then constitute the funding
        of the
        corresponding Term Loan (including any Loan deemed to have been made hereunder
        with such payment) or participation. In the event a Non-Funding Lender fails
        to
        pay the Non-Funded Amount, the Administrative Agent shall have the right,
        but
        not the obligation, to become a Substitute Lender pursuant to Section
        2.12
        and
        increase its Commitment by the Non-Funded Amount, in which case such Non-Funded
        Amount shall constitute a funding by Administrative Agent of the corresponding
        Term Loan. If Administrative Agent chooses not to become a Substitute Lender
        for
        the Non-Funded Amount, it shall notify Borrowers of such Lender’s failure to
        make payment hereunder. Borrower agrees to repay to the Administrative Agent
        the
        Non-Funded Amount together with interest thereon for each day from the date
        such
        amount is made available to the Borrower until the date such amount is repaid
        to
        the Administrative Agent, at the interest rate applicable to the Obligation
        that
        would have been created when the Administrative Agent made available such
        amount
        to the Borrower had such Lender made a corresponding payment available;
provided,
        however,
        that
        such payment shall not relieve such Lender of any obligation it may have
        to the
        Borrower. Such
        repayment by Borrower shall be made not later than 30 days following the
        receipt
        of such notice. The existence of any Non-Funding Lender shall not relieve
        any
        other Lender of its obligations under any Loan Document, but no other Lender
        shall be responsible for the failure of any Non-Funding Lender to make any
        payment required under any Loan Document.

       

      (b) Holdbacks,
        Reserves and Escrows.
        

       

      (i)  Holdbacks.
        (A) A
        portion of the proceeds of the Term Loan in an amount equal to Three Million
        Two
        Hundred Thousand Dollars and No/100 Dollars ($3,200,000) (the “Interest
        Holdback”)
        shall
        be retained by the Administrative Agent as a holdback, which amount shall
        be
        advanced by Administrative Agent to pay any shortfall in the interest due
        hereunder that cannot be paid out of Consolidated EBITDA; provided,
        however,
        at such
        time as the Consolidated Interest Coverage Ratio on any date of documentation
        shall be greater than or equal 1.10 to 1.00 for each of the immediately
        preceding twelve (12) months, the Interest Holdback shall no longer be required
        and, provided no Event of Default has occurred and is continuing, the balance
        of
        the Interest Holdback shall be refunded to Borrowers. Absent the existence
        of
        any Event of Default hereunder or under any of the other Loan Documents,
        to the
        extent any such shortfall exists, Administrative Agent shall make disbursements
        on the applicable due date for the payment of interest due on the Loan, in
        accordance with Sections
        2.2(b).
        Such
        disbursements under the Interest Holdback shall not exceed, in the aggregate,
        the amount of the Interest Holdback set forth above and shall be deemed to
        be a
        Term Loan made hereunder. Nothing in this Section
        2.1(b)(i)(A)
        shall be
        deemed to relieve Borrowers of their obligation to timely pay all principal
        and
        interest which comes due.

       

      (B)
        A
        portion of the proceeds of the Term Loan in an amount equal to Five Million
        One
        Hundred Thirty Thousand Dollars and No/100 Dollars ($5,130,000) (the
“Capital
        Improvement Holdback”)
        shall
        be retained by the Administrative Agent, which amount shall be advanced by
        Administrative Agent to pay costs and expenses related to the repairs,
        improvements, and replacements identified on Schedule
        2.1.
        Absent
        the existence of any Event of Default hereunder or under any of the other
        Loan
        Documents, upon evidence of the completion of, and verification of the cost
        associated with, such repair, improvement or replacement (whether authorized
        for


       


      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      


      payment
        or actually paid by Borrowers), Administrative Agent shall make disbursements
        under the Term Loan in an amount not to exceed 82.5% of such cost to reimburse
        Borrowers for such repair, improvement or replacement. To the extent any
        payment
        is authorized for payment or actually paid by Borrowers prior to completion
        of
        any repair, improvement or replacement, upon submittal of invoices associated
        with such partial payments and absent the existence of any Event of Default
        hereunder, Administrative Agent shall reimburse Borrowers no more frequently
        than on time per month, in an amount not to exceed 82.5% (less customary
        holdbacks to ensure completion) of such partial cost to reimburse Borrowers
        for
        such repair, improvement or replacement. Disbursements under the Capital
        Improvement Holdback shall not exceed, in the aggregate, the amount of the
        Capital Improvement Holdback set forth above and shall be deemed to be a
        Term
        Loan made hereunder. To the extent funds are advanced for invoices not already
        paid by Borrowers, (i) Borrowers shall provide Administrative Agent with
        evidence that each such invoice was paid in full and (ii) until such time
        as the
        paid invoices are received by Administrative Agent, Administrative Agent
        shall
        only, upon Borrowers’ request, reimburse Borrowers for invoices actually paid.
        Borrowers shall be obligated to make the repairs, improvements and replacements
        identified on Schedule
        2.1
        on the
        respective dates set forth therein. Upon completion of all items on Schedule
        2.1,
        the
        balance of the Capital Improvement Holdback shall be refunded to
        Borrowers.

       

      (ii)  Replacement
        Reserve.
        At or
        before the initial advance under the Term Loan, the Borrowers shall deposit
        with
        the Administrative Agent a sum of money in an amount equal to TWENTY FIVE
        DOLLARS ($25) per bed (the “Monthly
        Replacement Reserve Deposit”),
        and
        shall thereafter make a deposit equal to the Monthly Replacement Reserve
        Deposit
        each month, contemporaneously with its payment of interest due hereunder,
        provided,
        however,
        at such
        time as the amount in such replacement reserve is equal to or greater than
        12
        times the Monthly Replacement Reserve Deposit (the “Maximum
        Reserve Amount”),
        the
        Borrowers shall not be obligated to make any further Monthly Replacement
        Reserve
        Deposits until such time as the amount in such reserve is less than the Maximum
        Reserve Amount. Administrative Agent shall release funds from this reserve
        to
        reimburse the Borrowers, or pay directly if a request is made for an amount
        in
        excess of $20,000, for capital expenditures for, and replacement of furniture,
        fixtures and equipment used in connection with, the Facilities, promptly
        following the Borrowers’ request therefore, which request shall be accompanied
        by invoices or other reasonable evidence of the payment or obligations for
        which
        a release is being requested.

       

      (iii)  Tax
        Escrow.
        The
        Borrowers shall deposit monthly with the Administrative Agent or the
        Administrative Agent’s designee, a sum of money equal to equal to one-twelfth
        (1/12th) of the annual charges for real estate taxes, assessments and
        impositions relating to the Facilities as reasonably estimated by Administrative
        Agent. At or before the initial advance under the Term Loan, the Borrowers
        shall
        deposit with the Administrative Agent a sum of money which together with
        such
        monthly installments will be sufficient to make such tax payments thirty
        (30)
        days prior to the date any delinquency or penalty becomes due. Provided
        sufficient funds are available in the foregoing tax reserve, Administrative
        Agent shall use such funds to pay real estate taxes, assessments and impositions
        relating to the Facilities prior to the date same are due, and 

       


      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      


      any
        obligations of the Borrowers hereunder to pay same shall be deemed satisfied
        if
        sufficient funds to pay same are in such reserve.

       

      (iv)  Insurance
        Escrow.
        To the
        extent non-captive insurance is utilized and a third party collects a premium
        for such insurance coverage, the Borrowers shall deposit monthly with the
        Administrative Agent or Administrative Agent’s designee, a sum of money equal to
        equal to one-twelfth (1/12th) of the annual charges for insurance premiums
        relating to the insurance coverages required by this Agreement as reasonably
        estimated by Administrative Agent. At or before the initial advance under
        the
        Loan, the Borrowers shall deposit with the Administrative Agent a sum of
        money
        which together with such monthly installments will be sufficient to make
        such
        insurance payments thirty (30) days prior to the date any delinquency or
        penalty
        becomes due. Provided sufficient funds are available in the foregoing insurance
        reserve, Administrative Agent shall use such funds to pay insurance premiums
        relating to the Facilities prior to the date same are due, and any obligations
        of the Borrowers hereunder to pay same shall be deemed satisfied if sufficient
        funds to pay same are in such reserve.

       

      (v)  Disbursement
        and Interest.
        After
        the Closing Date, deposits in respect of the escrows described in clauses
        (iii) - (iv)
        above
        shall be made on the basis of the Administrative Agent’s reasonable estimate
        from time to time of the charges for the current year (or other applicable
        period). All funds deposited pursuant to clause
        (iii) - (iv)
        shall be
        held by the Administrative Agent. These sums may be commingled with the general
        funds of the Administrative Agent and shall not be deemed to be held in trust
        for the benefit of the Borrowers. So long as no Event of Default exists
        hereunder, the Administrative Agent shall credit for the Borrowers’ account
        interest on such funds held by the Administrative Agent from time to time
        at the
        money market account rate announced from time to time by The Northern Trust
        Company or any other national banking association selected by the Administrative
        Agent in its sole discretion (the “Money
        Market Rate”).
        All
        interest paid on such funds shall be deemed to be a part of the respective
        escrow and shall be applied in accordance with this Section
        2.1(b).
        The
        Borrowers hereby grant to the Administrative Agent for the benefit of Lender
        and
        the Administrative Agent a security interest in all funds so deposited with
        the
        Administrative Agent for the purpose of securing the Obligations. While an
        Event
        of Default exists, the funds deposited may be applied in payment of the charges
        for which such funds have been deposited, or to the payment of the Obligations
        or any other charges affecting the security of the Administrative Agent,
        as the
        Administrative Agent may elect, but no such application shall be deemed to
        have
        been made by operation of law or otherwise until actually made by the
        Administrative Agent. The Borrowers shall furnish the Administrative Agent
        with
        bills for the charges for which such escrows are required promptly upon the
        Borrowers’ receipt thereof. If at any time the amount in escrow with the
        Administrative Agent, together with amounts to be deposited by the Borrowers
        before such charges are payable, is insufficient to pay such charges, the
        Borrowers shall deposit any deficiency with the Administrative Agent immediately
        upon demand. The Administrative Agent shall promptly pay such charges, when
        the
        amount in escrow with the Administrative Agent is sufficient to pay such
        charges
        and the Administrative Agent has received a bill for such charges, if
        applicable. 

       

      
        
           

        

        
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      Section
        2.2  Termination
        of the Commitments, Maturity Date and Repayment of Loans.
        (a)Termination
        of Term Loan Commitments.
        Outstanding Term Loan Commitments in an amount equal to the amount of any
        Term
        Loan actually advanced shall terminate on the date of such advance (after
        giving
        effect to the Term Loan occurring on such date). The balance of all outstanding
        Term Loan Commitments shall terminate on the six (6) month anniversary of
        the
        Closing Date.

       

      (b)  Maturity
        Date and Repayment of the Term Loans.
        Commencing on January 2, 2007, the Borrowers shall pay interest in arrears
        on
        the first day of each month until all amounts due under the Loan Documents
        are
        paid in full. If the first day of the month is not a Business Day, then the
        applicable payment due hereunder shall be made on the first Business Day
        of such
        month. The Borrowers promise to repay all outstanding principal and accrued
        but
        unpaid interest, costs, expenses and fees under or related to the Term Loans
        on
        the Maturity Date. 

       

      The
        Borrowers may extend the Maturity Date to the first anniversary of the Scheduled
        Maturity Date (the “First
        Extension Period”)
        provided the following conditions are satisfied: (i) Borrowers have given
        the Administrative Agent written notice (the “First
        Extension Notice”)
        of
        such extension not less than thirty (30) days nor more than ninety (90) days
        prior to the Scheduled Maturity Date; (ii) no Event of Default has occurred
        and is continuing at the time of, or at any time after the delivery of, the
        First Extension Notice; (iii) if the Consolidated Project Yield as of the
        commencement of the First Extension Period would not be greater than or equal
        to
        10%, the Borrowers shall, prior to the commencement of the First Extension
        Period, deposit with Administrative Agent, to be held in escrow (the
“Cash
        Collateral Escrow”),
        an
        amount which, if applied against to the outstanding principal balance of
        the
        Term Loan would cause the Consolidated Project Yield as of the commencement
        of
        the First Extension Period to be equal to 10%; (iv) an Interest Rate Contract,
        reasonably acceptable to the Administrative Agent, shall be in full force
        and
        effect and (v) there shall have been no material adverse change in the business
        or financial condition of the Borrowers taken as a whole, which determination
        shall be made in the sole and absolute discretion of the Administrative
        Agent.

      


      In
        addition to the First Extension Period, the Borrowers may further extend
        the
        Loan for the twelve (12) month period ending on the second anniversary of
        the
        Scheduled Maturity Date (the “Second
        Extension Period”),
        provided the following conditions are satisfied: (i) Borrowers has given
        the Administrative Agent written notice (the “Second
        Extension Notice”)
        of
        such extension not less than thirty (30) days nor more than ninety (90) days
        prior to the expiration of First Extension Period; (ii)  no Event of
        Default has occurred and is continuing at the time of, or at any time after
        the
        delivery of, the Second Extension Notice; (iii) if the Consolidated Project
        Yield as of the commencement of the Second Extension Period would not be
        greater
        than or equal to 10%, the Borrowers shall, prior to the commencement of the
        Second Extension Period, deposit into the Cash Collateral Escrow, an amount
        which, if applied against to the outstanding principal balance of the Term
        Loan
        would cause the Consolidated Project Yield as of the commencement of the
        Second
        Extension Period to be equal to 10%; and (iv) an Interest Rate Contract,
        reasonably acceptable to the Administrative Agent, shall be in full force
        and
        effect and (v) there shall have been no material adverse change in the business
        or financial condition of the Borrowers taken as a whole, which determination
        shall be made in the sole and absolute discretion of the Administrative
        Agent.

       

      Section
        2.3  Optional
        Prepayments.
        The
        Borrowers may not prepay any of the outstanding principal balance of the
        Term
        Loans in whole or in part prior to the 1st
        anniversary of the
        Closing Date other than as may be permitted pursuant to Section 8.4(d) in
        respect of the sale of Westlake or Boynton or the Whittier Residence. From
        and
        after the first anniversary
        of                         

      
        
           

        

        
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the
        Closing Date, the Borrowers may
        prepay the outstanding principal amount of the Term Loans and other Obligations
        in whole but not in part at any time,
        without
        premium or penalty, other than as set forth in Section
        2.10(a).

       

      Section
        2.4  Mandatory
        Payments.
        (a)
Excess
        Cash Flow. For any quarter ending after the 2nd
        anniversary of the Closing Date, if the Consolidated Project Yield shall
        be less
        than 10% (for the relevant period as set forth in Section 5.1), the Borrowers
        shall pay or cause to be paid to the Administrative Agent, within five (5)
        Business Days after the last date Financial Statements can be delivered pursuant
        to Section 6.1(b)
        for such
        quarter, an amount equal to 100% of the Excess Cash Flow for such quarter
        and
        continuing thereafter on the last Business Day of each calendar month, which
        amount shall be held in the Cash Collateral Escrow; provided, however, if
        the
        Consolidated Project Yield shall, for two (2) consecutive quarters, be equal
        to
        or greater than 10% (for the relevant period as set forth in Section 5.1),
        the
        mandatory payment of Excess Cash Flow required pursuant to this Section 2.4
        shall be suspended, but only for so long as the Consolidated Project Yield
        shall
        remain equal to or greater than 10% (for the relevant period as set forth
        in
        Section 5.1).

       

      (c)  Cash
        Collateral Escrow.
        All
        funds held in the Cash Collateral Escrow shall be additional collateral to
        secure the Borrowers Obligations hereunder. Notwithstanding the other provisions
        of this Agreement, the Borrowers shall have the right, but not the obligation,
        at any time when there shall exist a positive balance in the Cash Collateral
        Escrow, to repay a portion of the outstanding principal balance of the Term
        Loan, subject to Section
        2.3,
        up to
        the amount held in the Cash Collateral Escrow. In such event, within ten
        (10)
        days of such repayment, Administrative Agent shall cause an amount equal
        to the
        amount so repaid to be released to the Borrowers from the Cash Collateral
        Escrow.

       

      (d)  Asset
        Sales and Property Loss Events. Upon
        receipt on or after the Closing Date by any Borrower of Net Cash Proceeds
        arising from (i) any
        Transfer by any Borrower of any of its property other than Transfers of its
        own
        Equity Interests and Transfers of property permitted hereunder in reliance
        upon
        any of clauses
        (a)
        through
(c)
        of
Section 8.4
        or
        (ii) any
        Property Loss Event with respect to any property of any Borrower to the extent
        resulting, in the aggregate with all other such Property Loss Events, in
        the
        receipt by any of them of Net Cash Proceeds in excess of $50,000,
        such Borrower shall immediately pay or cause to be paid to the Administrative
        Agent an amount equal to 100% of such Net Cash Proceeds; provided,
        however,
        that,
        in the case of clause
        (ii)
        above,
        upon any such receipt, as long as no Event of Default shall be continuing,
        any
        Borrower may make Permitted Reinvestments with such Net Cash Proceeds and
        such
        Borrower shall not be required to make or cause such payment to the extent
        (x)
        such Net Cash Proceeds are intended to be or are actually used to make Permitted
        Reinvestments and (y) on each Reinvestment Prepayment Date for such Net Cash
        Proceeds, such Borrower shall pay or cause to be paid to the Administrative
        Agent an amount equal to the Reinvestment Prepayment Amount applicable to
        such
        Reinvestment Prepayment Date.

       

      (e)  Application
        of Payments.
        Any
        payments made to the Administrative Agent pursuant to this Section 2.4
        shall be
        applied to the Obligations in accordance with Section 2.6(b).

       

       

      
        
           

        

        
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      Section
        2.5  Interest.
        (a)
        Rate. The Term Loans and the outstanding amount of all other Obligations
        (other
        than pursuant to Secured Hedging Agreements) shall bear interest, in the
        case of
        the Term Loans, on the unpaid principal amount thereof from the date such
        Term
        Loan is made, and, in the case of such other Obligations, from the date such
        other Obligations are due and payable until, in each case, paid in full,
        except
        as otherwise provided in clause (c) below,
        as
        follows: (i) in the case of Eurodollar Rate Loans, at a rate per annum equal
        to
        the sum of the Eurodollar Rate plus the Applicable Margin, each as in effect
        for
        the applicable Interest Period, and (iii) in the case of other Obligations,
        at a
        rate per annum equal to the Base Rate as in effect from time to
        time.

       

      (b)  Default
        Interest.
        Notwithstanding the rates of interest specified in clause (a)
        above or
        elsewhere in any Loan Document, effective immediately upon (A) the occurrence
        of
        any Event of Default under Section 9.1(e)(ii)
        or (B)
        the delivery of a notice by the Administrative Agent at the direction of
        the
        Required Lenders to any Borrower during the continuance of any other Event
        of
        Default and, in each case, for as long as such Event of Default shall be
        continuing, the principal balance of all Obligations (including any Obligation
        that bears interest by reference to the rate applicable to any other Obligation)
        then due and payable shall bear interest at a rate that is 4% per annum in
        excess of the interest rate applicable to such Obligations from time to time,
        payable on demand or, in the absence of demand, on the date that would otherwise
        be applicable. 

       

      (c)  Additional
        Fees.
        The
        Borrowers shall pay to the Administrative Agent and its Related Persons its
        reasonable and customary fees and expenses in connection with any payments
        made
        pursuant to Section 2.10(a)
        (Breakage
        Costs)
        and
        have agreed to pay the additional fees described in the Fee Letter.

       

       

      Section
        2.6  Application
        of Payments.
        (a)
Application
        of Voluntary Prepayments. Unless otherwise provided in this Section 2.6 or
        elsewhere in any Loan Document, all payments and any other amounts received
        by
        the Administrative Agent from or for the benefit of the Borrowers shall be
        applied to repay the Obligations the Borrowers designate, and shall be paid
        pro
        rata by the Administrative Agent to the Lenders.

       

      (b)  Application
        of Mandatory Prepayments.
        Subject
        to the provisions of clause
        (c)
        below
        with respect to the application of payments during the continuance of an
        Event
        of Default, any payment made by any Borrower to the Administrative Agent
        pursuant to Section 2.4
        or any
        other prepayment of the Obligations required to be applied in accordance
        with
        this clause
        (b)
        shall be
        applied to repay the outstanding principal balance of the Term
        Loans.

       

      (c)  Application
        of Payments During an Event of Default.
        Each
        Borrower hereby irrevocably waives, and agrees to cause each other Borrower
        and
        each other Borrower to waive, the right to direct the application during
        the
        continuance of an Event of Default of any and all payments in respect of
        any
        Obligation and any proceeds of Collateral and agrees that, during the
        continuance of an Event of Default, notwithstanding the provisions of
clause (a)
        above,
        the Administrative Agent may, and, upon either (A) the direction of the Required
        Lenders or (B) the termination of any Commitment or the acceleration of any
        Obligation pursuant to Section 9.2
        as a
        result of such Event of Default, shall, apply all payments in respect of
        any
        Obligation, all funds on deposit in any escrow established pursuant to
Section
        2.1(b)
        and all
        other proceeds of Collateral (i)
        first,
        to pay
        Obligations in respect of any cost or expense reimbursements, fees or
        indemnities then due to the Administrative Agent,
        (ii)
second,
        to pay
        Obligations in respect of 

       


      
        
          
          

        

        
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      any
        cost
        or expense reimbursements, fees or indemnities then due to the
        Lenders,
        (iii)
third,
        to pay
        interest then due and payable in respect of the Loans,
        and
        (iv) fourth,
        to
        repay the outstanding principal amounts of the Loans, (v) fifth,
        to pay
        amounts owing with respect to Secured Hedging Agreements and
        (vi)
sixth,
        to the
        ratable payment of all other Obligations.

       

      (d)  Application
        of Payments Generally.
        All
        repayments of Term Loans shall be applied first,
        to
        repay such Loans outstanding as Base Rate Loans and then,
        to
        repay such Loans outstanding as Eurodollar Rate Loans. All repayments of
        Term
        Loans shall be applied to reduce the remaining installments of such outstanding
        principal amounts of the Term Loans in the order of their maturities. Any
        priority level set forth in this Section 2.6
        that
        includes interest shall include all such interest, whether or not accruing
        after
        the filing of any petition in bankruptcy or the commencement of any insolvency,
        reorganization or similar proceeding, and whether or not a claim for post-filing
        or post-petition interest is allowed in any such proceeding.

       

       

      Section
        2.7  Payments
        and Computations.
        (a)
        Procedure. The Borrowers shall make each payment under any Loan Document
        not
        later than 2:00 p.m. on the day when due to the Administrative Agent by
        wire transfer to the following account (or at such other account or by such
        other means to such other address as the Administrative Agent shall have
        notified the Borrowers in writing within a reasonable time prior to such
        payment) in immediately available Dollars and without setoff or
        counterclaim:

       

      ABA
        No.
        021-001-033

       

      Account
        Number 502-695-34

       

      Deutsche
        Bank Trust Company Americas, New York, New York

       

      Account
        Name: GECC/Healthcare Financial Collections Depository, 

       

      Reference:
        BREA Emeritus LLC

       

      The
        Administrative Agent shall promptly thereafter cause to be distributed
        immediately available funds relating to the payment of principal, interest
        or
        fees to the Lenders, in accordance with the application of payments set forth
        in
Section 2.6.
        The
        Lenders shall make any payment under any Loan Document in immediately available
        Dollars and without setoff or counterclaim. 

       

      (b)  Computations
        of Interests and Fees.
        All
        computations of interest and of fees shall be made by the Administrative
        Agent
        on the basis of a year of 360 days (or, in the case of Base Rate Loans whose
        interest rate is calculated based on the rate set forth in clause
        (a)
        of the
        definition of “Base Rate”, 365/366 days), in each case for the actual number of
        days (including the first day but excluding the last day) occurring in the
        period for which such interest and fees are payable. Each determination of
        an
        interest rate or the amount of a fee hereunder shall be made by the
        Administrative Agent (including determinations of a Eurodollar Rate or Base
        Rate
        in accordance with the definitions of “Eurodollar Rate” and “Base Rate”,
        respectively) and shall be conclusive, binding and final for all purposes,
        absent manifest error.

       

      (c)  Payment
        Dates.
        Whenever any payment hereunder shall be stated to be due on a day other than
        a
        Business Day, the due date for such payment shall be extended to the next
        succeeding Business Day without any increase in such payment as a result
        of
        additional interest or fees; provided,
        however,
        that
        such interest and fees shall continue accruing as a result of such extension
        of
        time.

       

      
        
           

        

        
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      (d)  Advancing
        Payments.
        Unless
        the Administrative Agent shall have received notice from the Borrowers to
        the
        Lenders prior to the date on which any payment is due hereunder that such
        Borrower will not make such payment in full, the Administrative Agent may
        assume
        that the Borrowers has made such payment in full to the Administrative Agent
        on
        such date and the Administrative Agent may, in reliance upon such assumption,
        cause to be distributed to each Lender on such due date an amount equal to
        the
        amount then due such Lender. If and to the extent that the Borrowers shall
        not
        have made such payment in full to the Administrative Agent, each Lender shall
        repay to the Administrative Agent on demand such amount distributed to such
        Lender together with interest thereon (at the Federal Funds Rate for the
        first
        Business Day and thereafter, at the rate applicable to Base Rate Loans) for
        each
        day from the date such amount is distributed to such Lender until the date
        such
        Lender repays such amount to the Administrative Agent.

       

       

      Section
        2.8  Evidence
        of Debt.
        (a)
        Records of Lenders. Each Lender shall maintain in accordance with its usual
        practice accounts evidencing Indebtedness of the Borrowers to such Lender
        resulting from each Loan of such Lender from time to time, including the
        amounts
        of principal and interest payable and paid to such Lender from time to time
        under this Agreement.
        In
        addition, each Lender having sold a participation in any of its Obligations
        or
        having identified an SPV as such to the Administrative Agent, acting as agent
        of
        the Borrowers solely for this purpose and solely for tax purposes, shall
        establish and maintain at its address referred to in Section 11.11 (or at
        such other address as such Lender shall notify the Borrowers) a record of
        ownership, in which such Lender shall register by book entry (A) the name
        and
        address of each such participant and SPV (and each change thereto, whether
        by
        assignment or otherwise) and (B) the rights, interest or obligation of each
        such participant and SPV in any Obligation, in any Commitment and in any
        right
        to receive any payment hereunder.

       

      (b)  Records
        of Administrative Agent.
        The
        Administrative Agent, acting as agent of the Borrowers solely for tax purposes
        and solely with respect to the actions described in this Section 2.8,
        shall
        establish and maintain at its address referred to in Section 11.11
        (or at
        such other address as the Administrative Agent may notify the Borrowers)
        (A) a
        record of ownership (the “Register”)
        in
        which the Administrative Agent agrees to register by book entry the interests
        (including any rights to receive payment hereunder) of the Administrative
        Agent,
        each Lender and any assignment of any such interest, obligation or right
        and
        (B) accounts in the Register in accordance with its usual practice in which
        it shall record (1) the names and addresses of the Lenders (and each change
        thereto pursuant to Section 2.12
        (Substitution
        of Lenders)
        and
Section 11.2
        (Assignments
        and Participations; Binding Effect)),
        (2)
        the Commitments of each Lender, (3) the amount of each Loan and each funding
        of
        any participation described in clause
        (A)
        above,
        for Eurodollar Rate Loans, the Interest Period applicable thereto, (4) the
        amount of any principal or interest due and payable or paid, and (5) any
        other
        payment received by the Administrative Agent from the Borrowers and its
        application to the Obligations. 

       

      (c)  Registered
        Obligations.
        Notwithstanding anything to the contrary contained in this Agreement, the
        Loans
        (including any Notes evidencing such Loans) are registered obligations, the
        right, title and interest of the Lenders and their assignees in and to such
        Loans shall be transferable only upon notation of such transfer in the Register
        and no assignment thereof shall be effective until recorded therein. This
        Section 2.8
        and
Section 11.2
        shall be
        construed so that the Loans are at all times maintained in “registered
        form”
within
        the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any
        related regulations (and any successor provisions).

       

      
        
           

        

        
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      (d)  Prima
        Facie Evidence.
        The
        entries made in the Register and in the accounts maintained pursuant to
clauses
        (a)
        and
(b)
        above
        shall, to the extent permitted by applicable Requirements of Law, be prima
        facie
        evidence of the existence and amounts of the obligations recorded therein;
        provided,
        however,
        that no
        error in such account and no failure of any Lender or the Administrative
        Agent
        to maintain any such account shall affect the obligations of any Borrower
        to
        repay the Loans in accordance with their terms. In addition, the Borrowers,
        the
        Administrative Agent and the Lenders shall treat each Person whose name is
        recorded in the Register as a Lender, as applicable, for all purposes of
        this
        Agreement. Information contained in the Register with respect to any Lender
        shall be available for access by each Borrower, the Administrative Agent,
        and
        such Lender at any reasonable time and from time to time upon reasonable
        prior
        notice. No Lender shall, in such capacity, have access to or be otherwise
        permitted to review any information in the Register other than information
        with
        respect to such Lender unless otherwise agreed by the Administrative
        Agent.

       

      (e)  Notes.
        Upon
        any Lender’s request, made through the Administrative Agent, the Borrowers shall
        promptly execute and deliver Notes to such Lender evidencing the Loans of
        such
        Lender and substantially in the form of Exhibit E;
        provided,
        however,
        that
        only one Note shall be issued to each Lender, except (i) to an existing Lender
        exchanging existing Notes to reflect changes in the Register relating to
        such
        Lender, in which case the new Notes delivered to such Lender shall be dated
        the
        date of the original Notes and the Note being replaced shall be voided and
        returned to the Borrowers, and (ii) in the case of loss, destruction or
        mutilation of existing Notes and similar circumstances, provided that such
        Lender provides Borrowers with a lost note affidavit and indemnity related
        thereto.
        Each
        Note, if issued, shall only be issued as means to evidence the right, title
        or
        interest of a Lender or a registered assignee in and to the related Loan,
        as set
        forth in the Register, and in no event shall any Note be considered a bearer
        instrument or obligation.

       

       

      Section
        2.9  Suspension
        of Eurodollar Rate.
        Notwithstanding any provision to the contrary in this Article II, the
        following shall apply:

       

      (a)  Interest
        Rate Unascertainable, Inadequate or Unfair.
        In the
        event that (A) the Administrative Agent determines that adequate and fair
        means
        do not exist for ascertaining the applicable interest rates by reference
        to
        which the Eurodollar Rate is determined or (B) the Required Lenders notify
        the
        Administrative Agent that the Eurodollar Rate for any Interest Period will
        not
        adequately reflect the cost to the Lenders of making or maintaining such
        Loans
        for such Interest Period, the Administrative Agent shall promptly so notify
        the
        Parent and the Lenders, whereupon the obligation of each Lender to make or
        to
        continue Eurodollar Rate Loans shall be suspended as provided in clause
        (c)
        below
until
        the
        Administrative Agent shall notify the Parent that the Required Lenders have
        reasonably determined that the circumstances causing such suspension no longer
        exist.

       

      (b)  Illegality.
        If any
        Lender determines that the introduction of, or any change in or in the
        interpretation of, any Requirement of Law after the date of this Agreement
        shall
        make it unlawful, or any Governmental Authority shall assert that it is
        unlawful, for any Lender or its applicable lending office to make Eurodollar
        Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then,
        on
        notice thereof and demand therefor by such Lender to the Borrowers through
        the
        Administrative Agent, the obligation of such Lender to make or to continue
        Eurodollar Rate Loans shall be suspended as provided in clause
        (c)
        below
        until such 

       


      
        
          
          

        

        
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      Lender
        shall, through the Administrative Agent, notify the Borrowers that it has
        determined that it may lawfully make Eurodollar Rate Loans.

       

      (c)  Effect
        of Suspension.
        If the
        obligation of any Lender to make or to continue Eurodollar Rate Loans is
        suspended, (A) such Lender shall make a Base Rate Loan at any time such Lender
        would otherwise be obligated to make a Eurodollar Rate Loan, (B) the Borrowers
        may revoke any pending Notice of Borrowing to make any Eurodollar Rate Loan
        and
        (C) each existing Eurodollar Rate Loan of such Lender shall automatically
        and
        immediately (or, in the case of any suspension pursuant to clause
        (a)
        above,
        on the last day of the current Interest Period thereof) be converted into
        a Base
        Rate Loan.

       

       

      Section
        2.10  Breakage
        Costs; Increased Costs; Capital Requirements.
        (a)
        Breakage Costs.
        The
        Borrowers shall compensate each Lender, upon demand from such Lender to the
        Borrowers (with copy to the Administrative Agent), for all Liabilities
        (including, in each case, those incurred by reason of the liquidation or
        reemployment of deposits or other funds acquired by such Lender to prepare
        to
        fund, to fund or to maintain the Eurodollar Rate Loans of such Lender to
        the
        Borrowers but excluding any loss of the Applicable Margin on the relevant
        Loans)
        that such Lender may incur (A) to the extent any Eurodollar Rate Loan is
        paid
        (whether through a scheduled, optional or mandatory prepayment) or converted
        to
        a Base Rate Loan (including because of Section 2.09) on a date that is not
        the last day of the applicable Interest Period or (B) as a consequence of
        any failure by the Borrowers to repay Eurodollar Rate Loans when required
        by the
        terms hereof.
        For
        purposes of this
        clause
        (a), each Lender shall be deemed to have funded each Eurodollar Rate Loan
        made
        by it using a matching deposit or other borrowing in the London interbank
        market.

       

      (b) Increased
        Costs.
        If at
        any time any Lender reasonably determines that, after the date hereof, the
        adoption of, or any change in or in the interpretation, application or
        administration of, or compliance with, any Requirement of Law (other than
        any
        imposition or increase of Eurodollar Reserve Requirements) from any Governmental
        Authority shall have the effect of (i) increasing the cost to such Lender
        of
        making, funding or maintaining any Eurodollar Rate Loan or to agree to do
        so or
        of participating, or agreeing to participate, in extensions of credit or
        (ii)
        imposing any other cost to such Lender with respect to compliance with its
        obligations under any Loan Document, then, upon demand by such Lender (with
        copy
        to the Administrative Agent), the Borrowers shall pay to the Administrative
        Agent for the account of such Lender amounts sufficient to compensate such
        Lender for such increased cost.

       

      (c) Increased
        Capital Requirements.
        If at
        any time any Lender determines that, after the date hereof, the adoption
        of, or
        any change in or in the interpretation, application or administration of,
        or
        compliance with, any Requirement of Law (other than any imposition or increase
        of Eurodollar Reserve Requirements) from any Governmental Authority, regarding
        capital adequacy, reserves, special deposits, compulsory loans, insurance
        charges against property of, deposits with or for the account of, Obligations
        owing to, or other credit extended or participated in by, any Lender or any
        similar requirement (in each case other than any imposition or increase of
        Eurodollar Reserve Requirements) shall have the effect of reducing the rate
        of
        return on the capital of such Lender as a consequence of its obligations
        under
        or with respect to any Loan Document to a level below that which, taking
        into
        account the capital adequacy policies of such Lender, such Lender could have
        reasonably achieved but for such adoption or change, then, upon demand from
        time
        to time by such Lender (with a copy of such demand to the 

       


      
        
          
          

        

        
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      Administrative
        Agent), the Borrowers shall pay to the Administrative Agent for the account
        of
        such Lender amounts sufficient to compensate such Lender for such
        reduction.

       

      (d)  Compensation
        Certificate.
        Each
        demand for compensation under this Section 2.10
        shall be
        accompanied by a certificate of the Lender claiming such compensation, setting
        forth the amounts to be paid hereunder, which certificate shall be conclusive,
        binding and final for all purposes, absent manifest error. In determining
        such
        amount, such Lender may use any reasonable averaging and attribution
        methods.

       

       

      Section
        2.11  Taxes.
        (a)
        Payments Free and Clear of Taxes. Except as otherwise provided in this
        Section 2.11, each payment by any Borrower under any Loan Document shall be
        made free and clear of all present or future taxes, levies, imposts, deductions,
        charges or withholdings and all liabilities with respect thereto (and without
        deduction for any of them) (collectively, but excluding the taxes set forth
        in
        clauses (i) and (ii) below, the “Taxes”) other than for (i) taxes measured by
        net income (including branch profits taxes) and franchise taxes imposed in
        lieu
        of net income taxes, in each case imposed on any Secured Party as a result
        of a
        present or former connection between such Secured Party and the jurisdiction
        of
        the Governmental Authority imposing such tax or any political subdivision
        or
        taxing authority thereof or therein (other than such connection arising solely
        from any Secured Party having executed, delivered or performed its obligations
        or received a payment under, or enforced, any Loan Document) or (ii) taxes
        that
        are directly attributable to either (a) the failure (other than as a result
        of a
        change in any Requirement of Law that occurs after the date a Secured Party
        becomes a “Secured Party” under this Agreement) by any Secured Party to deliver
        the documentation required to be delivered by a Non-U.S. Lending Party claiming
        to be exempt from, or subject to a reduced rate for, United States withholding
        tax, pursuant to clause (f) below or (b) if the Non-U.S. Lender indicates
        in the
        documentation that they are only claiming a reduced rate for United States
        withholding, taxes up to the claimed rate of withholding with respect to
        the
        type of income for which the reduced rate is claimed. 

       

      (b)  Gross-Up.
        If any
        Taxes shall be required by law to be deducted from or in respect of any amount
        payable under any Loan Document (other than any Secured Hedging Agreement)
        to
        any Secured Party (i) such amount shall be increased as necessary to ensure
        that, after all required deductions for Taxes are made (including deductions
        applicable to any increases to any amount under this Section 2.11),
        such
        Secured Party receives the amount it would have received had no such deductions
        been made, (ii) the Borrowers shall make such deductions, (iii) the Borrowers
        shall timely pay the full amount deducted to the relevant taxing authority
        or
        other authority in accordance with applicable Requirements of Law and
        (iv) within thirty (30) days after such payment is made, the Borrowers
        shall deliver to the Administrative Agent an original or certified copy of
        a
        receipt evidencing such payment; provided,
        however,
        that no
        such increase shall be made with respect to, and no Borrower shall be required
        to indemnify any such Secured Party pursuant to clause
        (d)
        below for,
        withholding taxes to the extent that the obligation to withhold amounts existed
        on the date that such Secured Party became a “Secured Party” under this
        Agreement in the capacity under which such Secured Party makes a claim under
        this clause
        (b),
        except
        in each case to the extent such Secured Party is a direct or indirect assignee
        (other than pursuant to Section 2.12
        (Substitution
        of Lenders))
        of any
        other Secured Party that was entitled, at the time the assignment of such
        other
        Secured Party became effective, to receive additional amounts under this
        clause
        (b).

       

      
        
           

        

        
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      (c)  Other
        Taxes.
        In
        addition, the Borrowers agree to pay, and authorize the Administrative Agent
        to
        pay in their names, any stamp, documentary, excise or property tax, transfer,
        mortgage, recording charges or similar levies imposed by any applicable
        Requirement of Law or Governmental Authority and all Liabilities with respect
        thereto (including by reason of any delay in payment thereof), in each case
        arising from the execution, delivery or registration of, or otherwise with
        respect to, any Loan Document or any transaction contemplated therein
        (collectively, “Other
        Taxes”).
        Within 30 days after the date of any payment of Taxes or Other Taxes by any
        Borrower, such Borrower shall furnish to the Administrative Agent, at its
        address referred to in Section 11.11,
        the
        original or a certified copy of a receipt evidencing payment
        thereof.

       

      (d)  Indemnification.
        The
        Borrowers shall reimburse and indemnify, within thirty (30) days after receipt
        of demand therefor from the Administrative Agent, each Secured Party for
        all
        Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any
        jurisdiction on amounts payable under this Section 2.11)
        actually paid by such Secured Party and any Liabilities arising therefrom
        or
        with respect thereto.
        A
        certificate of the Secured Party (or of the Administrative Agent on behalf
        of
        such Secured Party) claiming any compensation under this clause
        (d),
        setting
        forth the amounts to be paid thereunder and delivered to the Borrowers with
        copy
        to the Administrative Agent, shall be conclusive, binding and final for all
        purposes, absent manifest error. 

       

      (e)  Mitigation.
        Any
        Lender claiming any additional amounts payable pursuant to this Section 2.11
        shall
        use its reasonable efforts (consistent with its internal policies and
        Requirements of Law) to change the jurisdiction of its lending office if
        such a
        change would reduce any such additional amounts (or any similar amount that
        may
        thereafter accrue) and would not, in the reasonable determination of such
        Lender, be otherwise disadvantageous to such Lender.

       

      (f)  Tax
        Forms.
        (i)
        Each Non-U.S. Lender Party shall (w) on or prior to the date such Non-U.S.
        Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x) on or prior
        to the date on which any such form or certification expires or becomes obsolete,
        (y) after the occurrence of any event requiring a change in the most recent
        form
        or certification previously delivered by it pursuant to this clause (i)
        and
(z)
        from
        time to time if requested by any Borrower or the Administrative Agent (or,
        in
        the case of a participant or SPV, the relevant Lender), provide the
        Administrative Agent and the Borrowers (or, in the case of a participant
        or SPV,
        the relevant Lender) with two completed originals of each of the following,
        as
        applicable:
        (A)
        Forms W-8ECI (claiming exemption from U.S. withholding tax because the income
        is
        effectively connected with a U.S. trade or business), W-8BEN (claiming exemption
        from U.S. withholding tax under an income tax treaty) and/or W-8IMY (claiming
        exemption from U.S. withholding tax for any portion of any sums paid or payable
        to such Non-U.S. Lender Party under any of the Loan Documents for which it
        does
        not act or ceases to act for its own account with respect to thereto) or
        any
        successor forms,
        (B) in
        the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h)
        or
        881(c) of the Code, Form W-8BEN (claiming exemption from U.S. withholding
        tax
        under the portfolio interest exemption) or any successor form
        and a
        certificate in form and substance acceptable to the Administrative Agent
        and the
        Borrowers that such Non-U.S. Lender Party is not (1) a “bank” within the meaning
        of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of any
        Borrower within the meaning of Section 881(c)(3)(B) of the Code or (3) a
        “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
        or (C) any other applicable document prescribed by the IRS certifying as
        to the
        entitlement of such 

       


      
        
          
          

        

        
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      Non-U.S.
        Lender Party to such exemption from United States withholding tax with respect
        to all payments to be made to such Non-U.S. Lender Party under the Loan
        Documents. Unless the Borrowers and the Administrative Agent have received
        forms
        or other documents satisfactory to them indicating that payments under any
        Loan
        Document to or for a Non-U.S. Lender Party are not subject to United States
        withholding tax, the Borrowers and the Administrative Agent shall withhold
        amounts required to be withheld by applicable Requirements of Law from such
        payments at the applicable statutory rate.

       

      (i)  Each
        U.S.
        Lender Party shall (A) on or prior to the date such U.S. Lender Party becomes
        a
“U.S. Lender Party” hereunder, (B) on or prior to the date on which any such
        form or certification expires or becomes obsolete, (C) after the occurrence
        of
        any event requiring a change in the most recent form or certification previously
        delivered by it pursuant to this clause
        (f)
        and (D)
        from time to time if requested by any Borrower or the Administrative Agent
        (or,
        in the case of a participant or SPV, the relevant Lender), provide the
        Administrative Agent and the Borrowers (or, in the case of a participant
        or SPV,
        the relevant Lender) with two completed originals of Form W-9 (certifying
        that
        such U.S. Lender Party is entitled to an exemption from U.S. backup withholding
        tax) or any successor form.

       

      (ii)  Each
        Lender having sold a participation in any of its Obligations or identified
        an
        SPV as such to the Administrative Agent shall collect from such participant
        or
        SPV the documents described in this clause
        (f)
        and
        provide them to the Administrative Agent.

       

       

      Section
        2.12  Substitution
        of Lenders.
        (a)
        Substitution Right. In the event that any Lender that is not an Affiliate
        of the
        Administrative Agent (an “Affected Lender”) (i) makes a claim under clause (b)
        (Increased Costs) or (c) (Increased Capital Requirements) of Section 2.10,
        (ii) notifies the Parent pursuant to Section 2.9(b) (Illegality) that it
        becomes illegal for such Lender to continue to fund or make any Eurodollar
        Rate
        Loan, (iii) makes a claim for payment pursuant to Section 2.11(b) (Taxes),
        (iv) becomes a Non-Funding Lender or (v) does not consent to any amendment,
        waiver or consent to any Loan Document for which the consent of the Required
        Lenders is obtained but that requires the consent of other Lenders, the
        Borrowers may either pay in full such Affected Lender without premium or
        penalty
        with respect to amounts due with the consent of the Administrative Agent
        or
        substitute for such Affected Lender any Lender or any Affiliate or Approved
        Fund
        of any Lender or any other Person acceptable (which acceptance shall not
        be
        unreasonably withheld or delayed) to the Administrative Agent (in each case,
        a
“Substitute Lender”).
        Upon
        Borrowers’ request, the Administrative Agent shall solicit and obtain a
        Substitute Lender.

       

      (b)  Procedure.
        To
        substitute such Affected Lender or pay in full the Obligations owed to such
        Affected Lender, the Borrowers shall deliver a notice to the Administrative
        Agent and such Affected Lender.
        The
        effectiveness of such payment or substitution shall be subject to the delivery
        to the Administrative Agent by the Borrowers (or, as may be applicable in
        the
        case of a substitution, by the Substitute Lender) of (i) payment for the
        account
        of such Affected Lender, of, to the extent accrued through, and outstanding
        on,
        the effective date for such payment or substitution, all Obligations owing
        to
        such Affected Lender (including interest through the end of the applicable
        Interest Period that will be owed because of such payment), and (ii) in the
        case
        of a substitution, (A) except in the event the Affected Lender 

       


      
        
          
          

        

        
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      is
        a
        Non-Funding Lender, payment of the assignment fee set forth in Section 11.2(c)
        and (B)
        an assumption agreement in form and substance reasonably satisfactory to
        the
        Administrative Agent whereby the Substitute Lender shall, among other things,
        agree to be bound by the terms of the Loan Documents and assume the Commitment
        of the Affected Lender.

       

      (c)  Effectiveness.
        Upon
        satisfaction of the conditions set forth in clause
        (b)
        above,
        the Administrative Agent shall record such substitution or payment in the
        Register, whereupon (i) in the case of any payment in full, such Affected
        Lender’s Commitments shall be terminated and (ii) in the case of any
        substitution, (A) the Affected Lender shall sell and be relieved of, and
        the
        Substitute Lender shall purchase and assume, all rights and claims of such
        Affected Lender under the Loan Documents, except that the Affected Lender
        shall
        retain such rights expressly providing that they survive the repayment of
        the
        Obligations and the termination of the Commitments, (B) the Substitute
        Lender shall become a “Lender”
        hereunder having a Commitment in the amount of such Affected Lender’s Commitment
        and (C) the Affected Lender shall execute and deliver to the Administrative
        Agent an Assignment to evidence such substitution and deliver any Note in
        its
        possession; provided,
        however,
        that
        the failure of any Affected Lender to execute any such Assignment or deliver
        any
        such Note shall not render such sale and purchase (or the corresponding
        assignment) invalid.

       

       

      ARTICLE
        III  

       

       

      


       

       

      CONDITIONS
        TO LOANS

       

       

      Section
        3.1  Conditions
        Precedent to Funding.
        The
        obligation of each Lender to make any advance under the Term Loan is subject
        to
        the satisfaction or due waiver by Administrative Agent and each Lender of
        each
        of the following conditions precedent on or before the Closing Date and on
        each
        Permitted Acquisition Closing Date, as applicable:

       

      (a)  Certain
        Documents.
        The
        Administrative Agent and MLC shall have received on or prior to the Closing
        Date
        or the applicable Permitted Acquisition Closing Date, each of the following,
        each dated the Closing Date or the applicable Permitted Acquisition Closing
        Date, unless otherwise agreed by the Administrative Agent and MLC, in form
        and
        substance satisfactory to the Administrative Agent and each Lender:

       

      (i)  this
        Agreement duly executed by each Borrower and, for the account of each Lender
        having requested the same by notice to the Administrative Agent and the
        Borrowers received by each at least 1 Business Days prior to the Closing
        Date
        (or such later date as may be agreed to by the Borrowers), Notes conforming
        to
        the requirements set forth in Section 2.8(e);

       

      (ii)  the
        Security Agreement, duly executed by each Borrower, together with (A) copies
        of
        UCC, Intellectual Property and other appropriate search reports and of all
        effective prior filings listed therein, together with evidence of the
        termination of such prior filings and other documents with respect to the
        priority of the security interest of the Administrative Agent in the Collateral,
        in each case as may be reasonably requested by the Administrative Agent,
        (B) all
        documents representing all Equity Interests being pledged pursuant to such
        Security Agreement and related undated powers or endorsements duly executed
        in
        blank and (C) all Control Agreements that, in the reasonable judgment of
        the
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      comply
        with the Loan Documents as of the Closing Date, each duly executed by, in
        addition to the applicable Borrower, the applicable financial institution;
        

       

      (iii)  Mortgages,
        duly executed by each respective Borrower, for each Facility (except as may
        be
        otherwise agreed to by the Administrative Agent), together with all Mortgage
        Supporting Documents relating thereto;

       

      (iv)  The
        Limited Recourse Guaranty, duly executed by Emeritus;

       

      (v)  One
        or
        more Environmental Indemnities, duly executed by Emeritus and the
        Borrowers;

       

      (vi)  The
        state
        of title to the Real Property shall be satisfactory to the Administrative
        Agent
        and the Mortgages shall be insured by a mortgagee title insurance policy
        (or
        binding commitment therefor) in form and substance and from a title insurer,
        all
        reasonably acceptable to the Administrative Agent.
        Except
        for variances approved by the Administrative Agent prior to the Closing Date
        (which approval shall be evidenced by the Administrative Agent’s execution and
        delivery of this Agreement), on or before the Closing Date, such title insurance
        policy shall be on an American Land Title Association (“ALTA”)
        form
        designated by the
        Administrative
        Agent, but subject to the local customs in the jurisdiction in which such
        Real
        Property exists, shall specifically contain no exception as to survey matters
        or
        creditors rights, must contain affirmative coverage against mechanics’,
        contractors’, suppliers’ and/or materialmen’s liens, filed or unfiled, must
        affirmatively insure that the security instrument is a valid first lien against
        the fee simple, marketable estate, insuring the
        Administrative
        Agent for the benefit of Lenders for a sum not less than the maximum principal
        amount of all financing hereunder and must contain such endorsements as may
        be
        required by the
        Administrative
        Agent (including, but not limited to and subject to availability in the
        jurisdiction in which the Real Property is located, endorsements covering
        zoning
        (ALTA 3.1 with parking), variable interest rates, no violations of covenants,
        conditions and restrictions of record, street address, no usury violation,
        environmental liens, tie-in, access, contiguity, encroachment, tax parcel,
        doing
        business, mortgage tax, first loss and last dollar). Fee simple title to
        the
        Real Property and to the fixtures, equipment, furniture and personal property
        encumbered by the Loan Documents shall be marketable, and free and clear
        of all
        defects, liens, encumbrances, security interests, assessments, restrictions
        and
        easements which are not acceptable to the
        Administrative
        Agent, in the
        Administrative
        Agent’s reasonable discretion. If access to the Real Property is by means of
        easements or leases, said easements or leases shall be reasonably satisfactory
        in form and substance to the
        Administrative
        Agent, shall be insured under the mortgagee’s title insurance policy issued to
the
        Administrative
        Agent as part of the insured estate and shall not be subject to any prior
        liens
        or encumbrances. A search of the state and local public records shall disclose
        no conditional sales contracts, chattel mortgages, leases of personalty,
        financing statements or title retention agreements filed and/or recorded
        against
        any Borrower or the property other than liens which are expressly permitted
        under this Agreement.

       

      (vii)  The
        Administrative Agent shall have received the following, all in form and
        substance reasonably satisfactory to the Administrative Agent and MLC in
        its
        sole and absolute discretion:

       

      
        
           

        

        
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      (A)  such
        property appraisals, property As-Built Surveys, environmental reports, physical
        and structural inspection reports and other third party reports as the
        Administrative Agent shall deem necessary or appropriate;

       

      


      (B)  evidence,
        in the form of letters from municipalities, if available, As-Built Surveys,
        or
        other reasonable evidence , that the Real Property and all improvements thereon
        comply in all material respects with applicable codes, regulations and
        ordinances, are zoned for their current use, are adequately served by public
        utilities, are completed free of mechanics and materialmen’s liens, are not the
        subject to any pending litigation, are not the subject of any pending
        condemnation proceeding and have not been materially damaged by fire or other
        casualty;

       

      (C)  copies
        of
        all Leases pertaining to the Real Property;

       

      (D)  copies
        of
        all recent real estate tax bills, with proof of payment if due, together
        with
        evidence that each parcel of Real Property is a separately identifiable tax
        lot;
        and

       

      (E)  evidence,
        which evidence may be provided in the form of surveys required under
clause
        (A)
        above,
        reasonably satisfactory to the
        Administrative
        Agent that the improvements on the Real Property are not within a special
        flood
        hazard area and is not eligible for flood insurance under the U. S. Flood
        Disaster Protection Act of 1973, as amended.

       

      (viii)  duly
        executed favorable opinions of counsel to the Borrowers in New York and in
        each
        state in which a Facility being acquired is located, each addressed to the
        Administrative Agent and the Lenders and addressing such matters as the
        Administrative Agent may reasonably request including a non-consolidation
        opinion;

       

      (ix)  a
        copy of
        each Constituent Document of each Borrower that is on file with any Governmental
        Authority in any jurisdiction, certified as of a recent date by such
        Governmental Authority or a Responsible Officer, together with, if applicable,
        certificates from such Governmental Authority attesting to the good standing
        of
        such Borrower in such jurisdiction and each other jurisdiction where such
        Borrower is qualified to do business as a foreign entity or where such
        qualification is necessary (and, if appropriate in any such jurisdiction,
        related tax certificates);

       

      (x)  a
        certificate of a Responsible Officer of each Borrower in charge of maintaining
        books and records of such Borrower certifying as to (A) the names and signatures
        of each Responsible Officer of such Borrower authorized to execute and deliver
        any Loan Document, (B) the Constituent Documents of such Borrower attached
        to
        such certificate are complete and correct copies of such Constituent Documents
        as in effect on the date of such certification (or, for any such Constituent
        Document delivered pursuant to clause
        (v)
        above,
        that there have been no changes from such Constituent Document so delivered)
        and
        (C) if applicable, the resolutions of such Borrower’s board 

       


      
        
          
          

        

        
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      of
        directors or other appropriate governing body approving and authorizing the
        execution, delivery and performance of each Loan Document to which such Borrower
        is a party;

       

      (xi)  a
        certificate of a Responsible Officer of each Borrower to the effect that
        (A)
        after giving effect to the Term Loan, (1) the representations and warranties
        set
        forth in any Loan Document are true and correct in all material respects
        as of
        the Closing Date or the Permitted Acquisition Closing Date, and (2) no Event
        of
        Default shall be continuing, and (B) the Borrowers taken as a whole are
        Solvent after giving effect to the Term Loans, the application of the proceeds
        thereof in accordance with Section 7.9
        and the
        payment of all estimated legal, accounting and other fees and expenses related
        hereto and thereto; and

       

      (xii)  insurance
        certificates in form and substance satisfactory to the Administrative Agent
        demonstrating that the insurance policies required by Section 7.5
        are in
        full force and effect and have all endorsements required by such Section 7.5.

       

      (xiii)  such
        other documents and information with respect to the Facilities or the Borrowers
        as any Lender through the Administrative Agent may reasonably
        request.

       

      (b)  Escrows,
        Reserves, Fees and Expenses.
        Borrowers shall have funded all escrows and reserves and paid to the
        Administrative Agent, for the account of the Administrative Agent, its Related
        Persons or any Lender, as the case may be, all fees and all reimbursements
        of
        costs or expenses, in each case due and payable under any Loan
        Document.

       

      (c)  Consents.
        Each
        Borrower shall have received all consents and authorizations required pursuant
        to any material Contractual Obligation with any other Person and shall have
        obtained all Permits of, and effected all notices to and filings with, any
        Governmental Authority, in each case, as may be necessary in connection with
        the
        consummation of the transactions contemplated in any Loan Document or Related
        Document.

       

      (d)  Related
        Transactions.
        The
        Administrative Agent shall be satisfied that, (i) subject only the funding
        of
        the Term Loans hereunder and the use of proceeds thereof, (A) as certified
        to
        the Administrative Agent, all conditions precedent to the consummation of
        the
        applicable Acquisition will have been satisfied or duly waived with the consent
        of the Administrative Agent and such Acquisition will have been consummated
        in
        accordance with the Acquisition Agreement and (B) the applicable Collateral
        shall be free and clear of all Liens other than Liens permitted pursuant
        to
Section
        8.2,
        and
        (ii) the Required Investors’ Equity Investment will have been made.

       

       

      Section
        3.2  Determinations
        of Initial Borrowing Conditions.
        For
        purposes of determining compliance with the conditions specified in
        Section 3.1, each Lender shall be deemed to be satisfied with each document
        and each other matter required to be satisfactory to such Lender unless,
        prior
        to the Closing Date, the Permitted Acquisition Closing Date, or any subsequent
        advance under the Term Loan, the Administrative Agent receives notice from
        such
        Lender specifying such Lender’s objections and such Lender has not made
        available its Pro Rata Share of the Term Loan to be made on such
        date.

       

      
        
           

        

        
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      ARTICLE
        IV  

       

       

      


       

       

      REPRESENTATIONS
        AND WARRANTIES

       

      To
        induce
        the Lenders and the Administrative Agent to enter into the Loan Documents,
        each
        Borrower represents and warrants to each of them each of the following on
        and as
        of the Closing Date, on the Restatement Closing Date and on and as of each
        date
        on which a Permitted Acquisition shall occur, the following:

       

       

      Section
        4.1  Corporate
        Existence; Compliance with Law.
        (a) Each
        Borrower (i) is duly organized, validly existing and in good standing under
        the
        laws of the jurisdiction of its organization, (ii) is duly qualified to do
        business as a foreign entity and in good standing under the laws of each
        jurisdiction where such qualification is necessary, except where the failure
        to
        be so qualified or in good standing would not, in the aggregate, have a Material
        Adverse Effect, (iii) has all requisite power and authority and the legal
        right to own, pledge, mortgage and operate its property, to lease or sublease
        any property it operates under lease or sublease and to conduct its business
        as
        now or currently proposed to be conducted, (iv) is in compliance with its
        Constituent Documents, (v) is in compliance with all applicable Requirements
        of
        Law, except, in each case, where the failure to be in compliance would not
        have
        a Material Adverse Effect, (vi) with respect to any Facility then being
        acquired, has, or upon completion of the Acquisition and completion of any
        required post closing procedures which are preconditions thereto shall have,
        all
        necessary Permits from or by, has made all necessary filings with, and has
        given
        all necessary notices to, each Governmental Authority having jurisdiction,
        to
        the extent required for such ownership, lease, sublease, operation, occupation
        or conduct of business, except where the failure to obtain such Permits,
        make
        such filings or give such notices would not, in the aggregate, have a Material
        Adverse Effect, and (vii) is not a foreign person within the meaning of
§ 1445(f)(3) of the Code.

       

      (b)  With
        respect to any Facility then being acquired, each Facility (i) is being operated
        as an assisted living, skilled nursing, independent senior housing or
        Alzheimer’s facility, having the number of licensed beds/units as set forth on
Schedule
        4.16,
        attached hereto (as modified from time to time with Administrative Agent’s
        consent), (ii) is in conformance in all material respects with all insurance,
        reimbursement and cost reporting requirements, and, if applicable, has a
        current
        provider agreement that is in full force and effect under Medicare and Medicaid,
        and (iii) is in compliance with all applicable Requirements of Law, except,
        in
        each case, where the failure to be in compliance would not materially (x)
        impair
        the value or marketability of such Facility or (y) interfere with the ordinary
        conduct of the business conducted and proposed to be conducted at such Facility.
        There is no threatened in writing, existing or pending revocation, suspension,
        termination, probation, restriction, limitation, or nonrenewal proceeding
        by any
        third-party payor, including Medicare, Medicaid, Blue Cross, Blue Shield
        or any
        other private commercial insurance managed care and employee assistance program
        (such programs, the “Third-Party
        Payor Programs”),
        to
        which any Borrower may presently be subject with respect to any
        Facility.

       

      (c)  With
        respect to any Facility then being acquired, all Licenses necessary or desirable
        for using and operating the Facilities for the uses described in clause
        (a),
        above,
        are held by, or will be held by, Borrowers, in the name of the applicable
        Borrower, as required under applicable law, and are in full force and effect,
        or
        upon completion of the Acquisition and completion of any required post closing
        procedures which are preconditions to the issuance of 

       


      
        
          
          

        

        
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      such
        Licenses, provided,
        however,
        that if
        such Facility is being acquired pursuant to a sale/leaseback or similar
        arrangement, such Licenses may be held in the names of the prior owners or
        operators of the Facility and used by the Borrowers pursuant to such
        sale/leaseback or similar arrangement.

       

      (d)  To
        the
        Borrowers’ knowledge, with respect to any Facility then being acquired, there
        are no proceedings by any Governmental Authority or notices thereof that
        would,
        directly or indirectly, or with the passage of time (i) have a
        material adverse impact on Borrowers’ ability
        to accept and/or retain patients or residents or operate such Facility for
        its
        current use or result in the imposition of a fine, a sanction, a lower rate
        certification or a lower reimbursement rate for services rendered to eligible
        patients or residents, (ii) modify, limit or result in the transfer, suspension,
        revocation or imposition of probationary use of any of the Licenses, other
        than
        a transfer of such License to the Borrowers if such License is not already
        held
        by such Borrowers; or (iii) affect any Borrower’s continued participation in the
        Medicaid or Medicare programs or any other Third-Party Payors Programs, or
        any
        successor programs thereto.

       

      (e)  With
        respect to any Facility then being acquired, except as reviewed and approved
        by
        Administrative Agent, no Facility has received a violation, and no statement
        of
        charges or deficiencies has been made or penalty enforcement action has been
        undertaken against any Facility, Borrower or against any officer, director,
        partner, member or stockholder of any Borrower, by any Governmental Authority
        during the last five calendar years, and there have been no violations over
        the
        past five years which have threatened any Facility’s, or any Borrower’s
        certification for participation in Medicare or Medicaid or the other Third-Party
        Payor Programs.

       

      (f)  With
        respect to any Facility then being acquired, there are no current, pending
        or
        outstanding Third-Party Payor Programs reimbursement audits, appeals or
        recoupment efforts pending at any Facility, and there are no years that are
        subject to audit in respect of any Third-Party Payor Program that would,
        in each
        case, adversely affect any Borrower, other than audit rights pursuant to
        Medicare and Medicaid programs. 

       

      (g)  No
        Borrower is a participant in any federal program whereby any Governmental
        Authority may have the right to recover funds by reason of the advance of
        federal funds, including those authorized under the Hill-Burton Act (42 U.S.C.
        291, et
        seq.),
        as it
        may be amended.

       

      (h)  With
        respect to any Facility then being acquired, substantially all of the patient
        and resident care agreements conform in all material respects with the form
        patient or resident care agreements that have been delivered to Administrative
        Agent.

       

       

      Section
        4.2  Loan
        and Related Documents.
        (a)
        Power and Authority. The execution, delivery and performance by each Borrower
        of
        the Loan Documents and Related Documents to which it is a party
        (i) are
        within such Borrower’s corporate or similar powers and, at the time of execution
        thereof, have been duly authorized by all necessary corporate and similar
        action
        (including, if applicable, consent of holders of its Equity Interests), (ii)
        do
        not (A) contravene such Borrower’s Constituent Documents, (B) violate any
        applicable Requirement of Law, (C) conflict with, contravene, constitute a
        default or breach under, or result in or permit the termination or acceleration
        of, any material Contractual Obligation of any Borrower (including other
        Related
        Documents or Loan Documents) other than those that would not, in the aggregate,
        

       


      
        
          
          

        

        
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      have
        a
        Material Adverse Effect and are not created or caused by, or constitute a
        conflict, breach, default or termination or acceleration event under, any
        Loan
        Document or (D) result in the imposition of any Lien (other than a
        Permitted Lien) upon any property of any Borrower or any of its Subsidiaries
        and
        (iii) to any Borrower’s knowledge, do not require any Permit of, or filing with,
        any Governmental Authority or any consent of, or notice to, any Person, other
        than (A) with respect to the Loan Documents, the filings required to perfect
        the
        Liens created by the Loan Documents, (B) those listed on Schedule 4.2 and
        that have been, or will be prior to the Closing Date, obtained or made, copies
        of which have been, or will be prior to the Closing Date, delivered to the
        Administrative Agent, and each of which on the Closing Date will be in full
        force and effect and (C) with respect to the Acquisition, those that,
        (1) if not obtained, would not, in the aggregate, have a Material Adverse
        Effect, or (2) will be obtained upon completion of the Acquisition and
        completion of any required post closing procedures or undertakings that are
        preconditions thereto.

       

      (b) Due
        Execution, Delivery and Enforceability.
        From
        and after its delivery to the Administrative Agent, each Loan Document and
        Related Document has been duly executed and delivered to the other parties
        thereto by each Borrower party thereto, is the legal, valid and binding
        obligation of such Borrower and is enforceable against such Borrower in
        accordance with its terms.

       

      (c) Related
        Documents.
        Each
        representation and warranty in each Related Document is true and correct
        in all
        material respects and no default, or event that, with the giving of notice
        or
        lapse of time or both, would constitute a default, has occurred thereunder.
        As
        of the Closing Date, all applicable waiting periods in connection with the
        Acquisition have expired or have been terminated without any action being
        taken
        by any Governmental Authority (including any requisite waiting period (and
        any
        extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act
        of
        1976).

       

       

      Section
        4.3  Ownership
        of the Borrowers.
        The
        information set forth on the Corporate Chart is complete and accurate as
        of the
        Closing Date. All outstanding Equity Interests of each Person listed thereon
        have been validly issued, are fully paid and non-assessable (to the extent
        applicable). The Equity Interests of each Borrower are free and clear of
        all
        Liens other than the security interests created by the Loan Documents and,
        in
        the case of joint ventures, Permitted Liens. There are no Equity Equivalents
        with respect to the Equity Interests of any Borrower (other than the Parent),
        as
        of the Closing Date, except as set forth on Schedule 4.3. There are no
        Equity Equivalents with respect to the Equity Interests of Parent. There
        are no
        Contractual Obligations or other understandings to which any Borrower is
        a party
        with respect to (including any restriction on) the issuance, voting, Transfer
        or
        pledge of any Equity Interest or Equity Equivalent of any
        Borrower.

       

       

      Section
        4.4  Financial
        Statements.
        (a)
        To Borrowers’ knowledge each of (i) the audited Consolidated balance sheet of
        the Seller as at December 31, 2005 and the related Consolidated statements
        of
        income, retained earnings and cash flows of the Seller for the Fiscal Year
        then
        ended and (ii) subject to the absence of footnote disclosure and normal
        recurring year end audit adjustments, the unaudited Consolidated balance
        sheets
        of the Seller as at September 30, 2006 and the related Consolidated statements
        of income, retained earnings and cash flows of the Seller for the 3 months
        then
        ended, copies of each of which have been furnished to the Administrative
        Agent,
        fairly present in all material respects the Consolidated financial position,
        

       


      
        
          
          

        

        
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      results
        of operations and cash flow of the Seller as at the dates indicated and for
        the
        periods indicated in accordance with GAAP.

       

      (b)  Prior
        to
        the Closing Date, the Borrowers had no property (other than, in the case
        of
        Parent, the Equity Interests of the SPEs), liabilities or Contractual
        Obligations other than the Loan Documents and the Related Documents and no
        Borrower had any Subsidiary (other than, in the case of Parent, the Equity
        Interests of the SPEs). 

       

      (c)  The
        Initial Projections have been prepared by the Borrowers in light of the past
        operations of the business of the Seller and its Subsidiaries and reflect
        Projections for the 3 year period beginning December, 2006 on a quarterly
        basis
        for the first year and on a year by year basis thereafter. As of the Closing
        Date, the Initial Projections are based upon estimates and assumptions stated
        therein, all of which the Borrowers believe to be reasonable and fair in
        light
        of conditions and facts known to the Borrowers as of the Closing Date and
        reflect the good faith, reasonable and fair estimates by the Borrowers of
        the
        future Consolidated financial performance of the Parent and the other
        information Projections therein for the periods set forth therein.

       

       

      Section
        4.5  Material
        Adverse Effect. Since
        the
        Closing Date, to any Borrower’s knowledge, there have been no events,
        circumstances, developments or other changes in facts with respect to the
        Facilities or Borrowers that would, in the aggregate, have a Material Adverse
        Effect.

       

       

      Section
        4.6  Solvency.
        Both
        before and after giving effect to (a) the Term Loan made on or prior to the
        date
        this representation and warranty is made, (b) the disbursement of the proceeds
        of such Term Loan, (c) the consummation of the Related Transactions, and
        (d) the
        payment and accrual of all transaction costs in connection with the foregoing,
        the Borrowers, taken as a whole, are Solvent.

       

       

      Section
        4.7  Litigation.
        There
        are no pending (or, to the knowledge of any Borrower, threatened) actions,
        investigations, suits, proceedings, audits, claims, demands, orders or disputes
        affecting any Borrower with, by or before any Governmental Authority other
        than
        those that cannot reasonably be expected to affect the Obligations, the Loan
        Documents, the Related Documents and would not, in the aggregate, have a
        Material Adverse Effect. 

       

       

      Section
        4.8  Taxes.
        All
        federal, state, local and foreign income and franchise and other material
        tax
        returns, reports and statements (collectively, the “Tax Returns”) required to be
        filed by any Tax Affiliate have been filed with the appropriate Governmental
        Authorities in all jurisdictions in which such Tax Returns are required to
        be
        filed, all such Tax Returns are true and correct in all material respects,
        and
        all taxes, charges and other impositions reflected therein or otherwise due
        and
        payable have been paid prior to the date on which any Liability may be added
        thereto for non-payment thereof except for those contested in good faith
        by
        appropriate proceedings diligently conducted and for which adequate reserves
        are
        maintained on the books of the appropriate Tax Affiliate in accordance with
        GAAP. No Tax Return is under audit or examination by any Governmental Authority
        and no notice of such an audit or examination or any assertion of any claim
        for
        Taxes has been given or made by any Governmental Authority. Proper and accurate
        amounts have been withheld by each Tax Affiliate from their respective employees
        for all periods in full and complete compliance with the tax, social security
        and unemployment withholding provisions of applicable Requirements of Law
        and
        such withholdings have been timely paid to the respective Governmental
        Authorities.
        No Tax
        Affiliate has 

       


      
        
          
          

        

        
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      participated
        in a “reportable transaction” within the meaning of Treasury Regulation
        Section 1.6011-4(b) or has been a member of an affiliated, combined or
        unitary group other than the group of which a Tax Affiliate is the common
        parent.

       

      All
        Other
        Taxes required to be paid in connection with the transfer of the Real Property
        to Borrower and the granting of the security interest under the Loan Documents
        (including recording of the Mortgage, Mortgage Supporting Documents, and
        other
        Loan Documents required to be filed in connection with the Loan) have been
        paid
        or will be paid on the Closing Date or the Permitted Acquisition Closing
        Date,
        as applicable.

       

       

      Section
        4.9  Margin
        Regulations.
        Other than in the Related Documents, no Borrower is engaged in the business
        of
        extending credit for the purpose of, and no proceeds of any Loan or other
        extensions of credit hereunder will be used for the purpose of, buying or
        carrying margin stock (within the meaning of Regulation U of the Federal
        Reserve
        Board) or extending credit to others for the purpose of purchasing or carrying
        any such margin stock, in each case in contravention of Regulation T, U or
        X of
        the Federal Reserve Board.

       

       

      Section
        4.10  No
        Burdensome Obligations; No Defaults.
        No
        Borrower is a party to any Contractual Obligation, no Borrower has Constituent
        Documents containing obligations, and, to the knowledge of any Borrower,
        there
        are no applicable Requirements of Law, in each case the compliance with which
        would have, in the aggregate, a Material Adverse Effect. No Borrower (and,
        to
        the knowledge of each Borrower, no other party thereto) is in default under
        or
        with respect to any Contractual Obligation of any Borrower, other than those
        that would not, in the aggregate, have a Material Adverse
        Effect.

       

       

      Section
        4.11  Single
        Purpose Entity. Each
        Borrower is and has at all times since its formation been a Single Purpose
        Entity. All
        of
        the assumptions made in the non-consolidation opinion delivered on the Closing
        Date, including, but not limited to, any exhibits attached thereto, are true
        and
        correct in all respects. Each Borrower has complied with all of the assumptions
        made with respect to it in such non-consolidation opinion.

       

       

      Section
        4.12  Labor
        Matters.
        There
        are no strikes, work stoppages, slowdowns or lockouts existing, pending (or,
        to
        the knowledge of any Borrower, threatened) against or involving any Borrower,
        except, for those that would not, in the aggregate, have a Material Adverse
        Effect. Except
        as
        set forth on Schedule 4.12, as of the Closing Date, (a) there is no
        collective bargaining or similar agreement with any union, labor organization,
        works council or similar representative covering any employee of any
        Borrower, (b) no petition for certification or election of any such
        representative is existing or pending with respect to any employee of any
        Borrower and (c) no such representative has sought certification or recognition
        with respect to any employee of any Borrower.

       

       

      Section
        4.13  ERISA.
        Except
        for those that would not, in the aggregate, have a Material Adverse Effect,
        each
        Benefit Plan, and each trust thereunder, intended to qualify for tax exempt
        status under Section 401 or
        501 of
        the Code has been maintained in compliance with the requirements thereof.
        Except
        for those that would not, in the aggregate, have a Material Adverse Effect,
        (x)
        each Benefit Plan is in compliance with applicable provisions of ERISA, the
        Code
        and other Requirements of Law, (y) there are no existing or pending (or to
        the
        knowledge of any Borrower, threatened) claims (other than routine claims
        for
        benefits in the normal course), sanctions, actions, lawsuits or other
        proceedings or investigation involving any Benefit Plan to 

       


      
        
          
          

        

        
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      which
        any
        Borrower incurs or otherwise has or could have an obligation or any Liability
        and (z) no ERISA Event is reasonably expected to occur. On the Closing Date,
        no
        ERISA Event has occurred in connection with which obligations and liabilities
        remain outstanding that could reasonably be expected to have a Material Adverse
        Effect. No
        ERISA
        Affiliate would have any Withdrawal Liability as a result of a complete
        withdrawal from any Multiemployer Plan on the date this representation is
        made
        that could reasonably be expected to have a Material Adverse
        Effect.

       

       

      Section
        4.14  Environmental
        Matters.
        Except
        as
        set forth on Schedule 4.14,
        (a)
        the operations of each Borrower are and have been in compliance with all
        applicable Environmental Laws, including obtaining, maintaining and complying
        with all Permits required by any applicable Environmental Law, other than
        non-compliances that, in the aggregate, would not have a reasonable likelihood
        of resulting in Material Environmental Liabilities, (b) no Borrower is party
        to,
        and no Borrower and no real property currently (or to the knowledge of any
        Borrower previously) owned, leased, subleased, operated or otherwise occupied
        by
        or for any Borrower is subject to or the subject of, any pending (or, to
        the
        knowledge of any Borrower, threatened) order, action, investigation, suit,
        proceeding, audit, claim, demand, dispute or notice of violation or of potential
        liability or similar notice under or pursuant to any Environmental Law other
        than those that, in the aggregate, are not reasonably likely to result in
        Material Environmental Liabilities, (c) no Lien in favor of any Governmental
        Authority securing, in whole or in part, Environmental Liabilities has attached
        to any property of any Borrower and, to the knowledge of any Borrower, no
        facts,
        circumstances or conditions exist that could reasonably be expected to result
        in
        any such Lien attaching to any such property, (d) no Borrower has caused
        or
        suffered to occur a Release of Hazardous Materials at, to or from any real
        property of any Borrower and, to the knowledge of any Borrower, each such
        real
        property is free of contamination by any Hazardous Materials except for such
        Release or contamination that could not reasonably be expected to result,
        in the
        aggregate, in Material Environmental Liabilities, (e) no Borrower (i) is
        or has
        been engaged in, or has permitted any current or former tenant to engage
        in,
        operations, or (ii) knows of any facts, circumstances or conditions, including
        receipt of any information request or notice of potential responsibility
        under
        CERCLA or similar Environmental Laws, that, in the aggregate, would have
        a
        reasonable likelihood of resulting in Material Environmental Liabilities
        and (f)
        each Borrower has made available to the Administrative Agent copies of all
        existing environmental reports, reviews and audits and all documents pertaining
        to actual or potential Environmental Liabilities, in each case to the extent
        such reports, reviews, audits and documents are in their possession, custody
        or
        control.

       

       

      Section
        4.15  Intellectual
        Property.
        Each
        Borrower owns or licenses, or uses pursuant to a Management Agreement, all
        Intellectual Property that is necessary for the operations of its businesses.
        To
        the knowledge of each Borrower, (a) the conduct and operations of the businesses
        of each Borrower does not infringe, misappropriate, dilute, violate or otherwise
        impair any Intellectual Property owned by any other Person and (b) no other
        Person has contested any right, title or interest of any Borrower in, or
        relating to, any Intellectual Property, other than, in each case, as cannot
        reasonably be expected to affect the Loan Documents and the transactions
        contemplated therein and would not, in the aggregate, have a Material Adverse
        Effect. In addition, (x) there are no pending (or, to the knowledge of any
        Borrower, threatened) actions, investigations, suits, proceedings, audits,
        claims, demands, orders or disputes affecting any Borrower with respect to,
        (y)
        no judgment or order regarding any such claim has been rendered by any competent
        Governmental Authority, no settlement agreement or similar Contractual
        Obligation has been entered into by any Borrower, with respect to
        and (z)
        no Borrower knows or 

       


      
        
          
          

        

        
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      has
        any
        reason to know of any valid basis for any claim based on, any such infringement,
        misappropriation, dilution, violation or impairment or contest, other than,
        in
        each case, as cannot reasonably be expected to affect the Loan Documents
        and the
        transactions contemplated therein and would not, in the aggregate, have a
        Material Adverse Effect.

       

       

      Section
        4.16  Title;
        Real Property.
        (a)
        Set
        forth on Schedule 4.16 is, as of the Closing Date, (i) a complete and
        accurate list of all real property owned in fee simple by any Borrower or
        in
        which any Borrower owns a leasehold interest setting forth, for each such
        real
        property, the current street address (including, where applicable, county,
        state
        and other relevant jurisdictions), the record owner thereof and, where
        applicable, each lessee and sublessee thereof, (ii) any lease, sublease,
        license
        or sublicense of such real property by any Borrower and (iii) for each such
        real
        property that the Administrative Agent has requested be subject to a Mortgage
        or
        that is otherwise material to the business of any Borrower, each Contractual
        Obligation by any Borrower, whether contingent or otherwise, to Transfer
        such
        real property.

       

      (b) Each
        Borrower has good and marketable fee simple title to all owned real property
        and
        valid leasehold interests in all leased real property, and owns all personal
        property, in each case that is purported to be owned or leased by it, including
        those reflected on the most recent Financial Statements delivered by the
        Borrower, and none of such property is subject to any Lien except Permitted
        Liens.
        All such
        real and personal property represents all of the property used in the operation
        of the business located on the Real Property.

       

      (c) No
        condemnation has been commenced or, to the Borrowers’ knowledge, is contemplated
        with respect to all or any portion of any Facility or for the relocation
        of
        roadways providing access to any Facility.

       

      (d) Each
        Facility has adequate rights of access to public ways and is served by adequate
        water, sewer sanitary sewer and storm drain facilities. All public utilities
        necessary or convenient to the full use and enjoyment of each Facility is
        located in the public right-of-way abutting each Facility or in a duly recorded
        easement, and all such utilities are connected so as to serve such Facility
        without passing over other property, except to the extent such other property
        is
        subject to a recorded easement for such utility. Except as shown on the As-Built
        Surveys, all roads necessary for the full utilization of each Facility for
        its
        current purpose have been completed and dedicated to public use and accepted
        by
        all government authorities.

       

      (e) All
        real
        estate taxes and assessments, special or otherwise, which are due and payable
        with respect to each parcel of Real Property has been paid in full and there
        are
        no pending or, to Borrowers’ knowledge, proposed special or other assessments
        for public improvements or otherwise affecting the Real Property, nor are
        there
        any contemplated improvements to the Real Property that may result in such
        special or other assessments. 

       

      (f) No
        improvements on any parcel of Real Property is within a special flood hazard
        area nor is eligible for flood insurance under the U. S. Flood Disaster
        Protection Act of 1973, as amended or as a wetlands area by any governmental
        entity having jurisdiction over any Real Property.

       

      (g) The
        Real
        Property for each Facility is comprised of one (1) or more contiguous parcels
        that constitute a separate tax lot or lots and does not constitute or include
        a
        portion of any other tax lot not a part of such Real Property.

       


      
        
          
          

        

        
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      (h) To
        Borrower’s knowledge and except as expressly disclosed in any report addressing
        the physical condition of the Real Property, such Real Property, including,
        without limitation, all buildings, improvements, parking facilities, sidewalks,
        storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
        systems, electrical systems, equipment, elevators, exterior sidings and doors,
        landscaping, irrigation systems and all structural components, are in good
        condition, order and repair in all material respects; to Borrower’s knowledge
        and except as disclosed in such report, there exists no structural or other
        material defects or damages in or to the Real Property, whether latent or
        otherwise, and Borrower has not received any written notice from any insurance
        company or bonding company of any defects or inadequacies in the Property,
        or
        any part thereof, which would adversely affect the insurability of the same
        or
        cause the imposition of extraordinary premiums or charges thereon or of any
        termination or threatened termination of any policy of insurance or bond.
        

       

      (i) Each
        Lease associated with a Facility, other than any resident care agreement
        or any
        Lease pursuant to which the Facility is leased back to its prior owner after
        purchase by the Borrower, is terminable upon 30 days’ notice by Borrower to the
        tenant thereunder.

       

       

      Section
        4.17  Full
        Disclosure.
        The
        information prepared or furnished by or on behalf of any Borrower in connection
        with any Loan Document or Related Document (including the information contained
        in any Financial Statement or Disclosure Document), does not contain any
        untrue
        statement of a material fact or omit to state a material fact necessary to
        make
        the statements contained therein, in light of the circumstances when made,
        not
        misleading; provided, however, that Projections contained therein are not
        to be
        viewed as factual and that actual results during the periods covered thereby
        may
        differ from the results set forth in such Projections by a material amount.
        All
        Projections that are part of such information (including those set forth
        in any
        Projections delivered subsequent to the Closing Date) are based upon good
        faith
        estimates and stated assumptions believed to be reasonable and fair as of
        the
        date made in light of conditions and facts then known and, as of such date,
        reflect good faith, reasonable and fair estimates of the information projected
        for the periods set forth therein. All facts known to any Borrower and material
        to an understanding of the financial condition, business, property or prospects
        of the Borrower taken as one enterprise have been disclosed to the
        Lenders.
        The
        foregoing representation shall be limited to the Borrowers’ knowledge with
        respect to any reports or information furnished by a third party unless such
        third party has been engaged by the Borrowers to prepare such information
        for or
        on behalf of the Borrowers.

       

       

      Section
        4.18  Operation.
        Each
        Borrower shall, and shall cause the manager under any Management Agreement
        to,
        (i) promptly perform and/or observe all of the covenants and agreements required
        to be performed and observed by it under the applicable Management Agreement
        in
        all material respects and do all things necessary to preserve and to keep
        unimpaired its material rights thereunder; (ii) promptly notify the
        Administrative Agent of any “event of default” under the applicable Management
        Agreement of which it is aware; (iii) promptly deliver to the Administrative
        Agent a copy of each financial statement, capital expenditures plan, property
        improvement plan and any other accounting report received by it under the
        applicable Management Agreement; and (iv) enforce in a commercially reasonable
        manner the performance and observance of all of the material covenants and
        agreements required to be performed and/or observed by such Manager under
        the
        applicable Management Agreement.

       


      
        
          
          

        

        
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      Section
        4.19  Estoppel
        Certificates

       

      .
        Borrowers shall, from time to time, upon thirty (30) days’ prior written request
        from the Administrative Agent, execute, acknowledge and deliver to the
        Administrative Agent, an Officer’s Certificate, stating that this Agreement and
        the other Loan Documents are unmodified and in full force and effect (or,
        if
        there have been modifications, that this Agreement and the other Loan Documents
        are in full force and effect as modified and setting forth such modifications),
        stating the amount of accrued and unpaid interest and the outstanding principal
        amount of the Note and containing such other information with respect to
        the
        Borrowers, the Property and the Loan as the Administrative Agent shall
        reasonably request. The estoppel certificate shall also state either that
        to any
        Borrower’s knowledge no Default exists hereunder or, if any Default shall exist
        hereunder, specify such Default and the steps being taken to cure such
        Default.

       

       

      ARTICLE
        V  

       

       

      


       

       

      FINANCIAL
        COVENANTS

       

      Each
        Borrower agrees with the Lenders and the Administrative Agent to the following,
        as long as any Obligation or any Commitment remains outstanding:

       

       

      Section
        5.1  Minimum
        Consolidated Project Yield

       

      .
        Parent
        shall not have, on the last day of each period set forth below, a Consolidated
        Project Yield less than the minimum ratio set forth opposite such
        period:

       

      
        	
                 

                PERIOD

                 

              	
                 

                MINIMUM
                  FACILITY YIELD

                 

              
	
                 

                The
                  three (3) month period ending

                 

                 

                December
                  31, 2008

                 

              	
                 

                10.00%

                 

              
	
                 

                The
                  six (6) month period ending

                 

                 

                March
                  31, 2009

                 

              	
                10.00%

              
	
                 

                The
                  nine (9) month period ending

                 

                 

                June
                  30, 2009

                 

              	
                10.00%

              
	
                 

                The
                  twelve (12) month period ending

                 

                 

                September
                  30, 2009 and each twelve (12) month period ending each Fiscal Quarter
                  thereafter

                 

              	
                10.00%

              


      

      


       

      ARTICLE
        VI  

       

       

      


       

       

      REPORTING
        COVENANTS

       

      Each
        Borrower agrees with the Lenders and the Administrative Agent to each of
        the
        following, as long as any Obligation or any Commitment remains
        outstanding:

       

      
        
           

        

        
          54

          
            

          

        

        
           

        

      

       

      Section
        6.1  Financial
        Statements.
        The
        Borrowers shall deliver to the Administrative Agent and MLC each of the
        following:

       

      (a)  Monthly
        Reports.
        (i) As
        soon as available, and in any event within 30 days after the end of each
        of the
        first two fiscal months in each Fiscal Quarter, the Consolidated and
        consolidating unaudited balance sheet of Parent as of the close of such fiscal
        month and related Consolidated and consolidating statements of income and
        cash
        flow for such fiscal month and that portion of the Fiscal Year ending as
        of the
        close of such fiscal month, setting forth in comparative form the figures
        for
        the corresponding period in the prior Fiscal Year, in each case certified
        by a
        Responsible Officer of the Parent as fairly presenting in all material respects
        the Consolidated financial position, results of operations and cash flow
        of
        Parent as at the dates indicated and for the periods indicated in accordance
        with GAAP (subject to the absence of footnote disclosure and normal year-end
        audit adjustments).

       

      (ii)
        As
        soon as available, and in any event within 30 days after the end of each
        calendar month, for such calendar month, statements of the operations of
        each
        Facility (including a current occupancy report, operating statement) as of
        the
        last day of such calendar month; and aged accounts receivable.

       

      (b)  Quarterly
        Reports.
        As soon
        as available, and in any event within 45 days after the end of each of the
        first
        three Fiscal Quarters of each Fiscal Year, (i) the Consolidated and
        consolidating unaudited balance sheet of Parent as of the close of such Fiscal
        Quarter and related Consolidated and consolidating statements of income and
        cash
        flow for such Fiscal Quarter and that portion of the Fiscal Year ending as
        of
        the close of such Fiscal Quarter, setting forth in comparative form the figures
        for the corresponding period in the prior Fiscal Year and the figures contained
        in the latest Projections, in each case certified by a Responsible Officer
        of
        the Parent as fairly presenting in all material respects the Consolidated
        financial position, results of operations and cash flow of Parent as at the
        dates indicated and for the periods indicated in accordance with GAAP (subject
        to the absence of footnote disclosure and normal year-end audit
        adjustments). 

       

      (c)  Annual
        Reports.
        As soon
        as available, and in any event within 90 days after the end of each Fiscal
        Year,
        the Consolidated and consolidating balance sheet of the Parent as of the
        end of
        such year and related Consolidated and consolidating statements of income,
        stockholders’ equity and cash flow for such Fiscal Year, each prepared in
        accordance with GAAP, together with a certification by the Borrowers’
Accountants that (i) such Consolidated Financial Statements fairly present
        in
        all material respects the Consolidated financial position, results of operations
        and cash flow of the Parent as the dates indicated and for the periods indicated
        therein in accordance with GAAP without qualification as to the scope of
        the
        audit or as to going concern and without any other similar qualification
        and
        (ii) in the course of the regular audit of the businesses of the Borrowers,
        which audit was conducted in accordance with the standards of the United
        States’
Public Company Accounting Oversight Board (or any successor entity), such
        Borrowers’ Accountants have obtained no knowledge that a Default in respect of
        any financial covenant contained in Article V
        is
        continuing or, if in the opinion of the Borrowers’ Accountants such a Default is
        continuing, a statement as to the nature thereof.

       

      (d)  Compliance
        Certificate.
        Together with each delivery of any Financial Statement pursuant to clause
        (b)
        or
(c)
        above, a
        Compliance Certificate duly executed by a Responsible Officer of the
Parent
        that, among other things, (i) shows in reasonable detail the 

       


      
        
          
          

        

        
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      calculations
        used in determining the Consolidated Project Yield and, if delivered together
        with any Financial Statement pursuant to clause
        (c)
        above,
        the calculations used in determining Excess Cash Flow, (ii) demonstrates
        compliance, or failure to comply, if applicable, with each financial covenant
        contained in Article V
        that is
        tested at least on a quarterly basis and (iii) states that no Event of Default
        is continuing as of the date of delivery of such Compliance Certificate or,
        if a
        Event of Default is continuing, states the nature thereof and the action
        that
        the relevant Borrower proposes to take with respect thereto.

       

      (e)  Corporate
        Chart and Other Collateral Updates.
        As part
        of the Compliance Certificate delivered pursuant to clause
        (d)
        above,
        each in form and substance reasonably satisfactory to the Administrative
        Agent,
        a certificate by a Responsible Officer of the Parent that (i) the Corporate
        Chart attached thereto (or the last Corporate Chart delivered pursuant to
        this
clause
        (e))
        is
        correct and complete as of the date of such Compliance Certificate, (ii)
        the
        Borrowers have delivered all documents (including updated schedules as to
        locations of Collateral and acquisition of Intellectual Property or real
        property) they are required to deliver pursuant to any Loan Document on or
        prior
        to the date of delivery of such Compliance Certificate and (iii) complete
        and correct copies of all documents modifying any term of any Constituent
        Document of any Borrower or any Subsidiary or joint venture thereof on or
        prior
        to the date of delivery of such Compliance Certificate have been delivered
        to
        the Administrative Agent or are attached to such certificate.

       

      (f)  Additional
        Projections.
        As soon
        as available and in any event not later than 30 days after the end of each
        Fiscal Year, any significant revisions to, (i) the annual business plan of
        the
        Borrowers for the Fiscal Year next succeeding such Fiscal Year and
        (ii) forecasts prepared by management of the Parent (A) for each Fiscal
        Quarter in such next succeeding Fiscal Year and (B) for each other succeeding
        Fiscal Year through the Fiscal Year containing the Scheduled Maturity Date,
        in
        each case including in such forecasts (x) a projected year-end Consolidated
        balance sheet, income statement and statement of cash flows, (y) a statement
        of
        all of the material assumptions on which such forecasts are based and
        (z) substantially the same type of financial information as that contained
        in the Initial Projections.

       

      (g)  Management
        Discussion and Analysis.
        Together with each delivery of any Compliance Certificate pursuant to
clause
        (d)
        above, a
        discussion and analysis of the financial condition and results of operations
        of
        the Borrowers for the portion of the Fiscal Year then elapsed and discussing
        the
        reasons for any significant variations from the Projections for such period
        and
        the figures for the corresponding period in the previous Fiscal
        Year.

       

      (h)  Intercompany
        Loan Balances.
        Together with each delivery of any Compliance Certificate pursuant to
clause
        (d)
        above, a
        summary of the outstanding balances of all significant intercompany Indebtedness
        as of the last day of the Fiscal Quarter covered by such Financial Statement,
        certified as complete and correct by a Responsible Officer of the Parent
        as part
        of the Compliance Certificate delivered in connection with such Financial
        Statements.

       

      (i)  Audit
        Reports, Management Letters, Etc.
        Together with each delivery of any Financial Statement for any Fiscal Year
        pursuant to clause
        (c)
        above,
        copies of each management letter, audit report or similar letter or report
        received by any Borrower from any independent registered certified public
        accountant (including the Borrowers’ Accountants) in connection with such
        Financial Statements or any audit thereof, each certified to be complete
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      correct
        copies by a Responsible Officer of the Parent as part of the Compliance
        Certificate delivered in connection with such Financial Statements.

       

      (j)  Insurance.
        Together with each delivery of any Financial Statement for any Fiscal Year
        pursuant to clause
        (c)
        above,
        each in form and substance satisfactory to the Administrative Agent and
        certified as complete and correct by a Responsible Officer of the Parent
        as part
        of the Compliance Certificate delivered in connection with such Financial
        Statements, to the extent that there have been changes in any such material
        insurance coverage since last delivered to the Administrative Agent, a summary
        of all changes to any material insurance coverage maintained as of the date
        thereof by any Borrower, together with such other related documents and
        information as the Administrative Agent may reasonably require.

       

       

      Section
        6.2  Other
        Events.
        The
        Borrowers shall give the Administrative Agent and MLC notice of each of the
        following (which may be made by telephone if promptly confirmed in writing)
        promptly after any Responsible Officer of any Borrower knows or has reason
        to
        know of it: (a)(i) any Default and (ii) any event that would have a
        material adverse impact on any Borrower or any Facility, specifying, in each
        case, the nature and anticipated effect thereof and any action proposed to
        be
        taken in connection therewith, (b) any event (other than any event involving
        loss or damage to property) and any material Property Loss Event reasonably
        expected to result in a mandatory payment of the Obligations pursuant to
        Section 2.4, stating the material terms and conditions of such transaction
        and estimating the Net Cash Proceeds thereof, (c) the commencement of, or
        any
        material developments in, any action, investigation, suit, proceeding, audit,
        claim, demand, order or dispute with, by or before any Governmental Authority
        affecting any Borrower or any property of any Borrower that (i) seeks
        injunctive or similar relief, (ii) in the reasonable judgment of such
        Borrower, exposes any Borrower to liability in an aggregate amount in excess
        of
        $100,000 or (iii) if adversely determined would have a material adverse impact
        on any Borrower or any Facility, and (d) the acquisition of any material
        real
        property or the entering into any material lease (and for purposes hereof,
        resident care agreements shall not be deemed to be material
        leases).

       

       

      Section
        6.3  Copies
        of Notices and Reports.
        The
        Borrowers shall promptly deliver to the Administrative Agent and MLC copies
        of
        each of the following: (a) all reports that Parent transmits to its security
        holders generally, (b) all documents that any Borrower files with the Securities
        and Exchange Commission, the National Association of Securities Dealers,
        Inc.,
        any securities exchange or any Governmental Authority exercising similar
        functions, (c) all press releases not made available directly to the general
        public, and (d) any material document transmitted or received pursuant to,
        or in
        connection with, the Related Transaction or any Contractual Obligation governing
        Indebtedness of any Borrower.

       

       

      Section
        6.4  Taxes.
        The
        Borrowers shall give the Administrative Agent and MLC notice of each of the
        following (which may be made by telephone if promptly confirmed in writing)
        promptly after any Responsible Officer of any Borrower knows or has reason
        to
        know of it: (a) the creation, or filing with the IRS or any other Governmental
        Authority, of any Contractual Obligation or other document extending, or
        having
        the effect of extending, the period for assessment or collection of any taxes
        with respect to any Tax Affiliate and (b) the creation of any Contractual
        Obligation of any Tax Affiliate, or the receipt of any request directed to
        any
        Tax Affiliate, to make any adjustment under Section 481(a) of the Code, by
        reason of a change in accounting method or otherwise, which would have a
        Material Adverse Effect.

       

       

      
        
           

        

        
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      Section
        6.5  Labor
        Matters.
        The
        Borrowers shall give the Administrative Agent and MLC notice of each of the
        following (which may be made by telephone if promptly confirmed in writing),
        promptly after, and in any event within 30 days after any Responsible Officer
        of
        any Borrower knows or has reason to know of it: (a) the commencement of any
        material labor dispute to which any Borrower is or may become a party, including
        any strikes, lockouts or other disputes relating to any of such Person’s plants
        and other facilities and (b) the incurrence by any Borrower of any Worker
        Adjustment and Retraining Notification Act or related or similar liability
        incurred with respect to the closing of any plant or other facility of any
        such
        Borrower (other than, in the case of this clause (b), those that would not,
        in
        the aggregate, have a material adverse impact on any Borrower or any
        Facility).

       

       

      Section
        6.6  ERISA
        Matters.
        In
        the event a Borrower knows or has reason to know thereof, such Borrower shall
        give the Administrative Agent and MLC (a) on or prior to any filing by any
        ERISA Affiliate of any notice of intent to terminate any Title IV Plan, a
        copy of such notice and (b) promptly, and in any event within 30 days, after
        any
        Responsible Officer of any ERISA Affiliate knows or has reason to know that
        a
        request for a minimum funding waiver under Section 412 of the Code has been
        filed with respect to any Title IV Plan or Multiemployer Plan, a notice
        (which may be made by telephone if promptly confirmed in writing) describing
        such waiver request and any action that any ERISA Affiliate proposes to take
        with respect thereto, together with a copy of any notice filed with the PBGC
        or
        the IRS pertaining thereto.

       

       

      Section
        6.7  Environmental
        Matters.
        (a)The
        Borrowers shall provide the Administrative Agent and MLC notice of each of
        the
        following (which may be made by telephone if promptly confirmed by the
        Administrative Agent in writing) promptly after any Responsible Officer of
        any
        Borrower knows or has reason to know of it (and, upon reasonable request
        of the
        Administrative Agent, documents and information in connection
        therewith):
        (i)(A) unpermitted
        Releases, (B) the receipt by any Borrower of any notice of violation of or
        potential liability or similar notice under, or the existence of any condition
        that could reasonably be expected to result in violations of or liabilities
        under, any Environmental Law or (C) the commencement of, or any material
        change
        to, any action, investigation, suit, proceeding, audit, claim, demand, dispute
        alleging a violation of or liability under any Environmental Law, that, for
        each
        of clauses (A), (B) and (C) above (and, in the case of clause (C), if
        adversely determined), could reasonably be expected to result in Material
        Environmental Liabilities, and (ii) the receipt by any Borrower of
        notification that
        any
        property of any Borrower is subject to any Lien in favor of any Governmental
        Authority securing, in whole or in part, Environmental Liabilities.

       

      (b) Upon
        request of the Administrative Agent, each Borrower, as applicable, shall
        provide
        the Administrative Agent a report containing an update as to the status of
        any
        environmental, health or safety compliance, hazard or liability issue identified
        in any document, in each case, delivered to any Secured Party pursuant to
        any
        Loan Document or as to any condition reasonably believed by the Administrative
        Agent to result in Material Environmental
        Liabilities.

       

       

      Section
        6.8  Other
        Information.
        Each
        Borrower, as applicable, shall provide the Administrative Agent and MLC with
        such other documents and information with respect to the business, property,
        condition (financial or otherwise), financial or corporate or similar affairs
        or
        operations of such Borrower as the Administrative Agent or such Lender through
        the Administrative Agent may from time to time reasonably request; provided,
        however, Borrower shall have no obligation to provide any Constituent Documents
        or financial reports of any Person 

       


      
        
          
          

        

        
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      owning
        any Equity Interests in the Parent, except to the extent required to evidence
        compliance with Article VIII.

       

       

      ARTICLE
        VII  

       

       

      


       

       

      AFFIRMATIVE
        COVENANTS

       

      Each
        Borrower agrees with the Lenders and the Administrative Agent to each of
        the
        following, as long as any Obligation or any Commitment remains
        outstanding:

       

       

      Section
        7.1  Maintenance
        of Corporate Existence.
        Each
        Borrower shall
        (a) preserve and maintain its legal existence as a Single Purpose Entity,
        except in the consummation of transactions expressly permitted by Sections
        8.4
        and 8.7, and (b) preserve and maintain it rights (charter and statutory),
        privileges, franchises and Permits necessary or desirable in the conduct
        of its
        business, except, in the case of this clause (b), where the failure to do
        so
        would not have a Material Adverse Effect on any Borrower or any
        Facility.

       

       

      Section
        7.2  Compliance
        with Laws and Healthcare Matters, Etc.
        (a) Each
        Borrower shall comply with all applicable Requirements of Law, Contractual
        Obligations and Permits, except for such failures to comply that would not
        have
        a material adverse impact on any Borrower or any Facility. 

       

      (b) Without
        limiting the generality of the forgoing or any other provision of this
        Agreement, each Borrower and their employees and contractors (other than
        contracted agencies) in the exercise of their duties on behalf of any Borrower
        (with respect to its operation of the Facilities) shall be in compliance
        with
        all applicable Requirements of Law relating to patient healthcare and/or
        patient
        healthcare information, including without limitation (to the extent that
        any
        Borrower is a “covered entity” as defined therein) the Health Insurance
        Portability and Accountability Act of 1996, as amended, and the rules and
        regulations promulgated thereunder (“HIPAA”)
        (collectively, “Healthcare
        Laws”)).
        Each
        Borrower shall maintain in all material respects all records required to
        be
        maintained by any Governmental Authority or otherwise under the Healthcare
        Laws.
        Each Borrower shall maintain all Governmental Approvals necessary under
        applicable Requirements of Law to own and/or operate the Facilities, as
        applicable (including such Governmental Approvals as are required under such
        the
        Healthcare Laws). 

       

      (c) Intentionally
        Omitted.

       

      (d) If
        required under applicable Requirements of Law, each Borrower shall maintain
        in
        full force and effect a valid certificate of need or similar certificate,
        license, or approval issued by the State Regulator for the requisite number
        of
        licensed beds and units in the Facilities (as shown on Schedule
        4.16,
        attached hereto), and a provider agreement or other required documentation
        of
        approved provider status for each provider payment or reimbursement program
        listed in Schedule
        7.2,
        attached hereto. All required Government Approvals necessary for operation
        of
        the Facilities are listed on Schedule
        7.2
        hereto
        (collectively with all certificates of need, if applicable, the “Licenses”).
        Each
        Borrower shall operate the Facilities in accordance with and shall maintain
        in
        full force and effect, all Licenses. True and complete copies of the Licenses
        have been delivered to Administrative Agent.

       


      
        
          
          

        

        
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      (e) Each
        Facility has in full force and effect all necessary Medicare and Medicaid
        provider agreements and similar agreements with other third party payors
        and
        shall be operated in compliance with all requirements for participation in
        all
        Medicare, Medicaid, Blue Cross and/or Blue Shield, and any other private
        commercial insurance managed care and employee assistance program (such
        programs, the “Third-Party
        Payor Programs”)
        Third-Party Payor Programs.

       

      (f) No
        Borrower, other than in the normal course of business, shall change the terms
        of
        any Third-Party Payor Program now or hereinafter in effect or their normal
        billing payment or reimbursement policies and procedures with respect thereto
        (including the amount and timing of finance charges, fees and write-offs).
        All
        cost reports and financial reports submitted by any Borrower to any third
        party
        payor will be materially accurate and complete and have not been and will
        not be
        misleading in any material respects and all patient or resident records,
        including patient or resident trust fund accounts, will remain true and correct
        in all material respects. 

       

      (g) Intentionally
        Omitted.

       

      (h) No
        patient or resident care agreements entered into after the Permitted Acquisition
        Closing Date for such Facility, shall deviate in any material adverse respect
        from the form patient or resident care agreements which have been delivered
        to
        Administrative Agent, except to the extent necessary to comply with applicable
        law.

       

       

      Section
        7.3  Payment
        of Obligations.
        Each
        Borrower shall pay or discharge before they become delinquent (a) all material
        claims, taxes, assessments, charges and levies imposed by any Governmental
        Authority and (b) all other lawful claims that if unpaid would, by the operation
        of applicable Requirements of Law, become a Lien upon any property of any
        Borrower, except, in each case, for those whose amount or validity is being
        contested in good faith by proper proceedings diligently conducted and for
        which
        adequate reserves are maintained by the appropriate Borrower.

       

       

      Section
        7.4  Maintenance
        of Property.
        Each
        Borrower shall maintain and preserve, in compliance with all Requirements
        of
        Law, (a) in good working order and condition all of its property necessary
        in
        the conduct of its business and (b) all rights, permits, licenses, approvals
        and
        privileges (including all Permits) necessary, used or useful, whether because
        of
        its ownership, lease, sublease or other operation or occupation of property
        or
        other conduct of its business, and shall make all necessary or appropriate
        filings with, and give all required notices to, Government Authorities, except
        for such failures to maintain and preserve the items set forth in clauses
        (a)
        and (b) above for each Facility, that would not materially (x) impair the
        value
        or marketability of such Facility or (y) interfere with the ordinary conduct
        of
        the business conducted and proposed to be conducted at such
        Facility.

       

       

      Section
        7.5  Maintenance
        of Insurance.
        (a)
        Property.
        The
        Borrowers shall keep the Real Properties insured against damage by fire and
        the
        other hazards covered by a standard extended coverage and “special perils”
insurance policy (including a separate policy for broad form boiler and
        machinery coverage (without exclusion for explosion)) for the full insurable
        value thereof, the
        term
“full insurable value” to mean the actual replacement cost of the improvements
        and the personal property (without taking into account depreciation or
        co-insurance), and shall maintain such other casualty insurance as reasonably
        required by the 

       


      
        
          
          

        

        
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      Administrative
        Agent, including, without limitation, ordinance or law coverage, in amounts
        and
        in form approved by the Administrative Agent as of the Closing Date which
        amounts and form shall not be changed without the prior written consent of
        the
        Administrative Agent. The Borrowers shall keep the Facilities insured against
        loss by flood if any Facility is located in an area identified by the Federal
        Emergency Management Agency as an area having special flood hazards and in
        which
        flood insurance has been made available under the National Flood Insurance
        Act
        of 1968, the Flood Disaster Protection Act of 1973 and the National Flood
        Insurance Reform Act of 1994 (and any successor acts thereto) in an amount
        at
        least equal to the amount approved by the Administrative Agent as of the
        Closing
        Date. The proceeds of insurance paid on account of any damage or destruction
        to
        any Facility shall be paid to the Administrative Agent to be applied as provided
        in Section 2.6(b).

       

      (b) Liability.
        The
        Borrowers shall maintain (i) commercial general liability insurance with
        respect to the Facilities; (ii) worker’s compensation insurance and
        employer’s liability insurance covering employees at the Facilities employed by
        the Borrowers (to the extent required, and in the amounts required by applicable
        laws); (iii) business interruption insurance, including use and occupancy,
        rental income loss and extra expense, against all periods covered by the
        Borrowers’ property insurance; (iv) umbrella liability, (v) builder’s
        risk insurance, as applicable, and (vi) Terrorism insurance (subject to the
        requirements of this Section
        7.5).
        All of
        the above shall be maintained at all times during the term of the Loan with
        coverages, in the amounts and forms and with limits approved by the
        Administrative Agent as of the Closing Date which amounts, limits and form
        shall
        not be changed or reduced without the prior written consent of the
        Administrative Agent. Without limiting the foregoing and notwithstanding
        anything to the contrary contained in this Agreement, if on the Closing Date,
        Terrorism is an exclusion from coverage in any such insurance policy with
        respect to any Facility, then the Borrowers shall, upon the Administrative
        Agent’s request, obtain a separate policy insuring specifically against
        Terrorism; provided, that such coverage is (A) customarily obtained by owners
        of
        property of similar size and quality of such Facility and (B) readily available
        at a cost that, in Administrative Agent’s reasonable opinion, is commercially
        reasonable.

       

      (c) Intentionally
        Omitted.
        

       

      (d) Form
        and Quality.
        All
        insurance policies shall be endorsed in form and substance acceptable to
        the
        Administrative Agent to name the Administrative Agent as an additional insured,
        loss payee or mortgagee thereunder, as its interest may appear, with loss
        payable to the Administrative Agent, without contribution, under a standard
        New
        York (or local equivalent) mortgagee clause. All such insurance policies
        and
        endorsements shall be fully paid for and contain such provisions and expiration
        dates and be in such form and issued by such insurance companies licensed
        to do
        business in the State where each Facility is located, with a rating of “A-IX” or
        better as established by Best’s Rating Guide (or an equivalent rating approved
        in writing by the Administrative Agent). Each policy shall provide that such
        policy may not be cancelled or materially changed except upon thirty (30)
        days’
prior written notice (or ten (10) days’ prior written notice if for non-payment)
        of intention of non-renewal, cancellation or material change to the
        Administrative Agent and that no act or thing done by the Borrowers shall
        invalidate any policy as against the Administrative Agent. The Borrowers
        shall
        deliver copies of all original policies certified to the Administrative Agent
        by
        the insurance company or authorized agent as being true copies, together
        with
        the endorsements required hereunder. The proceeds of insurance policies coming
        into the possession of the Administrative Agent shall be deemed trust funds,
        and
        the Administrative Agent shall be entitled to apply such proceeds as herein
        provided. 

       


      
        
          
          

        

        
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      The
        Borrowers shall not maintain any separate or additional property insurance
        which
        is contributing in the event of loss unless it is properly endorsed and
        otherwise satisfactory to the Administrative Agent in all respects.

       

      (e) Adjustments.
        The
        Borrowers shall give immediate written notice of any loss to the insurance
        carrier and to the Administrative Agent. During any Event of Default, the
        Borrowers hereby irrevocably authorize and empower the Administrative Agent,
        as
        attorney-in-fact for the Borrowers coupled with an interest, to make proof
        of
        loss, to adjust and compromise any claim under insurance policies, to appear
        in
        and prosecute any action arising from such insurance policies, to collect
        and
        receive insurance proceeds, and to deduct therefrom the Administrative Agent’s
        reasonable expenses incurred in the collection of such proceeds. Nothing
        contained in this Section 7.5,
        however, shall require the Administrative Agent to incur any expense or take
        any
        action hereunder, provided if the Administrative Agent commences to make
        proof
        of loss, adjust or compromise any such claim, then it shall be obligated
        to
        complete same.

       

      (f) The
        Administrative Agent’s Right to Purchase Insurance.
        In the
        event the Borrowers fail to provide the Administrative Agent with evidence
        of
        the insurance coverage required by this Agreement, upon notice to Borrowers,
        the
        Administrative Agent may purchase insurance at the Borrowers’ expense to protect
        the Administrative Agent’s interests in the Facilities. This insurance may, but
        need not, protect the Borrowers’ interests. The coverage purchased by the
        Administrative Agent may not pay any claim made by any Borrower or any claim
        that is made against any Borrower in connection with the Facilities. The
        Borrowers may later cancel, or request the Administrative Agent to cancel,
        which
        the Administrative Agent shall promptly do, any insurance purchased by the
        Administrative Agent, but only after providing the Administrative Agent with
        evidence that the Borrowers have obtained insurance as required by this
        Agreement. If the Administrative Agent purchases insurance for the Facilities,
        the Borrowers will be responsible for all out-of-pocket costs of such insurance
        (regardless of whether or not Borrower is able to procure insurance at a
        lower
        cost), including interest and other charges imposed by the Administrative
        Agent
        in connection with the placement of the insurance, until the effective date
        of
        the cancellation or expiration of the insurance. The costs of the insurance
        may
        be added to the Loan, and the Administrative Agent shall provide a copy of
        the
        policy to the Borrowers. 

       

       

      Section
        7.6  Keeping
        of Books.
        The
        Borrowers shall keep proper books of record and account, in which full, true
        and
        correct entries shall be made in accordance with GAAP and all other applicable
        Requirements of Law of all financial transactions and the assets and business
        of
        each Borrower.

       

       

      Section
        7.7  Access
        to
        Books and Property.
        Each
        Borrower shall permit the Administrative Agent and MLC, at any reasonable
        time
        during normal business hours and with reasonable advance notice (except that,
        during the continuance of an Event of Default, no such notice shall be required)
        to (a) visit and, subject to the rights of the tenants under the Leases,
        inspect
        the property of each Borrower including, without limitation, each Facility,
        and
        examine and make copies of and abstracts from, the corporate (and similar),
        financial, operating and other books and records of each Borrower, and (b)
        discuss the affairs, finances and accounts of each Borrower with any officer
        or
        director of any Borrower;
        provided, however, so long as no Default then exists, the combined total
        of such
        visits and inspections by Administrative Agent and MLC shall not exceed more
        than two (2) such visits or inspections in any 12 month period.

       

       

      
        
           

        

        
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      Section
        7.8  Environmental.
        Each
        Borrower shall comply with, and maintain its real
        property, whether owned, leased, subleased or otherwise operated or occupied,
        in
        compliance with, all applicable Environmental Laws (including by implementing
        any Remedial Action necessary to achieve such compliance or that is required
        by
        orders and directives of any Governmental Authority) except for failures
        to
        comply that would not, in the aggregate, have a material adverse impact on
        any
        Borrower or any Facility. Without limiting the foregoing, if an Event of
        Default
        is continuing or if the Administrative Agent at any time has a reasonable
        basis
        to believe that there exist violations of Environmental Laws by any Borrower
        or
        that there exist any Environmental Liabilities, in each case, that would
        have a
        material adverse impact on any Borrower or any Facility, then such Borrower
        shall, promptly upon receipt of request from the Administrative Agent, cause
        the
        performance of, and allow the Administrative Agent and its Related Persons
        access to such Real Property for the purpose of conducting, by reputable
        environmental consulting firms, such environmental audits and assessments,
        including, if recommended by a phase I environmental assessment, subsurface
        sampling of soil and groundwater, and cause the preparation of such reports,
        in
        each case as the Administrative Agent may from time to time reasonably request.
        Such audits, assessments and reports shall be conducted and prepared only
        by
        reputable environmental consulting firms reasonably acceptable to the
        Administrative Agent and shall be in form and substance reasonably acceptable
        to
        the Administrative Agent.

       

       

      Section
        7.9  Use
        of
        Proceeds.
        The
        proceeds of the Loans shall be used by the Borrowers (and, to the extent
        distributed to them by the Borrowers, each other Borrower) solely (a) to
        consummate the Acquisitions and for the payment of related transaction costs,
        fees and expenses, (b) for the payment of transaction costs, fees and expenses
        incurred in connection with the Loan Documents and the transactions contemplated
        therein, and (c) for the reserves and distribution thereof as contemplated
        by
        Section 2.1(b).

       

       

      Section
        7.10  Additional
        Collateral,
        Subsidiaries and Further Assurances.
        To the
        extent not delivered to the Administrative Agent on or before the Closing
        Date
        (including in respect of any Permitted Acquisition or after-acquired property
        and Persons that become Subsidiaries of any Borrower after the Closing Date),
        each Borrower shall, promptly, do each of the following, unless otherwise
        agreed
        by the Administrative Agent:

       

      (a)  deliver
        to the Administrative Agent such modifications to the terms of the Loan
        Documents (or, to the extent applicable as determined by the Administrative
        Agent, such other documents), in each case in form and substance reasonably
        satisfactory to the Administrative Agent and as the Administrative Agent
        deems
        necessary or advisable in order to ensure the following:

       

      (i)  each
        Subsidiary of any Borrower shall become a Borrower under this Agreement and
        shall assume all of the Obligations hereunder and be bound as if it had been
        an
        original signatory hereto;
        and

       

      (ii)  each
        Borrower (including any Person required to become a Borrower pursuant to
        clause
        (i)
        above)
        shall effectively grant to the Administrative Agent, for the benefit of the
        Secured Parties, a valid and enforceable security interest in all of its
        real
        and personal property, including all of its Equity Interests and Equity
        Equivalents and other securities, as security for the Obligations of such
        Borrower.

       

      
        
           

        

        
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      (b)  deliver
        to the Administrative Agent all documents, if any, representing all Equity
        Interests, Equity Equivalents and other securities pledged pursuant to the
        documents delivered pursuant to clause
        (a)
        above,
        together with undated powers or endorsements duly executed in
        blank;

       

      (c)  deliver
        to the Administrative Agent a Mortgage on any real property owned or leased
        by
        any Borrower, together with all Mortgage Supporting Documents relating thereto
        and shall comply with the conditions set forth in Sections
        3.1(a)
        with
        respect thereto; 

       

      (d)  to
        take
        all other actions, or cause the Permitted Investors to take all actions,
        reasonably necessary or advisable to ensure the validity or continuing validity
        of any guaranty for any Obligation or any Lien securing any Obligation, to
        perfect, maintain, evidence or enforce any Lien securing any Obligation or
        to
        ensure such Liens have the same priority as that of the Liens on similar
        Collateral set forth in the Loan Documents executed on the Closing Date,
        including the filing of UCC financing statements in such jurisdictions as
        may be
        required by the Loan Documents or applicable Requirements of Law or as the
        Administrative Agent may otherwise reasonably request; and

       

      (e)  deliver
        to the Administrative Agent legal opinions similar to those delivered to
        the
        Administrative Agent on the Closing Date.

       

       

      Section
        7.11  Deposit
        Accounts; Securities Accounts.
        Each
        Borrower shall (i) deposit all of its cash in deposit accounts that are
        Controlled Deposit Accounts, provided, however, that each Borrower may maintain
        zero-balance accounts for the purpose of managing local disbursements and
        may
        maintain payroll, withholding tax and other fiduciary accounts,
        (ii) deposit all of its Cash Equivalents in securities accounts that are
        Controlled Securities Accounts.

       

       

      Section
        7.12  Interest
        Rate Contracts.
        Each
        Borrower shall, within 30 days after the Closing Date, enter into and thereafter
        maintain Interest Rate Contracts on terms and with counterparties reasonably
        satisfactory to the Administrative Agent, to provide protection against
        fluctuation of interest rates until the Scheduled Maturity Date for a notional
        amount that, when added to the aggregate principal amount of Consolidated
        Total
        Debt of Parent bearing interest at a fixed rate, equals at least 75% of the
        aggregate principal amount of the Consolidated Total Debt of Parent.


       

       

      ARTICLE
        VIII  

       

       

      


       

       

      NEGATIVE
        COVENANTS

       

      Each
        Borrower agrees with the Lenders and the Administrative Agent to each of
        the
        following, as long as any Obligation or any Commitment remains
        outstanding:

       

       

      Section
        8.1  Indebtedness

       

      .
        No
        Borrower shall, directly or indirectly, incur or otherwise remain liable
        with
        respect to or responsible for, any Indebtedness except for the
        following:

       

      (a)  the
        Obligations;

       

      
        
           

        

        
          64

          
            

          

        

        
           

        

      

      (b)  Indebtedness
        existing on the date hereof and set forth on Schedule 8.1,
        together with any Permitted Refinancing of any Indebtedness permitted hereunder
        in reliance upon this clause
        (b);

       

      (c)  intercompany
        loans owing to any Borrower and constituting Permitted Investments of such
        Borrower;

       

      (d)  obligations
        under Interest Rate Contracts entered into to comply with Section 7.12; 

       

      (e)  unsecured
        trade payables and operational debt not evidenced by a note, and equipment
        and
        vehicle lease obligations, and in an aggregate amount per Borrower not exceeding
        $100,000; and

       

      (f)  Guaranty
        Obligations of any Borrower with respect to Indebtedness of any other Borrower
        (other than Indebtedness permitted hereunder in reliance upon clause
        (b)
        above,
        for which Guaranty Obligations may be permitted to the extent set forth in
        such
        clauses).

       

       

      Section
        8.2  Liens.
        No
        Borrower shall incur, maintain or otherwise suffer to exist any Lien upon
        or
        with respect to any of its real or personal property including all Licenses,
        whether now owned or hereafter acquired, or assign any right to receive income
        or profits, except for the following:

       

      (a)  Liens
        created pursuant to any Loan Document;

       

      (b)  Customary
        Permitted Liens of the Borrowers;

       

      (c)  Liens
        existing on the date hereof and set forth on Schedule 8.2;
        and

       

      (d)  Liens
        on
        the property of any Borrower securing the Permitted Refinancing of any
        Indebtedness secured by any Lien on such property permitted hereunder in
        reliance upon clause
        (c)
        or this
clause
        (d)
        without
        any change in the property subject to such Liens.

       

       

      Section
        8.3  Investments.
        No
        Borrower shall make or maintain, directly or indirectly, any Investment except
        for the following:

       

      (a)  Investments
        existing on the date hereof and set forth on Schedule 8.3;

       

      (b)  Investments
        in cash and Cash Equivalents;

       

      (c)  endorsements
        for collection or deposit in the ordinary course of business; and

       

      (d)  Investments
        made as part of a Permitted Acquisition.

       

      
        
           

        

        
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      Section
        8.4  Transfers.
        No
        Borrower shall Transfer any of its real or personal property or issue or
        cause
        or permit a direct or indirect Transfer or Lien upon its own direct or indirect
        Equity Interests, except for the following:

       

      (a)  In
        each
        case to the extent entered into in the ordinary course of business and made
        to a
        Person that is not an Affiliate of any Borrower, (i) Transfers of Cash
        Equivalents for property or services of equivalent value, (ii) inventory
        or
        property that has become obsolete or worn out and (iii) non-exclusive licenses
        of Intellectual Property;

       

      (b)  (i)
        any
        Transfer of any personal property (other than their own Equity Interests
        or
        Equity Equivalents) by any Borrower to any other Borrower to the extent any
        resulting Investment constitutes a Permitted Investment, (ii) any Restricted
        Payment by any Borrower permitted pursuant to Section 8.5,
        (iii)
        any distribution by Parent of the proceeds of Restricted Payments from any
        other
        Borrower to the extent permitted in Section 8.5,
        and
        (iv) any transaction permitted pursuant to Section
        8.9;

       

      (c)  so
        long
        as no (x) monetary Default or other Event of Default has occurred and is
        continuing, (y) no Change of Control shall result therefrom and (z) upon
        at
        least thirty (30) days’ prior written notice to the Administrative Agent, (i)
        Transfer by any Borrower (other than Parent) of its own Equity Interests
        to
        Parent, (ii) any direct or indirect Transfer by Parent of its own Equity
        Interests or Transfer of Parent’s Equity Interests among the Permitted
        Investors, (iii) any direct or indirect Transfer by Parent of its own Equity
        Interests to any Person other than the Permitted Investors; provided,
        however,
        in
        the
        case of this clause
        (iii),
        if such
        Transfer consists of the Transfer of greater than 20% of such interests of
        Parent (with the express understanding that no Transfer is permitted if a
        Change
        of Control shall result therefrom), such Transfer shall be subject to the
        approval of the Lenders in accordance with their reasonable standards with
        respect to (A) previous relationships between such Lender and the proposed
        transferee, (B) the reputation for integrity, honesty and veracity of the
        proposed transferee and its principals, owners, officers and directors, and
        (C)
        OFAC, money-laundering, anti-terrorism, SEC, healthcare laws and regulations,
        and other similar regulations and activities, which approval shall not be
        unreasonably withheld, conditioned or delayed (provided that the Borrowers
        provide timely information reasonably requested by Lenders with respect to
        such
        proposed manager). Notwithstanding anything in any Loan Document to the
        contrary, the following Transfers are permitted: (i) the trading or issuance
        of
        Equity Interests of Emeritus or Blackstone in the public or private markets,
        (ii) issuance, transfer or sale of Equity Interests of Emeritus or Blackstone
        in
        connection with the merger, reorganization or consolidation of Emeritus or
        Blackstone, (iii) transfers of the limited partnership interests of Blackstone
        and its Affiliates, and (iv) any merger or consolidation of Emeritus or
        Blackstone into or with, or a sale of substantially all of the asset of Emeritus
        or Blackstone to any Person; provided,
        however,
        the
        managing member or manager, as the case may be, shall not be
        transferred.

       

      (d)  the
        Transfer for value of Westlake or Boynton, or the Parent’s interest in the
        related Borrowers, or the Whittier Residence; provided that all Net Cash
        Proceeds of such Transfer be applied to the outstanding principal of the
        Term
        Loans in accordance with Section
        2.6(b);
        

       

      (e)  entering
        into, modifying, amending, renewing, terminating in the ordinary course of
        business any resident care agreement or service agreement for ancillary
        services; and

       

      
        
           

        

        
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      (f)  entering
        into, modifying or amending any Lease (other than resident care agreements
        and
        service agreements for ancillary services) in the ordinary course on market
        terms; provided,
        however,
        the
        total square footage of all such leases shall not exceed 2,500 square feet
        at
        any Facility without Lender’s consent. 

       

       

      Section
        8.5  Restricted
        Payments.
        No
        Borrower shall directly or indirectly, declare, order, pay, make or set apart
        any sum for any Restricted Payment except for the following:

       

      (a)  Restricted
        Payments by any Borrower to any other Borrower;

       

      (b)  dividends
        and distributions declared and paid on the common
        (or common equivalent) Equity Interests
        of the
        Parent ratably to the holders of such common (or common equivalent) Equity
        Interests and payable only in common (or common equivalent) Equity Interests
        of
        Parent; and

       

      (c)  cash
        dividends on the Equity Interests of the Parent to its members paid and declared
        solely for the purpose of funding,
        subject
        to the requirements of Section
        2.4,
        Excess
        Cash Flow.

       

      (d) Term
        Loan
        proceeds actually advanced in respect of any Permitted Acquisition, to the
        extent not paid to Seller for such Permitted Acquisition.

       

       

      Section
        8.6  Prepayment
        of Indebtedness.
        Subject to Section 2.3, no Borrower shall (x) prepay, redeem, purchase, defease
        or otherwise satisfy prior to the scheduled maturity thereof any Indebtedness,
        (y) set apart any property for such purpose, whether directly or indirectly
        and
        whether to a sinking fund, a similar fund or otherwise, or (z) make any payment
        in violation of any subordination terms of any Indebtedness; provided, however,
        that each Borrower may, to the extent otherwise permitted by the Loan Documents,
        do each of the following:

       

      (a)  (i)
        prepay the Obligations, and (ii) consummate a Permitted
        Refinancing;

       

      (b)  prepay,
        redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity
        thereof (or set apart any property for such purpose) any Indebtedness owing
        to
        any other Borrower; and

       

      (c)  make
        regularly scheduled or otherwise required repayments or redemptions of
        Indebtedness but only, in the case of Subordinated Debt, to the extent permitted
        by the subordination provisions thereof.

       

       

      Section
        8.7  Fundamental
        Changes.
        Except as set forth in Section 8.4(c), no Borrower shall (a) merge, consolidate
        or amalgamate with any Person, (b) acquire all or substantially all of the
        Equity Interests or Equity Equivalents of any Person or (c) acquire any brand
        or
        all or substantially all of the assets of any Person or all or substantially
        all
        of the assets constituting any line of business, division, branch, operating
        division or other unit operation of any Person, in each case, except for
        the
        following: (i) any Permitted Acquisition, (ii) the merger, consolidation or
        amalgamation of any Borrower into any other Borrower and (iii) the merger,
        consolidation or amalgamation of any Borrower for the sole purpose, and with
        the
        sole material effect, of changing its State of organization within the United
        States; provided, however, that in the case of any merger, consolidation
        or
        amalgamation involving any Borrower for the purpose of 

       


      
        
          
          

        

        
          67

          
            

          

        

        
          
          

        

      


       

      changing
        its State of organization, all actions required to maintain the perfection
        of
        the Lien of the Administrative Agent on the Equity Interests, or other real
        or
        personal property of such Borrower shall have been made.

       

       

      Section
        8.8  Change
        in
        Nature of Business.
        No
        Borrower shall carry on any business, operations or activities (whether
        directly, through a joint venture, in connection with a Permitted Acquisition
        or
        otherwise) substantially different from those carried on, or intended to
        be
        carried on, by such Borrowers as of the date hereof and business, operations
        and
        activities reasonably related thereto.

       

       

      Section
        8.9  Transactions
        with Affiliates.
        No
        Borrower shall, except as otherwise expressly permitted herein, enter into
        any
        other transaction directly or indirectly with, or for the benefit of, any
        Affiliate of any Borrower that is not a Borrower (including Guaranty Obligations
        with respect to any obligation of any such Affiliate), except for
        (a) transactions in the ordinary course of business on a basis no less
        favorable to such Borrower as would be obtained in a comparable arm’s length
        transaction with a Person not an Affiliate of any Borrower, (b) Restricted
        Payments, the proceeds of which, if received by any Person other than any
        Borrower, are used as required by Section 8.5, (c) reasonable salaries and
        other reasonable director or employee compensation to officers and directors
        of
        any Borrower, and (d) Management Fees, provided that, in the case of this
        clause
        (d), such Management Fees shall be paid last in priority and only after the
        payment of all other current operating expenses of the Borrowers and the
        Facilities (including, all current debt service and other interest payments
        on
        any Indebtedness permitted hereunder and the funding of all escrows and reserved
        required hereunder).

       

       

      Section
        8.10  Third-Party
        Restrictions on Indebtedness, Liens, Investments or Restricted
        Payments.
        No
        Borrower shall incur or otherwise suffer to exist or become effective or
        remain
        liable on or responsible for any Contractual Obligation limiting the ability
        of
        (a) any Borrower to make Restricted Payments to, or Investments in, or repay
        Indebtedness to or otherwise Transfer property to, any other Borrower or
        (b) any
        Borrower to incur or suffer to exist any Lien upon any property of any Borrower,
        whether now owned or hereafter acquired, securing any of its Obligations
        (including any “equal and ratable” clause and any similar Contractual Obligation
        requiring, when a Lien is granted on any property, another Lien to be granted
        on
        such property or any other property), except, in each case (x) pursuant to
        the
        Loan Documents and (y) limitations on Liens (other than those securing any
        Obligation) on any property whose acquisition or repair is financed by purchase
        money Indebtedness or Permitted Refinancings permitted hereunder in reliance
        upon Section (b) set forth in the Contractual Obligations governing such
        Indebtedness or Permitted Refinancing or Guaranty Obligations with respect
        thereto.

       

       

      Section
        8.11  Modification
        of Certain Documents.
        No
        Borrower shall do any of the following: 

       

      (a)  waive
        or
        otherwise modify any term of any Related Document (other than the terms of
        any
        Subordinated Debt) or any Constituent Document of, or otherwise change the
        capital structure of, any Borrower (including the terms of any of their
        outstanding Equity Interests or Equity Equivalents), in each case except
        for
        those modifications and waivers that (x) do not elect, or permit the election,
        to treat the Equity Interests or Equity Equivalents of any limited liability
        company (or similar entity) as certificated, (y) do not materially affect
        the
        rights and privileges of any Borrower and (z) do not materially affect the
        interests of any Secured Party under the Loan Documents or in the
        Collateral;

       

      
        
           

        

        
          68

          
            

          

        

        
           

        

      

      (b)  waive
        or
        otherwise modify any term of any Subordinated Debt if the effect thereof
        on such
        Subordinated Debt is to (i) increase the interest rate, (ii) change the due
        dates for principal or interest, other than to extend such dates, (iii) modify
        any default or event of default, other than to delete it or make it less
        restrictive, (iv) add any covenant with respect thereto, (v) modify any
        subordination provision, (vi) modify any redemption or prepayment provision,
        other than to extend the dates therefor or to reduce the premiums payable
        in
        connection therewith or (vii) materially increase any obligation of any Borrower
        or confer additional material rights to the holder of such Subordinated Debt
        in
        a manner adverse to any Borrower or any Secured Party.

       

       

      Section
        8.12  Accounting
        Changes; Fiscal Year.
        No
        Borrower shall change its (a) accounting treatment or reporting practices,
        except as required by GAAP or any Requirement of Law, or (b) its fiscal year
        or
        its method for determining fiscal quarters or fiscal months.

       

       

      Section
        8.13  Margin
        Regulations.
        No
        Borrower shall use all or any portion of the proceeds of any credit extended
        hereunder to purchase or carry margin stock (within the meaning of Regulation
        U
        of the Federal Reserve Board) in contravention of Regulation U of the Federal
        Reserve Board.

       

       

      Section
        8.14  Compliance
        with ERISA.
        No
        ERISA Affiliate shall cause or suffer to exist (a) any event that could result
        in the imposition of a Lien on any asset of any Borrower with respect to
        any
        Title IV Plan or Multiemployer Plan or (b) any other ERISA
        Event, that would, in the aggregate, have a Material Adverse Effect.


       

       

      Section
        8.15  Hazardous
        Materials.
        No
        Borrower shall cause or suffer to exist any Release of any Hazardous Material
        at, to or from any real property owned, leased, subleased or otherwise operated
        or occupied by any Borrower that would violate any Environmental Law, form
        the
        basis for any Environmental Liabilities or otherwise adversely affect the
        value
        or marketability of any real property (whether or not owned by any Borrower),
        other than such violations, Environmental Liabilities and effects that would
        not, in the aggregate, have a material adverse impact on any Borrower or
        any
        Facility.

       

       

      ARTICLE
        IX  

       

       

      


       

       

      EVENTS
        OF
        DEFAULT

       

       

      Section
        9.1  Definition.
        Each
        of the following shall be an “Event of Default”:

       

      (a)  The
        Borrowers shall fail to pay (i) any principal of any Loan when the same becomes
        due and payable
        or (ii)
        any interest on any Loan, any fee under any Loan Document or any other
        Obligation (other than those set forth in clause
        (i)
        above)
        and, in the case of this clause
        (ii),
        such
        non-payment continues for a period of 5 Business Days after the due date
        therefor; or

       

      (b)  any
        representation, warranty or certification made or deemed made by or on behalf
        of
        any Borrower (or any Responsible Officer thereof) in, or in connection with,
        any
        Loan Document (including in any document delivered in connection with any
        Loan
        Document) shall prove to have been incorrect in any material respect when
        made
        or deemed made; or

       

      
        
           

        

        
          69

          
            

          

        

        
           

        

      

      (c)  any
        Borrower shall fail to comply with (i) any provision of Article VI,
        Sections 7.1
        (Maintenance
        of Corporate Existence),
        7.5
        (Insurance),
        7.7
        (Access
        to Books and Property),
        7.9
        (Use
        of
        Proceeds),
        7.11
        (Deposit
        Accounts)
        or
Article VIII
        (Negative
        Covenants)
        or (ii)
        any other provision of any Loan Document (other than Section
        5.1 (Minimum
        Consolidated Project Yield))
        if, in
        the case of this clause
        (ii),
        such
        failure shall remain unremedied for thirty (30) days after the earlier of
        (A)
        the date on which a Responsible Officer of such Borrower becomes aware of
        such
        failure and (B) the date on which notice thereof shall have been given to
        such
        Borrower by the Administrative Agent, provided, that in the case of clause
        (ii),
        if such
        failure cannot be cured within such 30 day period but during such 30 day
        period
        Borrowers have commenced to cure such failure and thereafter have demonstrated
        to Administrative Agent that they have diligently pursued same to completion,
        such 30 day period shall be extended for an additional 30 days; or

       

      (d)  (i)
        any
        Borrower shall fail to make any payment when due (whether due because of
        scheduled maturity, required prepayment provisions, acceleration, demand
        or
        otherwise) on any Indebtedness of any Borrower (other than the Obligations
        or
        any Hedging Agreement) and, in each case, such failure relates to Indebtedness
        having a principal amount of $100,000 or more, (ii) any other event shall
        occur
        or condition shall exist under any Contractual Obligation relating to any
        such
        Indebtedness, if the effect of such event or condition is to accelerate,
        or to
        permit the acceleration of, the maturity of such Indebtedness or (iii) any
        such
        Indebtedness shall become or be declared to be due and payable, or be required
        to be prepaid, redeemed, defeased or repurchased (other than by a regularly
        scheduled required prepayment), prior to the stated maturity thereof;
        or

       

      (e)  (i)
        any
        Borrower shall generally not pay its debts as such debts become due, shall
        admit
        in writing its inability to pay its debts generally or shall make a general
        assignment for the benefit of creditors, (ii) any proceeding shall be instituted
        by or against (without contest) any Borrower seeking to adjudicate it a bankrupt
        or insolvent or seeking liquidation, winding up, reorganization, arrangement,
        adjustment, protection, relief, composition of it or its debts or any similar
        order, in each case under any Requirement of Law relating to bankruptcy,
        insolvency or reorganization or relief of debtors or seeking the entry of
        an
        order for relief or the appointment of a custodian, receiver, trustee,
        conservator, liquidating agent, liquidator, other similar official or other
        official with similar powers, in each case for it or for any substantial
        part of
        its property and, in the case of any such proceedings instituted against
        (but
        not by or with the consent of) any Borrower, either such proceedings shall
        remain undismissed or unstayed for a period of 60 days or more or any
        action sought in such proceedings shall occur or (iii) any Borrower shall
        take
        any corporate or similar action or any other action to authorize any action
        described in clause
        (i)
        or
(ii)
        above;
        or

       

      (f)  one
        or
        more judgments, orders or decrees (or other similar process) shall be rendered
        against any Borrower (i)(A) in the case of money judgments, orders and decrees,
        involving an aggregate amount (excluding amounts adequately covered by insurance
        payable to any Borrower, to the extent the relevant insurer has not denied
        coverage therefore or for with Borrowers have set aside adequate reserves)
        in
        excess of $250,000 or (B) otherwise, that would have, in the aggregate, a
        Material Adverse Effect and (ii)(A) enforcement proceedings shall have been
        commenced by any creditor upon any such judgment, order or decree or (B)
        such
        judgment, order or decree shall not have been vacated or discharged for a
        period
        of 60 consecutive days and there shall not be in effect (by reason of a pending
        appeal or otherwise) any stay of enforcement thereof; or

       

      
        
           

        

        
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      (g)  except
        pursuant to a valid, binding and enforceable termination or release permitted
        under the Loan Documents and executed by the Administrative Agent or as
        otherwise expressly permitted under any Loan Document, (i) any provision
        of any
        Loan Document shall, at any time after the delivery of such Loan Document,
        fail
        to be valid and binding on, or enforceable against, any Borrower party thereto
        or (ii) any Loan Document purporting to grant a Lien to secure any Obligation
        shall, at any time after the delivery of such Loan Document, fail to create
        a
        valid and enforceable Lien on any Collateral purported to be covered thereby
        or
        such Lien shall fail or cease to be a perfected Lien with the priority required
        in the relevant Loan Document, or any Borrower shall state in writing that
        any
        of the events described in clause
        (i)
        or
(ii)
        above
        shall have occurred; or

       

      (h)  there
        shall occur any Change of Control; or

       

      (i)  there
        shall occur any uninsured damage to or loss, theft or destruction of any
        Facility or portion of the Collateral that exceeds $250,000 in the aggregate;
        or

       

      (j)  intentionally
        omitted

       

      (k)  with
        respect to three (3) or more Facilities, any state or federal regulatory
        agency
        shall have either revoked the licenses or, in the case of any skilled nursing
        facility, has issued a denial of payment for new admissions, at such Facilities
        and all applicable appeal periods related to such revocation shall have
        expired.

       

       

      Section
        9.2  Remedies.
        During the continuance of any Event of Default, the Administrative Agent
        may,
        and, at the request of the Required Lenders, shall, in each case by notice
        to
        the Parent and in addition to any other right or remedy provided under any
        Loan
        Document or by any applicable Requirement of Law, do each of the following:
        (a)
        declare all or any portion of the Commitments terminated, whereupon the
        Commitments shall immediately be reduced by such portion or, in the case
        of a
        termination in whole, shall terminate together with any obligation any Lender
        may have hereunder to make any Loan or (b) declare immediately due and payable
        all or part of any Obligation (including any accrued but unpaid interest
        thereon), whereupon the same shall become immediately due and payable, without
        presentment, demand, protest or further notice or other requirements of any
        kind, all of which are hereby expressly waived by the Parent and the other
        Borrowers (and, to the extent provided in any other Loan Document, other
        Borrowers); provided, however, that, effective immediately upon the occurrence
        of the Events of Default specified in Section 9.1(e)(ii), (x) the
        Commitments of each Lender to make Loans shall each automatically be terminated
        and (y) each Obligation (including in each case any accrued all accrued but
        unpaid interest thereon) shall automatically become and be due and payable,
        without presentment, demand, protest or further notice or other requirement
        of
        any kind, all of which are hereby expressly waived by Parent and the other
        Borrowers (and, to the extent provided in any other Loan Document, any other
        Borrower).

       

       

      ARTICLE
        X  

       

       

      


       

       

      THE
        ADMINISTRATIVE AGENT

       

       

      Section
        10.1  Appointment
        and Duties.
        (a)
        Appointment of Administrative Agent. Each Lender hereby appoints GE Capital
        (together with any successor Administrative Agent pursuant to Section 10.9)
        as the Administrative Agent hereunder and authorizes the 

       


      
        
          
          

        

        
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      Administrative
        Agent to (i) accept delivery thereof on its behalf from any Borrower, (ii)
        take such action on its behalf and to exercise all rights, powers and remedies
        and perform the duties as are expressly delegated to the Administrative Agent
        under such Loan Documents and (iii) exercise such powers as are reasonably
        incidental thereto.

       

      (b) Duties
        as Collateral and Disbursing Agent.
        Without
        limiting the generality of clause
        (a)
        above,
        the Administrative Agent shall have the sole and exclusive right and authority
        (to the exclusion of the Lenders), and is hereby authorized on behalf of
        the
        Lenders, to (i) act as the disbursing and collecting agent for the Lenders
        with respect to all payments and collections arising in connection with the
        Loan
        Documents (including in any proceeding described in Section 9.1(e)(ii)
        or any
        other bankruptcy, insolvency or similar proceeding), and each Person making
        any
        payment in connection with any Loan Document to any Secured Party is hereby
        authorized to make such payment to the Administrative Agent, (ii) file and
        prove
        claims and file other documents necessary or desirable to allow the claims
        of
        the Secured Parties with respect to any Obligation in any proceeding described
        in Section 9.1(e)(ii)
        or any
        other bankruptcy, insolvency or similar proceeding (but not to vote, consent
        or
        otherwise act on behalf of such Secured Party), (iii) act as collateral agent
        for each Secured Party for purposes of the perfection of all Liens created
        by
        such agreements and all other purposes stated therein, (iv) manage,
        supervise and otherwise deal with the Collateral, (v) take such other action
        as
        is necessary or desirable to maintain the perfection and priority of the
        Liens
        created or purported to be created by the Loan Documents, (vi) except as
        may be
        otherwise specified in any Loan Document, exercise all remedies given to
        the
        Administrative Agent and the other Secured Parties with respect to the
        Collateral, whether under the Loan Documents, applicable Requirements of
        Law or
        otherwise and (vii) execute any amendment, consent or waiver under the Loan
        Documents on behalf of any Lender that has consented in writing to such
        amendment, consent or waiver; provided,
        however,
        that
        the Administrative Agent hereby appoints, authorizes and directs each Lender
        to
        act as collateral sub-agent for the Administrative Agent and the Lenders
        for
        purposes of the perfection of all Liens with respect to the Collateral,
        including any deposit account maintained by a Borrower with, and cash and
        Cash
        Equivalents held by, such Lender, and may further authorize and direct the
        Lenders to take further actions as collateral sub-agents for purposes of
        enforcing such Liens or otherwise to transfer the Collateral subject thereto
        to
        the Administrative Agent, and each Lender hereby agrees to take such further
        actions to the extent, and only to the extent, so authorized and
        directed.

       

      (c) Limited
        Duties.
        Under
        the Loan Documents, the Administrative Agent (i) is acting solely on behalf
        of
        the Lenders (except to the limited extent provided in Section 2.8(b)
        with
        respect to the Register and in Section 10.11),
        with
        duties that are entirely administrative in nature, notwithstanding the use
        of
        the defined term “Administrative Agent”, the terms “agent”, “administrative
        agent” and “collateral agent” and similar terms in any Loan Document to refer to
        the Administrative Agent, which terms are used for title purposes only,
        (ii) is not assuming any obligation under any Loan Document other than as
        expressly set forth therein or any role as agent, fiduciary or trustee of
        or for
        any Lender or any other Secured Party and (iii) shall have no implied functions,
        responsibilities, duties, obligations or other liabilities under any Loan
        Document, and each
        Lender hereby waives and agrees not to assert any claim against the
        Administrative Agent based on the roles, duties and legal relationships
        expressly disclaimed in clauses
        (i)
        through
(iii)
        above.

       

       

      Section
        10.2  Binding
        Effect.
        Each
        Lender agrees that (i) any action taken by the Administrative Agent or the
        Required Lenders (or, if expressly required hereby, a greater 

       


      
        
          
          

        

        
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      proportion
        of the Lenders) in accordance with the provisions of the Loan Documents,
        (ii)
        any action taken by the Administrative Agent in reliance upon the instructions
        of Required Lenders (or, where so required, such greater proportion) and
        (iii)
        the exercise by the Administrative Agent or the Required Lenders (or, where
        so
        required, such greater proportion) of the powers set forth herein or therein,
        together with such other powers as are reasonably incidental thereto, shall
        be
        authorized and binding upon all of the Secured Parties.

       

       

      Section
        10.3  Use
        of
        Discretion.
        (a) No
        Action without Instructions. The Administrative Agent shall not be required
        to
        exercise any discretion or take, or to omit to take, any action, including
        with
        respect to enforcement or collection, except any action it is required to
        take
        or omit to take (i) under any Loan Document or (ii) pursuant to
        instructions from the Required Lenders (or, where expressly required by the
        terms of this Agreement, a greater proportion of the Lenders).

       

      (b) Right
        Not to Follow Certain Instructions.
        Notwithstanding clause
        (a)
        above,
        the Administrative Agent shall not be required to take, or to omit to take,
        any
        action (i) unless, upon demand, the Administrative Agent receives an
        indemnification satisfactory to it from the Lenders (or, to the extent
        applicable and acceptable to the Administrative Agent, any other Secured
        Party)
        against all Liabilities that, by reason of such action or omission, may be
        imposed on, incurred by or asserted against the Administrative Agent or any
        Related Person thereof or (ii) that is, in the opinion of the Administrative
        Agent or its counsel, contrary to any Loan Document or applicable Requirement
        of
        Law.

       

       

      Section
        10.4  Delegation
        of Rights and Duties.
        The
        Administrative Agent may, upon any term or condition it specifies, delegate
        or
        exercise any of its rights, powers and remedies under, and delegate or perform
        any of its duties or any other action with respect to, any Loan Document
        by or
        through any trustee, co-agent, employee, attorney-in-fact and any other Person
        (including any Secured Party).
        Any
        such Person shall benefit from this
        Article X to the extent provided by the Administrative
        Agent.

       

       

      Section
        10.5  Reliance
        and Liability.
        (a)
        The Administrative Agent may, without incurring any liability hereunder to
        Lenders, (i) treat the payee of any Note as its holder until such Note has
        been
        assigned in accordance with Section 11.2(e), (ii) rely on the Register to
        the extent set forth in Section 2.8, (iii) consult with any of its Related
        Persons and, whether or not selected by it, any other advisors, accountants
        and
        other experts (including advisors to, and accountants and experts engaged
        by,
        any Borrower) and (iv) rely and act upon any document and information (including
        those transmitted by Electronic Transmission) and any telephone message or
        conversation, in each case believed by it to be genuine and transmitted,
        signed
        or otherwise authenticated by the appropriate parties.

       

      (b) None
        of
        the Administrative Agent and its Related Persons shall be liable to Lenders
        for
        any action taken or omitted to be taken by any of them under or in connection
        with any Loan Document, and each Lender and each Borrower, hereby waives
        and
        shall not assert any right, claim or cause of action based thereon, except
        to
        the extent of liabilities resulting primarily from the gross negligence or
        willful misconduct of the Administrative Agent or, as the case may be, such
        Related Person (each as determined in a final, non-appealable judgment by
        a
        court of competent jurisdiction) in connection with the duties expressly
        set
        forth herein. Without limiting the foregoing, the Administrative
        Agent:

       

      
        
           

        

        
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      (i)  shall
        not
        be responsible or otherwise incur liability to Lenders for any action or
        omission taken in reliance upon the instructions of the Required Lenders
        or for
        the actions or omissions of any of its Related Persons selected with reasonable
        care (other than employees, officers and directors of the Administrative
        Agent,
        when acting on behalf of the Administrative Agent); 

       

      (ii)  shall
        not
        be responsible to any Secured Party for the due execution, legality, validity,
        enforceability, effectiveness, genuineness, sufficiency or value of, or the
        attachment or priority of any Lien created or purported to be created under
        or
        in connection with, any Loan Document;

       

      (iii)  makes
        no
        warranty or representation, and shall not be responsible, to any Secured
        Party
        for any statement, document, information, representation or warranty made
        or
        furnished by or on behalf of any Related Person or any Borrower in connection
        with any Loan Document or any transaction contemplated therein or any other
        document or information with respect to any Borrower, whether or not transmitted
        or (except for documents expressly required under any Loan Document to be
        transmitted to the Lenders) omitted to be transmitted by the Administrative
        Agent, including as to completeness, accuracy, scope or adequacy thereof,
        or for
        the scope, nature or results of any due diligence performed by the
        Administrative Agent in connection with the Loan Documents; and

       

      (iv)  shall
        not
        have any duty to ascertain or to inquire as to the performance or observance
        of
        any provision of any Loan Document, whether any condition set forth in any
        Loan
        Document is satisfied or waived, as to the financial condition of any Borrower
        or as to the existence or continuation or possible occurrence or continuation
        of
        any Default or Event of Default and shall not be deemed to have notice or
        knowledge of such occurrence or continuation unless it has received a notice
        from any Borrower, any Lender describing such Default or Event of Default
        clearly labeled “notice of default” (in which case the Administrative Agent
        shall promptly give notice of such receipt to all Lenders);

       

      and,
        for
        each of the items set forth in clauses
        (i)
        through
(iv)
        above,
        each Lender and each Borrower hereby waives and agrees not to assert (and
        each
        Borrower shall cause each other Borrower to waive and agree not to assert)
        any
        right, claim or cause of action it might have against the Administrative
        Agent
        based thereon, except with respect to the gross negligence or willful misconduct
        of the Administrative Agent or any Lender.

       

       

      Section
        10.6  Administrative
        Agent Individually.
        The
        Administrative Agent and its Affiliates may make loans and other extensions
        of
        credit to, acquire Equity Interests and Equity Equivalents of, engage in
        any
        kind of business with, any Borrower or Affiliate thereof as though it were
        not
        acting as the Administrative Agent and may receive separate fees and other
        payments therefor. To the extent the Administrative Agent or any of its
        Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall
        have
        and may exercise the same rights and powers hereunder and shall be subject
        to
        the same obligations and liabilities as any other Lender and the terms “Lender”,
“Required Lender” and any similar terms shall, except where otherwise expressly
        provided in any Loan Document, include, without limitation, the Administrative
        Agent 

       


      
        
          
          

        

        
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      or
        such
        Affiliate, as the case may be, in its individual capacity as Lender or as
        one of
        the Required Lenders.

       

       

      Section
        10.7  Lender
        Credit Decision.
        Each
        Lender acknowledges that it shall, independently and without reliance upon
        the
        Administrative Agent, any Lender or any of their Related Persons or upon
        any
        document (including the Disclosure Documents) solely or in part because such
        document was transmitted by the Administrative Agent or any of its Related
        Persons, conduct its own independent investigation of the financial condition
        and affairs of each Borrower and make and continue to make its own credit
        decisions in connection with entering into, and taking or not taking any
        action
        under, any Loan Document or with respect to any transaction contemplated
        in any
        Loan Document, in each case based on such documents and information as it
        shall
        deem appropriate.
        Except
        for documents expressly required by any Loan Document to be transmitted by
        the
        Administrative Agent to the Lenders, the Administrative Agent shall not have
        any
        duty or responsibility to provide any Lender with any credit or other
        information concerning the business, prospects, operations, property, financial
        and other condition or creditworthiness of any Borrower or any Affiliate
        of any
        Borrower that may come in to the possession of the Administrative Agent or
        any
        of its Related Persons.

       

       

      Section
        10.8  Expenses;
        Indemnities.
        (a)
        Each Lender agrees to reimburse the Administrative Agent and each of its
        Related
        Persons (to the extent not reimbursed by any Borrower) promptly upon demand
        for
        such Lender’s Pro Rata Share with respect to the Facilities of any costs and
        expenses (including fees, charges and disbursements of financial, legal and
        other advisors and Other Taxes paid in the name of, or on behalf of, any
        Borrower) that may be incurred by the Administrative Agent or any of its
        Related
        Persons in connection with the preparation, execution, delivery, administration,
        modification, consent, waiver or enforcement (whether through negotiations,
        through any work-out, bankruptcy, restructuring or other legal or other
        proceeding or otherwise) of, or legal advice in respect of its rights or
        responsibilities under, any Loan Document.

       

      (b) Each
        Lender further agrees to indemnify the Administrative Agent and each of its
        Related Persons (to the extent not reimbursed by any Borrower), from and
        against
        such Lender’s aggregate Pro Rata Share with respect to the Facilities of the
        Liabilities (including taxes, interests and penalties imposed for not properly
        withholding or backup withholding on payments made to on or for the account
        of
        any Lender) that may be imposed on, incurred by or asserted against the
        Administrative Agent or any of its Related Persons in any matter relating
        to or
        arising out of, in connection with or as a result of any Loan Document, any
        Related Document or any other act, event or transaction related, contemplated
        in
        or attendant to any such document, or, in each case, any action taken or
        omitted
        to be taken by the Administrative Agent or any of its Related Persons under
        or
        with respect to any of the foregoing; provided,
        however,
        that no
        Lender shall be liable to the Administrative Agent or any of its Related
        Persons
        to the extent such liability has resulted primarily from the gross negligence
        or
        willful misconduct of the Administrative Agent or, as the case may be, such
        Related Person, as determined by a court of competent jurisdiction in a final
        non-appealable judgment or order.

       

       

      Section
        10.9  Resignation
        of Administrative Agent.
        (a)
        The Administrative Agent may resign at any time by delivering notice of such
        resignation to the Lenders and the Parent, effective on the date set forth
        in
        such notice or, if not such date is set forth therein, upon the date such
        notice
        shall be effective. If the Administrative Agent delivers any such notice,
        the
        Required Lenders shall have the right to appoint a successor Administrative
        Agent. If, within 30 days after 

       


      
        
          
          

        

        
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      the
        retiring Administrative Agent having given notice of resignation, no successor
        Administrative Agent has been appointed by the Required Lenders that has
        accepted such appointment, then the retiring Administrative Agent shall,
        on
        behalf of the Lenders, appoint a successor Administrative Agent from among
        the
        Lenders. Each appointment under this clause (a) shall be subject to the prior
        consent of the Borrowers, which may not be unreasonably withheld but shall
        not
        be required during the continuance of a Default.

       

      (b) Effective
        immediately upon its resignation, (i) the retiring Administrative Agent shall
        be
        discharged from its duties and obligations under the Loan Documents, (ii)
        the
        Lenders shall assume and perform all of the duties of the Administrative
        Agent
        until a successor Administrative Agent shall have accepted a valid appointment
        hereunder, (iii) the retiring Administrative Agent and its Related Persons
        shall
        no longer have the benefit of any provision of any Loan Document other than
        with
        respect to any actions taken or omitted to be taken while such retiring the
        Administrative Agent was, or because such Administrative Agent had been,
        validly
        acting as the Administrative Agent under the Loan Documents and (iv) subject
        to
        its rights under Section 10.3,
        the
        retiring Administrative Agent shall take such action as may be reasonably
        necessary to assign to the successor Administrative Agent its rights as
        Administrative Agent under the Loan Documents. Effective immediately upon
        its
        acceptance of a valid appointment as Administrative Agent, a successor
        Administrative Agent shall succeed to, and become vested with, all the rights,
        powers, privileges and duties of the retiring Administrative Agent under
        the
        Loan Documents. 

       

       

      Section
        10.10  Release
        of Collateral.
        Each
        Lender hereby consents to the release and hereby directs the Administrative
        Agent to release (or, in the case of clause (b)(ii) below, release or
        subordinate) the following:

       

      (a)  any
        Borrower from its Obligations hereunder if all of the Equity Interests of
        such
        Borrower are disposed of in a Transfer permitted under the Loan Documents
        (including pursuant to a waiver or consent), provided, after giving effect
        to
        such Transfer, Borrowers have complied with the requirements of Section 7.10;
        and

       

      (b)  any
        Lien
        held by the Administrative Agent for the benefit of the Secured Parties against
        (i) any Collateral that is disposed of by a Borrower in a Transfer permitted
        by
        the Loan Documents (including pursuant to a valid waiver or consent),
        to the
        extent all Liens required to be granted in such Collateral pursuant to
Section 7.10
        after
        giving effect to such Transfer have been granted, (ii) any property subject
        to a
        Lien permitted hereunder in reliance upon Section 8.2(c)
        or (d),
        (iii)
        all of the Collateral and all the Borrowers, upon (A) termination of the
        Commitments, (B) payment and satisfaction in full of all Loans and all other
        Obligations that the Administrative Agent has been notified in writing are
        then
        due and payable, (C) deposit of cash collateral with respect to all contingent
        Obligations, in amounts and on terms and conditions and with parties
        satisfactory to the Administrative Agent and each Indemnitee that is owed
        such
        Obligations and (D) to the extent requested by the Administrative Agent,
        receipt
        by the Secured Parties of liability releases from the Borrowers each in form
        and
        substance acceptable to the Administrative Agent,
        and
        (iv) any Lien on the Collateral related to Westlake, Boynton and the Whittier
        Residence upon the sale of same as permitted hereunder.

       

      Each
        Lender hereby directs the Administrative Agent, and the Administrative Agent
        hereby agrees, upon receipt of reasonable advance notice from any Borrower,
        to
        execute and deliver or 

       

      
        
           

        

        
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      file
        such
        documents and to perform other actions reasonably necessary to release the
        guaranties and Liens when and as directed in this Section 10.10.

       

       

      Section
        10.11  Additional
        Secured Parties.
        The
        benefit of the provisions of the Loan Documents directly relating to the
        Collateral or any Lien granted thereunder shall extend to and be available
        to
        any Secured Party that is not a Lender as long as, by accepting such benefits,
        such Secured Party agrees, as among the Administrative Agent and all other
        Secured Parties, that such Secured Party is bound by (and, if requested by
        the
        Administrative Agent, shall confirm such agreement in a writing in form and
        substance acceptable to the Administrative Agent) this Article X,
        Section 11.8 (Right of Setoff), Section 11.9 (Sharing of Payments) and
        Section 11.20 (Confidentiality) and the decisions and actions of the
        Administrative Agent and the Required Lenders (or, where expressly required
        by
        the terms of this Agreement, a greater proportion of the Lenders) to the
        same
        extent a Lender is bound; provided, however, that, notwithstanding the
        foregoing, (a) such Secured Party shall be bound by Section 10.8 only to
        the extent of Liabilities, costs and expenses with respect to or otherwise
        relating to the Collateral held for the benefit of such Secured Party, in
        which
        case the obligations of such Secured Party thereunder shall not be limited
        by
        any concept of Pro Rata Share or similar concept, (b) each of the Administrative
        Agent and the Lenders shall be entitled to act at its sole discretion, without
        regard to the interest of such Secured Party, regardless of whether any
        Obligation to such Secured Party thereafter remains outstanding, is deprived
        of
        the benefit of the Collateral, becomes unsecured or is otherwise affected
        or put
        in jeopardy thereby, and without any duty or liability to such Secured Party
        or
        any such Obligation and (c) such Secured Party shall not have any right to
        be
        notified of, consent to, direct, require or be heard with respect to, any
        action
        taken or omitted in respect of the Collateral or under any Loan
        Document.

       

       

      ARTICLE
        XI  

       

       

      


       

       

      MISCELLANEOUS

       

       

      Section
        11.1  Amendments,
        Waivers, Etc.
        (a)
        No amendment or waiver of any provision of any Loan Document (other than
        the Fee
        Letter, the Control Agreements and the Secured Hedging Agreements) and no
        consent to any departure by any Borrower therefrom shall be effective unless
        the
        same shall be in writing and signed (1) in the case of an amendment, consent
        or
        waiver to cure any ambiguity, omission, defect or inconsistency, by the
        Administrative Agent and the Parent, (2) in the case of an amendment granting
        a
        new Lien for the benefit of the Secured Parties or extending an existing
        Lien
        over additional property, by the Administrative Agent and each Borrower directly
        affected thereby, (3) in the case of any other waiver or consent, by the
        Required Lenders (or by the Administrative Agent with the consent of the
        Required Lenders), and (4) in the case of any other amendment, by the Required
        Lenders (or by the Administrative Agent with the consent of the Required
        Lenders) and the Borrowers; provided, however, that no amendment, consent
        or
        waiver described in clause (3) or (4) above shall, unless in writing and
        signed by each Lender directly affected thereby (or by the Administrative
        Agent
        with the consent of such Lender), in addition to any other Person the signature
        of which is otherwise required pursuant to any Loan Document, do any of the
        following:

       

      (i)  waive
        any
        condition specified in Section 3.1,
        except
        any condition referring to any other provision of any Loan
        Document;

       

      
        
           

        

        
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      (ii)  increase
        the Commitment of such Lender or subject such Lender to any additional
        obligation;

       

      (iii)  reduce
        (including through release, forgiveness, assignment or otherwise) (A) the
        principal amount of, the interest rate on, or any obligation of any Borrower
        to
        repay (whether or not on a fixed date), any outstanding Loan owing to such
        Lender, or (B) any fee or accrued interest payable to such Lender; provided,
        however,
        that
        this clause
        (iii)
        does not
        apply to (x) any change to any provision increasing any interest rate or
        fee during the continuance of an Event of Default or to any payment of any
        such
        increase or (y) any modification to any financial covenant set forth in
Article V
        or in
        any definition set forth therein or principally used therein;

       

      (iv)  waive
        or
        postpone any scheduled maturity date or other scheduled date fixed for the
        payment, in whole or in part, of principal of or interest on any Loan or
        fee
        owing to such Lender or for the reduction of such Lender’s Commitment;
provided,
        however,
        that
        this clause
        (iv)
        does not
        apply to any change to mandatory prepayments, including those required under
        Section 2.4,
        or to
        the application of any payment, including as set forth in Section 2.6;

       

      (v)  except
        as
        provided in Section 10.10,
        release
        any material portion of the Collateral (it being acknowledged and understood
        that any Facility shall be deemed a material portion of the
        Collateral); 

       

      (vi)  reduce
        or
        increase the proportion of Lenders required for the Lenders (or any subset
        thereof) to take any action hereunder or change the definition of the terms
        “Required Lenders”, “Pro Rata Share” or “Pro Rata Outstandings”; or


       

      (vii)  amend
        Section 10.10
        (Release
        of Collateral),
        Section 11.9
        (Sharing
        of Payments)
        or this
Section 11.1;

       

      and
        provided,
        further,
        that
        (x)(A) any waiver of any payment applied pursuant to Section 2.6(b)
        (Application
        of Mandatory Prepayments)
        to, and
        any modification of the application of any such payment to, the Term Loans
        shall
        require the consent of the Required Lenders, (B) any change to the
        definition of the term “Required Lender” shall require the consent of the
        Required Lenders and (y) no amendment, waiver or consent shall affect the
        rights
        or duties under any Loan Document of, or any payment to, the Administrative
        Agent (or otherwise modify any provision of Article X
        or the
        application thereof), any SPV that has been granted an option pursuant to
        Section 11.2(f)
        unless
        in writing and signed by the Administrative Agent, such SPV in addition to
        any
        signature otherwise required and (z) the consent of the Borrowers shall not
        be
        required to change any order of priority set forth in Section 2.6.

       

      (b)  Each
        waiver or consent under any Loan Document shall be effective only in the
        specific instance and for the specific purpose for which it was given. No
        notice
        to or demand on any Borrower shall entitle any Borrower to any notice or
        demand
        in the same, similar or other circumstances. No failure on the part of any
        Secured Party to exercise, and no delay in exercising, any right hereunder
        shall
        operate as a waiver thereof, nor shall any single or partial 

       


      
        
          
          

        

        
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      exercise
        of any such right preclude any other or further exercise thereof or the exercise
        of any other right.

       

       

      Section
        11.2  Assignments
        and Participations;
        Binding Effect.
        (a)
        Binding Effect. This Agreement shall become effective when it shall have
        been
        executed by Parent, the other Borrowers and the Administrative Agent and
        when
        the Administrative Agent shall have been notified by each Lender that such
        Lender has executed it. Thereafter, it shall be binding upon and inure to
        the
        benefit of, but only to the benefit of, Parent, the other Borrowers (in each
        case except for Article X), the Administrative Agent, each Lender and, to
        the extent provided in Section 10.11, each other Indemnitee and Secured
        Party and, in each case, their respective successors and permitted assigns.
        Except as expressly provided in any Loan Document (including in
        Section 10.9), none of Parent, the other Borrowers or the Administrative
        Agent shall have the right to assign any rights or obligations hereunder
        or any
        interest herein.

       

      (b) Right
        to Assign.
        Each
        Lender may sell, transfer, negotiate or assign all or a portion of its rights
        and obligations hereunder (including all or a portion of its Commitments
        and its
        rights and obligations with respect to Loans) to (i) any existing Lender,
        (ii)
        any Affiliate or Approved Fund of any existing
        Lender or (iii) any other Person acceptable (which acceptance shall not be
        unreasonably withheld or delayed) to the Administrative Agent and, as long
        as no
        Event of Default is continuing, the Borrowers; provided,
        however,
        that (x)
        such
        Transfers do not have to be ratable between the Facilities but must be ratable
        among the obligations owing to and owed by such Lender and (y) the aggregate
        outstanding principal amount (determined as of the effective date of the
        applicable Assignment) of the Loans, Commitments subject to any such Transfer
        shall be an integral multiple of $1,000,000, unless such Transfer is made
        to an
        existing Lender or an Affiliate or Approved Fund of any existing Lender,
        is of
        the assignor’s (together with its Affiliates and Approved Funds) entire interest
        or is made with the prior consent of the Parent and the Administrative
        Agent.

       

      (c) Procedure.
        The
        parties to each Transfer made in reliance on clause
        (b)
        above
        (other than those described in clause
        (e)
        or
(f)
        below)
        shall execute and deliver to the Administrative Agent (which shall keep a
        copy
        thereof) an Assignment, together with any existing Note subject to such Transfer
        (or any affidavit of loss therefor acceptable to the Administrative Agent),
        any
        tax forms required to be delivered pursuant to Section 2.11(f)
        and
        payment by the assignee to the Administrative Agent of an assignment fee
        in the
        amount of $3,500. Upon receipt of all the foregoing, and conditioned upon
        such
        receipt and upon the Administrative Agent consenting to such Assignment,
        from
        and after the effective date specified in such Assignment, the Administrative
        Agent shall record or cause to be recorded in the Register the information
        contained in such Assignment.

       

      (d) Effectiveness.
        Effective upon the entry of such record in the Register, (i) such assignee
        shall become a party hereto and, to the extent that rights and obligations
        under
        the Loan Documents have been assigned to such assignee pursuant to such
        Assignment, shall have the rights and obligations of a Lender, (ii) any
        applicable Note shall be transferred to such assignee through such entry
        and
        (iii) the assignor thereunder shall, to the extent that rights and obligations
        under this Agreement have been assigned by it pursuant to such Assignment,
        relinquish its rights (except for those surviving the termination of the
        Commitments and the payment in full of the Obligations) and be released from
        its
        obligations under the Loan Documents, other than those relating to events
        or
        circumstances occurring prior to such assignment (and, in the case of an
        Assignment covering all or the remaining portion of an 

       


      
        
          
          

        

        
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      assigning
        Lender’s rights and obligations under the Loan Documents, such Lender shall
        cease to be a party hereto except that each Lender agrees to remain bound
        by
Article X,
        Section 11.8
        (Right
        of Setoff)
        and
Section 11.9
        (Sharing
        of Payments)
        to the
        extent provided in Section 10.11
        (Additional
        Secured Parties)).

       

      (e) Grant
        of Security Interests.
        In
        addition to the other rights provided in this Section 11.2,
        each
        Lender may grant
        a
        security interest in, or otherwise assign as collateral, any of its rights
        under
        this Agreement, whether now owned or hereafter acquired (including rights
        to
        payments of principal or interest on the Loans), to (A) any federal reserve
        bank
        (pursuant to Regulation A of the Federal Reserve Board), without notice to
        the
        Administrative Agent or (B) any holder of, or trustee for the benefit of
        the holders of, such Lender’s securities by notice to the Administrative Agent;
provided,
        however,
        that no
        such holder or trustee, whether because of such grant or assignment or any
        foreclosure thereon (unless such foreclosure is made through an assignment
        in
        accordance with clause
        (b)
        above),
        shall be entitled to any rights of such Lender hereunder and no such Lender
        shall be relieved of any of its obligations hereunder.

       

      (f) Participants
        and SPVs.
        In
        addition to the other rights provided in this Section 11.2,
        each
        Lender may, at no cost to the Borrowers (unless such assignment or participation
        is undertaken at the request of Borrowers, which costs and expense in the
        case
        of syndication to MLC shall be less than or equal to $15,000), (x) with notice
        to the Administrative Agent, grant to an SPV the option to make all or any
        part
        of any Loan that such Lender would otherwise be required to make hereunder
        (and
        the exercise of such option by such SPV and the making of Loans pursuant
        thereto
        shall satisfy the obligation of such Lender to make such Loans hereunder)
        and
        such SPV may assign to such Lender the right to receive payment with respect
        to
        any Obligation and (y) without notice to or consent from the Administrative
        Agent or the Parent, sell participations to one or more Persons in or to
        all or
        a portion of its rights and obligations under the Loan Documents (including
        all
        its rights and obligations with respect to the Term Loans); provided,
        however,
        that,
        whether as a result of any term of any Loan Document or of such grant or
        participation, (i) no such SPV or participant shall have a commitment, or
        be
        deemed to have made an offer to commit, to make Loans hereunder, and, except
        as
        provided in the applicable option agreement, none shall be liable for any
        obligation of such Lender hereunder, (ii) such Lender’s rights and
        obligations, and the rights and obligations of the Borrowers and the Secured
        Parties towards such Lender, under any Loan Document shall remain unchanged
        and
        each other party hereto shall continue to deal solely with such Lender, which
        shall remain the holder of the Obligations in the Register, except that (A)
        each
        such participant and SPV shall be entitled to the benefit of Sections 2.10
        (Breakage
        Costs; Increased Costs; Capital Requirements)
        and
2.11
        (Taxes),
        but
        only to the extent such participant or SPV delivers the tax forms such Lender
        is
        required to collect pursuant to Section 2.11(f)
        and then
        only to the extent of any amount to which such Lender would be entitled in
        the
        absence of any such grant or participation and (B) each such SPV may
        receive other payments that would otherwise be made to such Lender with respect
        to Loans funded by such SPV to the extent provided in the applicable option
        agreement and set forth in a notice provided to the Administrative Agent
        by such
        SPV and such Lender, provided,
        however,
        that in
        no case (including pursuant to clause
        (A)
        or
(B)
        above)
        shall an SPV or participant have the right to enforce any of the terms of
        any
        Loan Document, and (iii) the consent of such SPV or participant shall not
        be
        required (either directly, as a restraint on such Lender’s ability to consent
        hereunder or otherwise) for any amendments, waivers or consents with respect
        to
        any Loan Document or to exercise or refrain from exercising any powers or
        rights
        such Lender may have under or in respect of the Loan Documents (including
        the
        right to enforce or direct enforcement of the Obligations), except for those
        described in clauses (iii)
        and
(iv)
        of


       


      
        
          
          

        

        
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      Section 11.1(a)
        with
        respect to amounts, or dates fixed for payment of amounts, to which such
        participant or SPV would otherwise be entitled and, in the case of participants,
        except for those described in Section 11.1(a)(v)
        (or
        amendments, consents and waivers with respect to Section 10.10
        to
        release all or substantially
        all
        of the Collateral).
        No party
        hereto shall institute (and each Borrower shall cause each other Borrower
        not to
        institute) against any SPV grantee of an option pursuant to this clause
        (f)
        any
        bankruptcy, reorganization, insolvency, liquidation or similar proceeding,
        prior
        to the date that is one year and one day after the payment in full of all
        outstanding commercial paper of such SPV; provided,
        however,
        that
        each Lender having designated an SPV as such agrees to indemnify each Indemnitee
        against any Liability that may be incurred by, or asserted against, such
        Indemnitee as a result of failing to institute such proceeding (including
        a
        failure to get reimbursed by such SPV for any such Liability). The agreement
        in
        the preceding sentence shall survive the termination of the Commitments and
        the
        payment in full of the Obligations.

       

       

      Section
        11.3  Costs
        and Expenses.
        Any
        action taken by any Borrower under or with respect to any Loan Document,
        even if
        required under any Loan Document or at the request of any Secured Party,
        shall
        be at the expense of such Borrower, and no Secured Party shall be required
        under
        any Loan Document to reimburse any Borrower therefor except as expressly
        provided therein. In addition, each Borrower agrees to pay or reimburse upon
        demand (a) the Administrative Agent for all reasonable out-of-pocket costs
        and
        expenses incurred by it or any of its Related Persons in connection with
        the
        investigation, development, preparation, negotiation, execution (but not,
        unless
        undertaken at the request of Borrowers, syndication (which costs and expenses,
        in the case of syndication to MLC, shall be less than or equal to $15,000),
        interpretation, administration or servicing fees unless specifically set
        forth
        in this Agreement or the other Loan Documents) of, any modification of any
        term
        of or termination of, any Loan Document, any commitment or proposal letter
        therefor, any other document prepared in connection therewith or the
        consummation of any transaction contemplated therein (including periodic
        audits
        in connection therewith and environmental audits and assessments), in each
        case
        including the reasonable fees, charges and disbursements of legal counsel
        to the
        Administrative Agent or such Related Persons, fees, costs and expenses incurred
        in connection with Intralinks®
        or any
        other Electronic System and allocated to the Facilities by the Administrative
        Agent in its sole discretion and fees, charges and disbursements of the
        auditors, appraisers, printers and other of their Related Persons retained
        by or
        on behalf of any of them or any of their Related Persons, (b) the Administrative
        Agent for all reasonable costs and expenses incurred by it or any of its
        Related
        Persons in connection with internal audit reviews, field examinations and
        Collateral examinations (which shall be reimbursed, in addition to the
        out-of-pocket costs and expenses of such examiners, at the per diem rate
        per
        individual charged by the Administrative Agent for its examiners) and (c)
        each
        of the Administrative Agent, its Related Persons, and each Lender for all
        costs
        and expenses incurred in connection with (i) any refinancing or restructuring
        of
        the credit arrangements provided hereunder in the nature of a “work-out”, (ii)
        the enforcement or preservation of any right or remedy under any Loan Document,
        any Obligation, with respect to the Collateral or any other related right
        or
        remedy or (iii) the commencement, defense, conduct of, intervention in, or
        the
        taking of any other action with respect to, any proceeding (including any
        bankruptcy or insolvency proceeding) related to any Borrower, Loan Document,
        Obligation (or the response to and preparation for any subpoena or request
        for
        document production relating thereto), including fees and disbursements of
        counsel (including allocated costs of internal counsel).

       

       

      
        
           

        

        
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      Section
        11.4  Indemnities.
        (a)
        Each Borrower agrees to indemnify, hold harmless and defend the Administrative
        Agent, each Lender, each Person (other than the Borrowers) that is a party
        to a
        Secured Hedging Agreement, and each of their respective Related Persons (each
        such Person being an “Indemnitee”) from and against all Liabilities (including
        brokerage commissions, fees and other compensation) that may be imposed on,
        incurred by or asserted against any such Indemnitee in any matter relating
        to or
        arising out of, in connection with or as a result of (i) any Loan Document,
        any
        Related Document, any Disclosure Document, any Obligation (or the repayment
        thereof), the use or intended use of the proceeds of any Loan, any Related
        Transaction, or any securities filing of, or with respect to, any Borrower,
        (ii)
        any commitment letter, proposal letter or term sheet with any Person or any
        Contractual Obligation, arrangement or understanding with any broker, finder
        or
        consultant, in each case entered into by or on behalf of the Seller, any
        Borrower or any Affiliate of any of them in connection with any of the foregoing
        and any Contractual Obligation entered into in connection with any Electronic
        Systems or other Electronic Transmissions, (iii) any actual or prospective
        investigation, litigation or other proceeding, whether or not brought by
        any
        such Indemnitee or any of its Related Persons, any holders of securities
        or
        creditors (and including attorneys’ fees in any case), whether or not any such
        Indemnitee, Related Person, holder or creditor is a party thereto, and whether
        or not based on any securities or commercial law or regulation or any other
        Requirement of Law or theory thereof, including common law, equity, contract,
        tort or otherwise, or (iv) any other act, event or transaction related,
        contemplated in or attendant to any of the foregoing (collectively, the
“Indemnified Matters”); provided, however, that each Borrower shall not have any
        liability under this Section 11.4 to any Indemnitee with respect to any
        Indemnified Matter, and no Indemnitee shall have any liability with respect
        to
        any Indemnified Matter other than (to the extent otherwise liable), to the
        extent such liability has resulted primarily from the gross negligence or
        willful misconduct of any Indemnitee. Furthermore, each Borrower waives and
        agrees not to assert against any Indemnitee, and shall cause each other Borrower
        to waive and not assert against any Indemnitee, any right of contribution
        with
        respect to any Liabilities that may be imposed on, incurred by or asserted
        against any Related Person.

       

      (b) Without
        limiting the foregoing, “Indemnified
        Matters”
        includes all Environmental Liabilities, including those arising from, or
        otherwise involving, or any actual, alleged or prospective damage to property
        or
        natural resources or harm or injury alleged to have resulted from any Release
        of
        Hazardous Materials on, upon or into such property or natural resource or
        any
        property on or contiguous to any real property of any Borrower, whether or
        not,
        with respect to any such Environmental Liabilities, any Indemnitee is a
        mortgagee pursuant to any leasehold mortgage, a mortgagee in possession,
        or the
        successor-in-interest to any Related Person, in each case except to the extent
        such Environmental Liabilities (i) are incurred solely following foreclosure
        by
        any Secured Party or following any Secured Party having become the
        successor-in-interest to any Borrower and (ii) are attributable solely to
        acts of such Indemnitee.

       

       

      Section
        11.5  Survival.
        Any
        indemnification or other protection provided to any Indemnitee pursuant to
        any
        Loan Document (including pursuant to Section 2.11 (Taxes),
        Section 2.10 (Breakage
        Costs; Increased Costs; Capital Requirements), Article X (The
        Administrative Agent), Section 11.3 (Costs and Expenses), Section 11.4
        (Indemnities) or
        this Section 11.5 and also including Guaranty Obligations for which Lender
        has recourse to the party obligated thereunder) and all representations and
        warranties made in any Loan Document shall (A) survive the termination of
        the Commitments and the payment in full of other Obligations and (B) inure
        to
        the benefit of any Person that at any time held a right thereunder (as an
        Indemnitee or otherwise) and, thereafter, its successors and permitted assigns,
        other than any person who has 

       


      
        
          
          

        

        
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      taken
        an
        interest herein or in the Facilities through foreclosure, deed-in-lieu or
        similar transaction, unless such person taking such interest through
        foreclosure, deed-in-lieu or similar transaction is a Lender, the Administrative
        Agent or any of their Affiliates.

       

       

      Section
        11.6  Limitation
        of Liability for Certain Damages.
        In no
        event shall any Indemnitee be liable on any theory of liability for any special,
        indirect, consequential or punitive damages (including any loss of profits,
        business or anticipated savings). Each Borrower hereby waives, releases and
        agrees (and shall cause each other Borrower to waive, release and agree)
        not to
        sue upon any such claim for any special, indirect, consequential or punitive
        damages, whether or not accrued and whether or not known or suspected to
        exist
        in its favor.

       

       

      Section
        11.7  Lender-Creditor
        Relationship.
        The
        relationship between the Lenders and the Administrative Agent, on the one
        hand,
        and the Borrowers, on the other hand, is solely that of lender and creditor.
        No
        Secured Party has any fiduciary relationship or duty to any Borrower arising
        out
        of or in connection with, and there is no agency, tenancy or joint venture
        relationship between the Secured Parties and the Borrowers by virtue of,
        any
        Loan Document or any transaction contemplated therein.

       

       

      Section
        11.8  Right
        of
        Setoff.
        Each of
        the Administrative Agent, each Lender and each Affiliate (including each
        branch
        office thereof) of any of them is hereby authorized, without notice or demand
        (each of which is hereby waived by each Borrower), at any time and from time
        to
        time during the continuance of any Event of Default and to the fullest extent
        permitted by applicable Requirements of Law, to set off and apply any and
        all
        deposits (whether general or special, time or demand, provisional or final)
        at
        any time held and other Indebtedness, claims or other obligations at any
        time
        owing by the Administrative Agent, such Lender or any of their respective
        Affiliates to or for the credit or the account of any Borrower against any
        Obligation of any Borrower now or hereafter existing, whether or not any
        demand
        was made under any Loan Document with respect to such Obligation and even
        though
        such Obligation may be unmatured. Each of the Administrative Agent, each
        Lender
        agrees promptly to notify the Borrowers and the Administrative Agent after
        any
        such setoff and application made by such Lender or its Affiliates; provided,
        however, that the failure to give such notice shall not affect the validity
        of
        such setoff and application. The rights under this Section 11.8 are in
        addition to any other rights and remedies (including other rights of setoff)
        that the Administrative Agent, the Lenders and their Affiliates and other
        Secured Parties may have.

       

       

      Section
        11.9  Sharing
        of Payments, Reinstatement Etc.
        If any
        Lender, directly or through an Affiliate or branch office thereof, obtains
        any
        payment of any Obligation of any Borrower (whether voluntary, involuntary
        or
        through the exercise of any right of setoff or the receipt of any Collateral
        or
“proceeds” (as defined under the applicable UCC) of Collateral) other than
        pursuant to Sections 2.10 (Breakage Costs; Increased Costs; Capital
        Requirements), 2.11 (Taxes) and 2.12 (Substitution of Lenders) and such payment
        exceeds the amount such Lender would have been entitled to receive if all
        payments had gone to, and been distributed by, the Administrative Agent in
        accordance with the provisions of the Loan Documents, such Lender shall purchase
        for cash from other Secured Parties such participations in their Obligations
        as
        necessary for such Lender to share such excess payment with such Secured
        Parties
        to ensure such payment is applied as though it had been received by the
        Administrative Agent and applied in accordance with this Agreement (or, if
        such
        application would then be at the discretion of the Borrowers, applied to
        repay
        the Obligations in accordance herewith);
        provided, however, that (a) if such payment is rescinded or otherwise recovered
        from such Lender in whole or in part, such 

       


      
        
          
          

        

        
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      purchase
        shall be rescinded and the purchase price therefor shall be returned to such
        Lender without interest and (b) such Lender shall, to the fullest extent
        permitted by applicable Requirements of Law, be able to exercise all its
        rights
        of payment (including the right of setoff) with respect to such participation
        as
        fully as if such Lender were the direct creditor of such Borrower in the
        amount
        of such participation.

       

      If
        any
        payments of money or transfers of property made to Administrative Agent (for
        the
        benefit of Lenders) by any Borrower should for any reason subsequently be
        declared to be, or in Administrative Agent’s counsel’s good faith opinion be
        determined to be, fraudulent (within the meaning of any state or federal
        law
        relating to fraudulent conveyances), preferential or otherwise voidable or
        recoverable in whole or in part for any reason (hereinafter collectively
        called
“voidable transfers”) under the Bankruptcy Code or any other federal or state
        law and Administrative Agent or any Lender is required to repay or restore,
        or
        in Administrative Agent’s counsel’s opinion may be so liable to repay or
        restore, any such voidable transfer, or the amount or any portion thereof,
        then
        as to any such voidable transfer or the amount repaid or restored and all
        reasonable costs and expenses (including reasonable attorneys’ fees) of
        Administrative Agent and Lenders related thereto, such Borrower’s liability
        hereunder shall automatically be revived, reinstated and restored and shall
        exist as though such voidable transfer had never been made.

       

       

      Section
        11.10  Marshaling;
        Payments Set Aside.
        No
        Secured Party shall be under any obligation to marshal any property in favor
        of
        any Borrower or any other party or against or in payment of any Obligation.
        To
        the extent that any Secured Party receives a payment from any Borrower, from
        the
        proceeds of the Collateral, from the exercise of its rights of setoff, any
        enforcement action or otherwise, and such payment is subsequently, in whole
        or
        in part, invalidated, declared to be fraudulent or preferential, set aside
        or
        required to be repaid to a trustee, receiver or any other party, then to
        the
        extent of such recovery, the obligation or part thereof originally intended
        to
        be satisfied, and all Liens, rights and remedies therefor, shall be revived
        and
        continued in full force and effect as if such payment had not
        occurred.

       

       

      Section
        11.11  Notices.
        (a)
        Addresses. All
        notices, demands, requests, approvals, consents, directions and other
        communications required or expressly authorized to be made by this Agreement
        shall, whether or not specified to be in writing but unless otherwise expressly
        specified to be given by any other means, be given in writing and (i) addressed
        to:

       

      if
        to the
        Borrowers: BREA
        Emeritus LLC

      345
        Park
        Avenue

      New
        York,
        New York 10154

      Attention:
        David Roth

      Tel:
        (212) 583-5885

      Fax:
        (212) 583-5202

      


       

      with
        copy
        to: Emeritus
        Corporation

      3131
        Elliott Avenue, Suite 500

      Seattle,
        Washington 98121

      Attention:
        Eric Mendelsohn

      Tel:
        (206) 301-4493

      Fax:
        (206) 357-7388

      


       


      
        
          
          

        

        
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      and: Pircher,
        Nichols & Meeks

      900
        North
        Michigan Avenue, Suite 1050

      Chicago,
        Illinois 60611

      Attention:
        Real Estate Notices (JDL-CHI/SAC-LA)

      Tel:
        (312) 915-3112

      Fax:
        (312) 915-3348

      


       

      and
         Foster
        Pepper PLLC

      1111
        Third Avenue

      Seattle,
        Washington 98101-3299

      Attention:
        Laura McClellan, Esq.

      Tel:
        (206) 447-2871

      Fax:
        (206) 749-1917, 

      


       

      if
        to the


      Administrative
        Agent: GE
        Capital

      500
        West
        Monroe Street

      Chicago,
        IL 60661

      Attention:
        John Cobb, Senior Managing Director

      Tel:
        (312) 441-7421

      Fax:
        (866) 252-2015

      


       

      with
        copy
        to: 5804
        Trailridge Drive

      Austin,
        TX 78731

      Attention:
        Diana Pennington, Senior Vice President & Chief Counsel

      Tel:
        (512) 458-8625

      Fax:
        (866) 221-0433 

      


       

      or
        (ii)
        addressed to such other address as shall be notified in writing (A) in the
        case
        of any Borrower, the Administrative Agent, to the other parties hereto and
        (B)
        in the case of all other parties, to the Parent and the Administrative Agent.
        

       

      (b) Effectiveness.
        All
        communications described in clause
        (a)
        above
        and all other notices, demands, requests and other communications made in
        connection with this Agreement shall be effective and be deemed to have been
        received (i) if delivered by hand, upon personal delivery, (ii) if delivered
        by
        overnight courier service, one Business Day after delivery to such courier
        service, (iii) if delivered by United States mail, 5 days after being deposited
        in the mails, and (iv) if delivered by facsimile, upon sender’s receipt of
        confirmation of proper transmission,; provided,
        however,
        that no
        communications to the Administrative Agent pursuant to Article II
        or
Article X
        shall be
        effective until received by the Administrative Agent, and any communications
        delivered pursuant to clause (iv) shall be immediately followed by a hard
        copy
        sent pursuant to clauses (i), (ii) or (iii).

       

      
        
           

        

        
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      Section
        11.12  Electronic
        Transmissions.
        (a)
        Authorization. Subject to the provisions of Section 11.11(a), each of the
        Administrative Agent, the Borrowers, the Lenders and each of their Related
        Persons is authorized (but not required) to transmit, post or otherwise make
        or
        communicate, in its sole discretion, Electronic Transmissions in connection
        with
        any Loan Document and the transactions contemplated therein. Each Borrower
        and
        each Secured Party hereby acknowledges and agrees, and each Borrower shall
        cause
        each other Borrower to acknowledge and agree, that the use of Electronic
        Transmissions is not necessarily secure and that there are risks associated
        with
        such use, including risks of interception, disclosure and abuse and each
        indicates it assumes and accepts such risks by hereby authorizing the
        transmission of Electronic Transmissions.

       

      (b) Signatures.
        Subject
        to the provisions of Section 11.11(a),
        (i)(A)
        no posting to any Electronic System shall be denied legal effect merely because
        it is made electronically, (B) each Electronic Signature on any such
        posting shall be deemed sufficient to satisfy any requirement for a “signature”
and (C) each such posting shall be deemed sufficient to satisfy any
        requirement for a “writing”, in each case including pursuant to any Loan
        Document, any applicable provision of any UCC, the federal Uniform Electronic
        Transactions Act, the Electronic Signatures in Global and National Commerce
        Act
        and any substantive or procedural Requirement of Law governing such subject
        matter, (ii) each such posting that is not readily capable of bearing either
        a
        signature or a reproduction of a signature may be signed, and shall be deemed
        signed, by attaching to, or logically associating with such posting, an
        Electronic Signature, upon which each Secured Party and each Borrower may
        rely
        and assume the authenticity thereof, (iii) each such posting containing a
        signature, a reproduction of a signature or an Electronic Signature shall,
        for
        all intents and purposes, have the same effect and weight as a signed paper
        original and (iv) each party hereto or beneficiary hereto agrees not to contest
        the validity or enforceability of any posting on any Electronic System or
        Electronic Signature on any such posting under the provisions of any applicable
        Requirement of Law requiring certain documents to be in writing or signed;
        provided,
        however,
        that
        nothing herein shall limit such party’s or beneficiary’s right to contest
        whether any posting to any Electronic System or Electronic Signature has
        been
        altered after transmission.

       

      (c) Separate
        Agreements.
        All
        uses of an Electronic System shall be governed by and subject to, in addition
        to
Section 11.11
        and this
Section 11.12,
        separate terms and conditions posted or referenced in such Electronic System
        and
        related Contractual Obligations executed by Secured Parties and Borrowers
        in
        connection with the use of such Electronic System.

       

      (d) Limitation
        of Liability.
        All
        Electronic Systems and Electronic Transmissions shall be provided “as is” and
“as available”. None of Administrative Agent or any of its Related Persons
        warrants the accuracy, adequacy or completeness of any Electronic Systems
        or
        Electronic Transmission, and each disclaims all liability for errors or
        omissions therein. No Warranty of any kind is made by the Administrative
        Agent
        or any of its Related Persons in
        connection with any Electronic Systems or Electronic Communication,
        including any warranty of merchantability, fitness for a particular purpose,
        non-infringement of third-party rights or freedom from viruses or other code
        defects. 
        Each
        Borrower and each Secured Party agrees (and each Borrower shall cause each
        other
        Borrower to agree) that the Administrative Agent has no responsibility for
        maintaining or 

       


      
        
          
          

        

        
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      providing
        any equipment, software, services or any testing required in connection with
        any
        Electronic Transmission or otherwise required for any Electronic
        System.

       

       

      Section
        11.13  Governing
        Law.
        This
        Agreement, each other Loan Document that does not expressly set forth its
        applicable law, and the rights and obligations of the parties hereto and
        thereto
        shall be governed by, and construed and interpreted in accordance with, the
        law
        of the State of New York.

       

       

      Section
        11.14  Jurisdiction.
        (a)
        Submission to Jurisdiction. Any legal action or proceeding with respect to
        any
        Loan Document may be brought in the courts of the State of New York located
        in
        the City of New York, Borough of Manhattan, or of the United States of America
        for the Southern District of New York and, by execution and delivery of this
        Agreement, each Borrower hereby accepts for itself and in respect of its
        property, generally and unconditionally, the jurisdiction of the aforesaid
        courts. The parties hereto (and, to the extent set forth in any other Loan
        Document, each other Borrower) hereby irrevocably waive any objection, including
        any objection to the laying of venue or based on the grounds of forum
        non conveniens,
        that
        any of them may now or hereafter have to the bringing of any such action
        or
        proceeding in such jurisdictions.

       

      (b) Service
        of Process.
        Each
        Borrower (and, to the extent set forth in any other Loan Document, each other
        Borrower) hereby irrevocably waives personal service of any and all legal
        process, summons, notices and other documents and other service of process
        of
        any kind and consents to such service in any suit, action or proceeding brought
        in the United States of America with respect to or otherwise arising out
        of or
        in connection with any Loan Document by any means permitted by applicable
        Requirements of Law, including by the mailing thereof (by registered or
        certified mail, postage prepaid) to the address of the Borrowers specified
        in
Section 11.11
        (and
        shall be effective when such mailing shall be effective, as provided therein).
        Each Borrower (and, to the extent set forth in any other Loan Document, each
        other Borrower) agrees that a final judgment in any such action or proceeding
        shall be conclusive and may be enforced in other jurisdictions by suit on
        the
        judgment or in any other manner provided by law.

       

      (c) Non-Exclusive
        Jurisdiction.
        Nothing
        contained in this Section 11.14
        shall
        affect the right of the Administrative Agent or any Lender to serve process
        in
        any other manner permitted by applicable Requirements of Law.

       

       

      Section
        11.15  Waiver
        of Jury Trial.
        Each
        party hereto hereby irrevocably waives trial by jury in any suit, action
        or
        proceeding with respect to, or directly or indirectly arising out of, under
        or
        in connection with, any Loan Document or the transactions contemplated therein
        or related thereto (whether founded in contract, tort or any other theory).
        Each
        party hereto (A) certifies that no other party and no Related Person of any
        other party has represented, expressly or otherwise, that such other party
        would
        not, in the event of litigation, seek to enforce the foregoing waiver and
        (B) acknowledges that it and the other parties hereto have been induced to
        enter into the Loan Documents, as applicable, by the mutual waivers and
        certifications in this
        Section 11.15.

       

       

      Section
        11.16  Severability.
        Any
        provision of any Loan Document being held illegal, invalid or unenforceable
        in
        any jurisdiction shall not affect any part of such provision not held


       


      
        
          
          

        

        
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      illegal,
        invalid or unenforceable, any other provision of any Loan Document or any
        part
        of such provision in any other jurisdiction.

       

       

      Section
        11.17  Execution
        in Counterparts.
        This
        Agreement may be executed in any number of counterparts and by different
        parties
        in separate counterparts, each of which when so executed shall be deemed
        to be
        an original and all of which taken together shall constitute one and the
        same
        agreement. Signature pages may be detached from multiple separate counterparts
        and attached to a single counterpart. Delivery of an executed signature page
        of
        this Agreement by facsimile transmission or Electronic Transmission shall
        be as
        effective as delivery of a manually executed counterpart hereof.

       

       

      Section
        11.18  Entire
        Agreement.
        The
        Loan Documents embody the entire agreement of the parties and supersede all
        prior agreements and understandings relating to the subject matter thereof
        and
        any prior letter of interest, commitment letter, confidentiality and similar
        agreements involving any Borrower and any of the Administrative Agent, any
        Lender or any of their respective Affiliates relating to a financing of
        substantially similar form, purpose or effect. In the event of any conflict
        between the terms of this Agreement and any other Loan Document, the terms
        of
        this Agreement shall govern (unless such terms of such other Loan Documents
        are
        necessary to comply with applicable Requirements of Law, in which case such
        terms shall govern to the extent necessary to comply therewith).

       

       

      Section
        11.19  Use
        of
        Name.
        Each
        Borrower agrees, and shall cause each other Borrower to agree, that it shall
        not, and none of its Affiliates shall, issue any press release or other public
        disclosure (other than any document filed with any Governmental Authority
        relating to a public offering of the Equity Interests of any Borrower) using
        the
        name, logo or otherwise referring to GE Capital or of any of its Affiliates,
        the
        Loan Documents or any transaction contemplated therein to which the Secured
        Parties are party without at least 2 Business Days’ prior notice to GE
        Capital and without the prior consent of GE Capital except to the extent
        required to do so under applicable Requirements of Law and then, only after
        consulting with GE Capital prior thereto.

       

       

      Section
        11.20  Non-Public
        Information; Confidentiality.
        (a)
        Each Lender acknowledges and agrees that it may receive material non-public
        information hereunder concerning the Borrowers and their Affiliates and
        securities and agrees to use such information in compliance with all relevant
        policies, procedures and Contractual Obligations and applicable Requirements
        of
        Laws (including United States federal and state security laws and
        regulations).

       

      (b) Each
        Lender and the Administrative Agent agrees to use all reasonable efforts
        to
        maintain, in accordance with its customary practices, the confidentiality
        of
        information obtained by it pursuant to any Loan Document and designated in
        writing by any Borrower as confidential, except that such information may
        be
        disclosed (i) with such Borrower’s consent, (ii) to Related Persons of such
        Lender or the Administrative Agent, as the case may be, that are advised
        of the
        confidential nature of such information and are instructed to keep such
        information confidential, (iii) to the extent such information presently
        is or
        hereafter becomes available to such Lender or the Administrative Agent, as
        the
        case may be, on a non-confidential basis from a source other than any Borrower,
        (iv) to the extent disclosure is required by applicable Requirements of Law
        or
        other legal process or requested or demanded by any Governmental Authority,
        (v) to the National Association of Insurance Commissioners or any similar
        organization, any examiner or any nationally recognized rating agency or
        otherwise to the extent 

       


      
        
          
          

        

        
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      consisting
        of general portfolio information that does not identify Borrowers, (vi) to
        current or prospective assignees, SPVs grantees of any option described in
        Section 11.2(f)
        or
        participants, direct or contractual counterparties to any Hedging Agreement
        permitted hereunder and to their respective Related Persons, in each case
        to the
        extent such assignees, participants, counterparties or Related Persons agree
        to
        be bound by provisions substantially similar to the provisions of this
Section 11.20
        and
        (vii) in connection with the exercise of any remedy under any Loan
        Document. 
        In the
        event of any conflict between the terms of this Section 11.20
        and
        those of any other Contractual Obligation entered into with any Borrower
        (whether or not a Loan Document), the terms of this Section 11.20
        shall
        govern.

       

       

      Section
        11.21  Patriot
        Act Notice.
        Each
        Lender subject to the USA Patriot Act of 2001 (31 U.S.C. 5318 et seq.) hereby
        notifies each Borrower that, pursuant to Section 326 thereof, it is required
        to
        obtain, verify and record information that identifies each Borrower, including
        the name and address of such Borrower and other information allowing such
        Lender
        to identify such Borrower in accordance with such act.

       

       

      Section
        11.22  Limitation
        of Liability.
        Notwithstanding
        anything to the contrary contained in this Agreement, except as expressly
        set
        forth in the Limited Recourse Guaranty or the Environmental Indemnity, no
        present or future “Constituent Partner” in or of any Borrower and no present or
        future advisor, trustee, director, officer, employee, beneficiary, member,
        shareholder, participant, advisor, principal or agent in or of any Borrower
        shall have any personal liability, directly or indirectly, under or in
        connection with this Agreement, and Lenders and their successors and assigns
        and, without limitation, all other persons and entities, hereby waive any
        and
        all such personal liability. “Constituent Partner” means any person or entity
        that is a partner in, member or shareholder of any Borrower, or any person
        or
        entity that directly or indirectly through one or more limited liability
        companies, partnership or other entities, is a partner in, member or shareholder
        of any Borrower; provided, however, in no event shall the Parent be a
“Constituent Partner”. 

       

       

      Section
        11.23  Existing
        Agreements Superseded; Exhibits and Schedules.
        (a) The
        Original Credit Agreement, including the schedules thereto, is superseded
        by
        this Agreement, including the schedules hereto, which has been executed in
        renewal, amendment, restatement and modification of, but not in novation
        or
        extinguishment of, the obligations under the Original Credit Agreement. Any
        and
        all outstanding amounts under the Original Credit Agreement including, but
        not
        limited to principal, accrued interest, fees and other charges, as of the
        date
        hereof shall be carried over and deemed outstanding under this Agreement.
        

       

      (b) Each
        Borrower reaffirms its obligations under each Loan Document to which it is
        a
        party, including but not limited to the Security Agreement and the schedules
        thereto, the Environmental Indemnity, each Mortgage and each Mortgage Supporting
        Document. 

       

      (c) Each
        Borrower agrees that each Loan Document (other than this Agreement) to which
        it
        is a party shall remain in full force and effect following the execution
        and
        delivery of this Agreement and that all references in any of the Loan Documents
        to the “Credit Agreement” shall be deemed to refer to this Amended and Restated
        Credit Agreement.

       

      


       

      [SIGNATURE
        PAGES FOLLOW]

      


       


      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
        by
        their respective officers thereunto duly authorized, as of the date first
        above
        written.

       

      BORROWERS

       

      BREA
        Emeritus LLC, a Delaware limited liability company

      


      By: Emeritus
        Corporation, a Washington  corporation,
        its Administrative Member

      


      


      


      By:
        /s/
        Raymond R. Brandstrom

      Name:
        Raymond R. Brandstrom

      Title:
        Vice President of Finance

      



      
        
          
          

        

        
          S-1

          
            

          

        

        
          
          

        

      


      


      BREA
        East
        Mesa LLC

      BREA
        Peoria LLC

      BREA
        Sun
        City West LLC

      BREA
        Tucson LLC

      BREA
        Brea
        LLC

      BREA
        Citrus Heights LLC

      BREA
        Whittier LLC

      BREA
        Denver LLC 

      BREA
        Colorado Springs LLC 

      BREA
        Boynton Beach LLC 

      BREA
        Sarasota LLC

      BREA
        Dunedin LLC

      BREA
        Palmer Ranch LLC

      BREA
        Decatur LLC

      BREA
        Atlanta Gardens LLC

      BREA
        Atlanta Court LLC

      BREA
        Smyrna LLC

      BREA
        Overland Park LLC

      BREA
        Charlotte LLC

      BREA
        Wayne LLC

      BREA
        Emerson LLC

      BREA
        West
        Orange LLC

      BREA
        Reno
        LLC

      BREA
        Westlake LLC

      BREA
        Roanoke LLC, 

      each
        a
        Delaware limited liability company

      


      By: BREA
        Emeritus LLC, a Delaware  limited
        liability company, its sole  member

      


      By: Emeritus
        Corporation, a Washington  corporation,
        its Administrative  Member

      


      


      


      By:
        _/s/
        Raymond R. Brandstrom __

      Name:
        Raymond R. Brandstrom

      Title:
        Vice President of Finance

      


      



      
        
          
          

        

        
          S-2

          
            

          

        

        
          
          

        

      


      Merrill
        Lynch Capital, a Division of Merrill Lynch Business Financial Services
        Inc.

       

      as
        a
        Lender

      
 

      By:
        /s/
        Michael A. Levin

                                      Name:
        Michael A.
        Levin

                                      Title:
        Vice
        President

       

       

      


      

        
          
            
            

          

          
            S-3

            
              

            

          

          
            
            

          

        



      General
        Electric Capital Corporation

       

      as
        Administrative Agent and a Lender

       

      


       

      


       

      By:
        /s/
        Jim McMahon

      Name:Jim
        McMahon

      Title:Vice
        President and 

      Duly
        Authorized Signatory

       

      


      


      GE
        Capital Markets, Inc.,

      
        	 	 	
                as
                  Lead Arranger

              


      

      


      


      


      By:
        /s/
        Jim McMahon

      Name:Jim
        McMahon

      Title:Vice
        President and 

      Duly
        Authorized Signatory

       

      


       

      



      
        
          
          

        

        
          S-4