ex105911loanagrmntaugusta.htm


    EX-10.59.11


    


     

    LOAN
AGREEMENT

     

    for a
loan in the amount of

     

    $4,087,500

     

    MADE BY
AND BETWEEN

     

    EMERIKEYT
FAIRWAYS OF AUGUSTA LLC,

     

    a
Delaware limited liability company

     

    


     

    as
Borrower

     

    and

     

    KEYBANK NATIONAL
ASSOCIATION,

     

    a
national banking association

     

    


     

    as
Lender

     

    Key
Healthcare Finance

     

    WA
31-13-2313

    1301
Fifth Avenue, 23rd Floor

    Seattle,
WA 98101

     

    Dated as
of April 25, 2008

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
 

    
      	 
      	
              TABLE
      OF CONTENTS

            	 
      
	
              Article
      1.

            	
              INCORPORATION
      OF RECITALS AND EXHIBITS

            	
              1

            
	
              1.1

            	
              Incorporation
      of Recitals.

            	
              1

            
	
              1.2

            	
              Incorporation
      of Exhibits.

            	
              1

            
	
              Article
      2.

            	
              DEFINITIONS

            	
              1

            
	
              2.1

            	
              Defined
      Terms.

            	
              1

            
	
              2.2

            	
              Other
      Definitional Provisions.

            	
              9

            
	
              Article
      3.

            	
              BORROWER'S
      REPRESENTATIONS AND WARRANTIES

            	
              9

            
	
              3.1

            	
              Representations
      and Warranties.

            	
              9

            
	
              3.2

            	
              Survival
      of Representations and Warranties.

            	
              12

            
	
              Article
      4.

            	
              LOAN
      AND LOAN DOCUMENTS

            	
              12

            
	
              4.1

            	
              Agreement
      to Borrow and Lend.

            	
              12

            
	
              4.2

            	
              Loan
      Documents.

            	
              13

            
	
              4.3

            	
              Term
      of the Loan; Extension Terms.

            	
              13

            
	
              4.4

            	
              Payments.

            	
              14

            
	
              4.5

            	
              Prepayments.

            	
              14

            
	
              4.6

            	
              Late
      Charge.

            	
              14

            
	
              Article
      5.

            	
              INTEREST

            	
              15

            
	
              5.1

            	
              Interest
      Rate.

            	
              15

            
	
              5.2

            	
              Interest
      Rate Agreements.

            	
              15

            
	
              Article
      6.

            	
              COSTS
      OF MAINTAINING LOAN

            	
              16

            
	
              6.1

            	
              Increased
      Costs and Capital Adequacy.

            	
              16

            
	
              6.2

            	
              Borrower
      Withholding.

            	
              17

            
	
              Article
      7.

            	
              LOAN
      EXPENSE AND ADVANCES

            	
              17

            
	
              7.1

            	
              Loan
      and Administration Expenses.

            	
              17

            
	
              7.2

            	
              Loan
      Origination Fee.

            	
              18

            
	
              7.3

            	
              Lender's
      Attorney Fees and Disbursements.

            	
              18

            
	
              7.4

            	
              Time
      of Payment of Fees and Expenses.

            	
              18

            
	
              7.5

            	
              Expenses
      and Advances Secured by Loan Documents.

            	
              18

            
	
              7.6

            	
              Right
      of Lender to Make Advances to Cure Borrower's Defaults.

            	
              18

            
	
              Article
      8.

            	
              CONDITIONS
      TO CLOSING AND DISBURSEMENT OF THE LOAN

            	
              19

            
	
              8.1

            	
              Conditions
      to Closing.

            	
              19

            
	
              8.2

            	
              Disbursements
      of Interest and Working Capital Reserve.

            	
              21

            
	
              Article
      9.

            	
              OTHER
      COVENANTS

            	
              22

            
	
              9.1

            	
              Balancing
      Obligation.

            	
              22

            
	
              9.2

            	
              Mechanics'
      Liens and Contest Thereof.

            	
              23

            
	
              9.3

            	
              Renewal
      of Insurance.

            	
              23

            
	
              9.4

            	
              Payment
      of Taxes.

            	
              23

            
	
              9.5

            	
              Tax
      and Insurance Escrow Accounts.

            	
              23

            


    

    


    
      
        
           


        

        
          i

          
            

          

        

        
           


        

      

    

     

    
      
        	
                9.6

              	
                Personal
      Property.

              	
                24

              
	
                9.7

              	
                Leasing
      Restrictions.

              	
                24

              
	
                9.8

              	
                Defaults
      Under Leases.

              	
                24

              
	
                9.9

              	
                Condition
      of Property.

              	
                24

              
	
                9.1

              	
                Inventory
      and Equipment.

              	
                24

              
	
                9.11

              	
                Lender's
      Attorneys' Fees for Enforcement of Agreement.

              	
                24

              
	
                9.12

              	
                Appraisals.

              	
                25

              
	
                9.13

              	
                Financial
      Information.

              	
                25

              
	
                9.14

              	
                Lost
      Note.

              	
                26

              
	
                9.15

              	
                Indemnification.

              	
                26

              
	
                9.16

              	
                No
      Additional Debt.

              	
                26

              
	
                9.17

              	
                Compliance
      With Laws.

              	
                26

              
	
                9.18

              	
                Organizational
      Documents.

              	
                26

              
	
                9.19

              	
                Management
      Contracts.

              	
                27

              
	
                9.2

              	
                Furnishing
      Notices.

              	
                27

              
	
                9.21

              	
                Authorized
      Representative.

              	
                27

              
	
                9.22

              	
                Financial
      Covenants.

              	
                27

              
	
                9.23

              	
                Single
      Purpose Entity Provisions.

              	
                28

              
	
                9.24

              	
                Right
      of First Refusal.

              	
                30

              
	
                Article
      10.

              	
                CASUALTIES
      AND CONDEMNATION

              	
                30

              
	
                10.1

              	
                Lender's
      Election to Apply Proceeds on Indebtedness.

              	
                30

              
	
                10.2

              	
                Borrower's
      Obligation to Rebuild and Use of Proceeds Therefor.

              	
                31

              
	
                Article
      11.

              	
                ASSIGNMENTS
      BY LENDER AND BORROWER

              	
                31

              
	
                11.1

              	
                Assignments
      and Participations.

              	
                31

              
	
                11.2

              	
                Prohibition
      of Assignments and Transfers by Borrower.

              	
                31

              
	
                11.3

              	
                Prohibition
      of Transfers in Violation of ERISA.

              	
                32

              
	
                11.4

              	
                Successors
      and Assigns.

              	
                32

              
	
                Article
      12.

              	
                DEFAULT

              	
                32

              
	
                12.1

              	
                Events
      of Default.

              	
                32

              
	
                12.2

              	
                Remedies
      Conferred Upon Lender.

              	
                34

              
	
                Article
      13.

              	
                GENERAL
      PROVISIONS

              	
                35

              
	
                13.1

              	
                Time
      is of the Essence.

              	
                35

              
	
                13.2

              	
                Captions.

              	
                35

              
	
                13.3

              	
                Modification;
      Waiver.

              	
                35

              
	
                13.4

              	
                Governing
      Law.

              	
                35

              
	
                13.5

              	
                Acquiescence
      Not to Constitute Waiver of Lender's Requirements.

              	
                35

              
	
                13.6

              	
                Disclaimer.

              	
                36

              
	
                13.7

              	
                Partial
      Invalidity; Severability.

              	
                36

              
	
                13.8

              	
                Definitions
      Include Amendments.

              	
                36

              
	
                13.9

              	
                Execution
      in Counterparts.

              	
                36

              
	
                13.1

              	
                Entire
      Agreement.

              	
                36

              
	
                13.11

              	
                Waiver
      of Damages.

              	
                36

              
	
                13.12

              	
                Claims
      Against Lender.

              	
                37

              
	
                13.13

              	
                Jurisdiction.

              	
                37

              


      


      
        
           


        

        
          ii

          
            

          

        

        
           


        

      



      
        	
                13.14

              	
                Set-Offs.

              	
                37

              
	
                13.15

              	
                Notices.

              	
                38

              
	
                13.16

              	
                Waiver
      of Jury Trial.

              	
                38

              
	
                13.17

              	
                Statutory
      Notice.

              	
                38

              


      



    


    


     

     LIST
OF EXHIBITS TO LOAN AGREEMENT

     

    Exhibit
A                                Legal
Description of Land

    Exhibit
B                                Survey
Requirements

    Exhibit
C                                Insurance
Requirements

    Exhibit
D                                Compliance
Certificate

    


     

    


     

    
      
        
           


        

        
          iii

          
            

          

        

        
           


        

      

    

    


    


     

    LOAN
AGREEMENT

     

    “Fairways
of Augusta”

     

    THIS LOAN
AGREEMENT (“Agreement”)
dated as of April 25, 2008, is made by and between EMERIKEYT FAIRWAYS OF AUGUSTA
LLC, a Delaware limited liability company (“Borrower”)
and KEYBANK NATIONAL ASSOCIATION, a national banking association, its successors
and assigns (“Lender”).

     

    Recitals

     

    A.           Borrower
is the owner of 50-unit assisted living and Alzheimer’s care facility, including
all furniture, fixtures and equipment (the “Facility”)
on real property located at 1611 Fairway Drive, Augusta, Kansas, and legally
described in Exhibit A
attached (together with the Facility, the “Property”).

     

    B.           Borrower
has applied to Lender for a loan in the amount of FOUR MILLION, EIGHTY SEVEN
THOUSAND, FIVE HUNDRED and NO/100 DOLLARS ($4,087,500.00) (the “Loan”)
the proceeds of which are to be used to refinance existing debt on the Property
and to finance interest and working capital expenses to be incurred by Borrower
with respect to the Facility.  Lender is willing to make the Loan to
Borrower on the terms and conditions set out in this Agreement.

     

    Agreement

     

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:

     

    ARTICLE
1.                

    INCORPORATION
OF RECITALS AND EXHIBITS

     

     

    1.1 Incorporation
of Recitals.

     

    The
foregoing preambles and all other recitals in this Agreement are made a part of
this Agreement by this reference.

     

    1.2 Incorporation
of Exhibits.

     

    The
Exhibits to this Agreement are incorporated in this Agreement and expressly made
a part hereof by this reference.

     

    ARTICLE
2.

    DEFINITIONS

     

     

    2.1 Defined
Terms.

     

    The
following terms as used herein shall have the following meanings:

    


    
      
        
           


        

        
          1

          
            

          

        

        
           


        

      

    

    


    Adjusted
LIBOR Rate:  The LIBOR Rate plus the applicable LIBOR Margin,
adjusting on the first day of each calendar month throughout the initial term
and any Extension Term of the Loan.

     

    Adjusted
Prime Rate:  A rate per annum equal to the sum of (a) the Prime
Rate Margin and (b) the greater of (i) the Prime Rate or (ii) one percent (1%)
in excess of the Federal Funds Effective Rate.  Any change in the
Adjusted Prime Rate shall be effective immediately from and after such change in
the Adjusted Prime Rate.

     

    Affiliate:  With
respect to a specified person or entity, any individual, partnership,
corporation, limited liability company, trust, unincorporated organization,
association or other entity which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such person or entity, including, without limitation, any general or limited
partnership in which such person or entity is a partner.

     

    Agreement:  This
Loan Agreement.

     

    Applicable
Rate:  The Adjusted LIBOR Rate unless the Default Rate is then
applicable or the provisions of Section 5.1 below are
then applicable.

     

    Appraisal.  An
MAI certified appraisal of the Property performed in accordance with FIRREA and
Lender’s appraisal requirements by an appraiser selected and retained by
Lender.

     

    Assignment
of Rents:  The Assignment of Rents and Leases made by Borrower
in favor of Lender assigning all leases, subleases and other agreements relating
to the use and occupancy of all or any portion of the Property, and all present
and future leases, rents, issues and profits therefrom.

     

    Authorized
Representative:  As such term is defined in Section 9.21.

     

    Bankruptcy
Code:  Title 11 of the United States Code entitled “Bankruptcy”
as now or hereafter in effect, or any successor thereto or any other present or
future bankruptcy or insolvency statute.

     

    Broadmoor
Borrower: As defined in Section
12.1(n).

     

    Broadmoor
Deed of Trust: As defined in Section
12.1(n).

     

    Broadmoor
Loan: As defined in Section
12.1(n).

     

    Broadmoor
Loan Documents: As defined in Section
12.1(n).

     

    Broadmoor
Property: As
defined in Section
12.1(n).

     

    Business
Day:  A day of the year on which banks are not required or
authorized to close in Seattle, Washington or Cleveland, Ohio.

     

    Capital
Improvements Funds:  As such term is defined in Section 8.3.

    


    
      
        
           


        

        
          2

          
            

          

        

        
           


        

      

    

    


    Control:  As
such term is used with respect to any person or entity, including the
correlative meanings of the terms “controlled by” and “under common control
with”, shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of such person or entity,
whether through the ownership of voting securities, by contract or
otherwise.

     

    Debt
Service:  (a) For each fiscal quarter of Borrower, commencing
at the Loan Closing and continuing through the initial Maturity Date, the amount
of interest payable on the Loan during such fiscal quarter, calculated at the
greater of (i) the Applicable Rate, or (ii) an assumed rate of six and one
quarter percent (6.25%) per annum, and (b) for each fiscal quarter during the
Extension Term, the total payments of principal and interest required on the
Loan during such fiscal quarter, with interest calculated at the greater of (i)
the Applicable Rate, or (ii) an assumed rate of six and one quarter percent
(6.25%) per annum and an amortization period of 25 years.

     

    Debt
Service Coverage Ratio A:  The ratio as of each Covenant Test
Date of (a) the Net Operating Income of the Property during the preceding fiscal
quarter, to (b) the Debt Service during such preceding fiscal
quarter.

     

    Debt
Service Coverage Ratio B:  For the applicable period, the ratio
of (a) the Net Operating Income of the Property during such period, to (b)
payments of principal and interest on the stated principal amount of the Loan
($4,087,500) during such period at an assumed interest rate of seven and one
half percent (7.5%) and an amortization period of 25 years.

     

    Debt
Service Coverage Ratio C:  For the applicable period, the ratio
of (a) the Net Operating Income of the Property during such period, to (b)
payments of principal and interest on the stated principal amount of the Loan
($4,087,500) during such period at calculated at the greater of (i) the
Applicable Rate, or (ii) an assumed rate of six and one quarter percent (6.25%)
per annum and an amortization period of 25 years.

     

    Default:  Any
event, circumstance or condition which, if it were to continue uncured, would,
with notice or lapse of time or both, constitute an Event of Default
hereunder.

     

    Default
Rate:  A rate per annum equal to three percent (3%) in excess
of the Adjusted LIBOR Rate, but shall not at any time exceed the highest rate
permitted by law.

     

    Environmental
Indemnity:  The Environmental and Hazardous Substances
Indemnity Agreement from Borrower and Guarantor, indemnifying Lender with regard
to all matters related to Hazardous Material and other matters.

     

    Environmental
Laws:  All federal, state and local statutes, ordinances,
rules, regulations, and other laws relating to environmental protection,
contamination or cleanup.

     

    Environmental
Proceedings:  Any environmental proceedings, whether civil
(including actions by private parties), criminal, or administrative proceedings,
relating to the Property.

     

    Environmental
Report:  An environmental report prepared at Borrower’s expense
by a qualified environmental consultant approved by Lender and addressed to
Lender (or subject to separate letter agreement permitting Lender to rely on
such environmental report).

    


    
      
        
           


        

        
          3

          
            

          

        

        
           


        

      

    

    


    ERISA:  The
Employee Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder from time to time.

     

    Event of
Default:  As such term is defined in Section 12.1.

     

    Extension
Option:  As defined in Section 4.3.

     

    Extension
Term:  As defined in Section 4.3.

     

    Facility:  As
defined in Recital
A.

     

    Federal
Funds Effective Rate:  Shall mean, for any day, the rate per
annum, rounded upward to the nearest on one-hundredth of one percent (1/100 of
1%), announced by the Federal Reserve Bank of Cleveland on such day as being the
weighted average of the rates on overnight federal funds transactions arranged
by federal funds brokers on the previous trading day, as computed and announced
by such Federal Reserve Bank in substantially the same manner as such Federal
Reserve Bank computes and announces the weighted average it refers to as the
“Federal Funds Effective Rate.”

     

    FIRREA:  The
Financial Institutions Reform, Recovery And Enforcement Act of 1989, as amended
from time to time.

     

    Governmental
Authority:  Any federal, state, county or municipal government,
or political subdivision thereof, any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality, or public
body, or any court, administrative tribunal, or public utility.

     

    Gross
Revenues:  For any period, all revenues of Borrower, determined
on a cash basis, derived from the ownership, operation, use, leasing and
occupancy of the Property during such period; provided, however, that in no
event shall Gross Revenues include (i) any loan proceeds,
(ii) proceeds or payments under insurance policies (except proceeds of
business interruption insurance); (iii) condemnation proceeds; (iv) any security
deposits received from Residents or tenants of the Property, unless and until
the same are applied to rent or other obligations in accordance with the
Residency Agreement or Lease; or (v) any other extraordinary items, in
Lender’s reasonable discretion.

     

    Guarantor:  Emeritus
Corporation, a Washington corporation.

     

    Hazardous
Material:  Means and includes gasoline, petroleum, asbestos
containing materials, explosives, radioactive materials or any hazardous or
toxic material, substance or waste which is defined by those or similar terms or
is regulated as such under any Law of any Governmental Authority having
jurisdiction over the Property or any portion thereof or its use, including:
(i) any “hazardous substance” defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C.A. § 9601(14) as may be amended from time to time, or any
so-called “superfund” or “superlien” Law, including the judicial interpretation
thereof; (ii) any “pollutant or contaminant” as defined in 42 U.S.C.A.
§ 9601(33); (iii) any material now defined as “hazardous waste”
pursuant to 40 C.F.R. Part 260; (iv) any petroleum, including crude
oil or any fraction thereof; (v) natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel; (vi) any
“hazardous chemical” as

    


    
      
        
           


        

        
          4

          
            

          

        

        
           


        

      

    

    


    defined
pursuant to 29 C.F.R. Part 1910; and  (vii) any other toxic
substance or contaminant that is subject to any other Law or other past or
present requirement of any Governmental Authority.  Any reference
above to a Law, includes the same as it may be amended from time to time,
including the judicial interpretation thereof.

     

    Including
or including:  Including but not limited to.

     

    Indemnified
Party:  As such term is defined in Section 9.15.

     

    Interest
and Working Capital Reserve:  $435,000 of the proceeds of the
Loan to be disbursed on the terms and conditions set out in Section 8.2
below.

     

    Interest
Rate Agreement:  As such term is defined in Section 5.2.

     

    Interest
Rate Protection Product:  As such term is defined in Section 5.2.

     

    Internal
Revenue Code:  The Internal Revenue Code of 1986, as amended
from time to time.

     

    Late
Charge:  As defined in Section 4.6.

     

    Laws:  Collectively,
all federal, state and local laws, statutes, codes, ordinances, orders, rules
and regulations, including judicial opinions or precedential authority in the
applicable jurisdiction.

     

    Leases:  The
collective reference to all leases, subleases, residency agreements and
occupancy agreements affecting the Property or any part thereof now existing or
hereafter executed and all amendments, modifications or supplements
thereto.

     

    Lender:  As
defined in the opening paragraph of this Agreement, and including any successor
holder of the Loan from time to time.

     

    Lender’s
Environmental Consultant:  An environmental consultant
designated by Lender in Lender’s sole discretion.

     

    LIBOR
Business Day:  A Business Day on which dealings in U.S. dollars
are carried on in the London Interbank Market.

     

    LIBOR
Margin:  Two and one-quarter percent (2.25%) per annum,
reducing to two percent (2%) per annum on the first day of the calendar month
after the Debt Service Coverage Ratio C  (calculated for the preceding
fiscal quarter) is at least 1.45 to 1.00; provided, however, that no rate
reduction shall occur if there is then any Default or Event of
Default.

     

    LIBOR
Rate: The rate per annum which Lender determines with reference to the
rate as shown in Dow Jones Markets (formerly Telerate) (Page 3750) at which one
month deposits in United States dollars in an amount comparable to the principal
balance outstanding on the Loan are offered by prime banks in the London
Interbank Eurodollar Market two LIBOR Business Days prior to the last day of
each calendar month.

     

    Loan:  As
defined in Recital
B.

    


    
      
        
           


        

        
          5

          
            

          

        

        
           


        

      

    

    


    Loan
Amount:  The maximum amount of the Loan as set forth in Section 4.1, as reduced
by principal payments made from time to time.

     

    Loan
Closing or Loan Closing Date:  The date the Mortgage is
recorded and all conditions to the initial disbursement of the Loan have been
satisfied.

     

    Loan
Documents:  The collective reference to this Agreement, the
documents and instruments listed in Section 4.2, and all the
other documents and instruments entered into from time to time, evidencing or
securing the Loan or any obligation of payment thereof or performance of
Borrower’s or Guarantor’s obligations in connection with the transaction
contemplated hereunder and any Interest Rate Agreement, each as
amended.  Notwithstanding any provision of this Agreement or any other
Loan Document, none of the obligations of Borrower or Guarantor under the
Environmental Indemnity or of Guarantor under the Payment Guaranty are secured
by the Mortgage or any other collateral for the Loan.

     

    Loan
Closing or Loan Closing Date:  The date the Mortgage is
recorded and all conditions to the initial disbursement of the Loan have been
satisfied.

     

    Master
Lease: The
lease of the Property from Borrower to Master Tenant and approved by
Lender.

     

    Master
Tenant: Emeritus Properties XVI,
Inc., a Nevada corporation.

     

    Material
Adverse Change or material adverse change:  If, in Lender’s
reasonable discretion, the business prospects, operations or financial condition
of a person, entity or property has changed in a manner which could impair the
value of Lender’s security for the Loan, prevent timely repayment of the Loan or
otherwise prevent the applicable person or entity from timely performing any of
its material obligations under the Loan Documents.

     

    Maturity
Date:  May 1, 2011, or if extended for the Extension Term in
accordance with Section 4.3, May 1,
2012.

     

    Mortgage:  The
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing executed by
Borrower as mortgagor to Lender as mortgagee, granting a first priority lien on
Borrower’s fee interest in the Property, subject only to the Permitted
Exceptions.

     

    Net
Operating Income:  The net income of the Facility during the
applicable period (computed in accordance with generally accepted accounting
principles), before taxes, depreciation, amortization of intangible assets and
before interest expense and management fees, decreased

     

    by (i) an
annual replacement reserve of $300.00 per apartment Unit in the Facility, and
(ii) an allowance for management fees equal to 5% of the Gross Revenues of the
Facility.

     

    Note:  A
Promissory Note in the Loan Amount, executed by Borrower and payable to the
order of Lender, evidencing the Loan.

     

    Obligations.  All
obligations of Borrower under this Agreement and the other Loan
Documents.

    


    
      
        
           


        

        
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    Operating
Deficit:  For any calendar month, the amount by which the sum
of (i) Operating Expenses and (ii) the monthly payment of principal and interest
required on the Note exceeds the Gross Revenues.

     

    Operating
Expenses:  For any period, the actual costs and expenses of
owning, operating, managing and maintaining the Property, determined on a cash
basis (except for real and personal property taxes and insurance premiums, which
shall be determined on an accrual basis) (including, an annual replacement
reserve of $300 per apartment Unit, a five percent (5%) vacancy factor and a
management fee equal to five percent (5%) of Gross Revenues), excepting,
however, (i) interest or principal due on the Loan and (ii) capital
expenditures.

     

    Organizational
Documents:  (a) For any limited liability company, a true copy
of the articles of organization or certificate of formation of such limited
liability company evidencing the creation of such limited liability company, the
limited liability company agreement or operating agreement of such limited
liability company with all amendments thereto, certified by the manager or such
authorized person of such limited liability company as being true, correct and
complete, together with a current certificate of existence and good standing of
such limited liability company issued by the applicable authority for the state
of organization; and if appropriate, a current certificate of qualification and
good standing (or other similar instruments) from the appropriate authority of
each state in which it must be qualified to do business, (b) for any limited
partnership, a true copy of the certificate of limited partnership of such
limited partnership evidencing the creation of such limited partnership, the
limited partnership agreement of such limited partnership with all amendments
thereto, certified by the general partner or such authorized person of such
limited partnership as being true, correct and complete, together with a current
certificate of existence and good standing of such limited partnership issued by
the applicable authority for the state of organization; and if appropriate, a
current certificate of qualification and good standing (or other similar
instruments) from the appropriate authority of each state in which it must be
qualified to do business, and (c) for any corporation, a true copy of the
articles of incorporation of such corporation evidencing the creation of such
corporation, together with all amendments thereto, the bylaws of such
corporation with all amendments thereto, certified by a responsible officer of
such corporation as being true, correct and complete, together with a current
certificate of existence and good standing of such corporation issued by the
applicable authority for the state of organization; and if appropriate, a
current certificate of qualification and good standing (or other similar
instruments) from the appropriate authority of each state in which it must be
qualified to do business.

     

    Payment
Guaranty:  The Limited Payment Guaranty of even date herewith
from Guarantor to Lender.

     

    Permitted
Exceptions:  Those matters listed on Schedule B of the Title
Policy to which title to the Property is subject at the Loan Closing and
thereafter such other title exceptions as Lender may approve in
writing.

     

    Permitted
Transfer:  (a) Residency Agreements entered into in the
ordinary course of business provided the same are in the form reasonably
approved by Lender without material modification and are in compliance with
Laws, (b) arms-length non-residential Leases entered into by Borrower in the
ordinary course of business for premises in the Facility intended
for

    


    
      
        
           


        

        
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    non-residential
use, (c) Transfers of publicly traded stock in Guarantor on a nationally
recognized securities exchange, (d) Transfer of all or substantially all of the
stock or assets of Guarantor in a merger or consolidation of Guarantor with
another entity, and (e) Any Transfer of shares of common stock, limited
partnership interests limited liability company membership interests or other
beneficial or ownership interests or other forms of securities in Borrower or in
any direct or indirect owner of membership interests in Borrower so long as
Guarantor retains Control of Borrower and directly or indirectly owns more than
50% of the membership interests in Borrower.

     

    Prime
Rate:  That interest rate established from time to time by
KeyBank National Association as its Prime Rate, whether or not such rate is
publicly announced; the Prime Rate may not be the lowest interest rate charged
by KeyBank National Association for commercial or other extensions of
credit.

     

    Prime
Rate Margin:  One percent (1%) per annum.

     

    Pro-Forma
Projection:  A pro forma statement of projected income and
expenses of the Property.

     

    Property:  The
collective reference to (i) the real property legally described on Exhibit
A attached, together with the Facility and all buildings, structures and
improvements located or to be located thereon, (ii) all rights, privileges,
easements and hereditaments relating or appertaining thereto, and (iii) all
personal property, fixtures and equipment required or beneficial for the
operation thereof.

     

    Reimbursement
Contracts: All managed care
agreements, and all third party reimbursement contracts or programs for the
Facility which are now or hereafter in effect with respect to Residents
qualifying for coverage under the same, including Medicare, Medicaid, any
successor or similar reimbursement program and private insurance
agreements.

     

    Required
Permits:  A certificate of occupancy for the Facility issued by
the City of Augusta, Kansas, all licenses required under Law for use and
occupancy of the Facility as an assisted living and Alzheimer care facility, and
all other licenses, permits, certificates, approvals, authorizations and
registrations required from any Governmental Authority in connection with the
improvement, renovation, ownership, operation, use or occupancy of the Facility,
including, without limitation, business licenses and food service
licenses.

     

    Resident:  Any
person residing in the Facility.

     

    Residency
Agreements:  All agreements providing for residential occupancy
of the Facility.

     

    Security
Agreement:  The Security Agreement of even date herewith from
Borrower to Lender granting Lender a first lien on and security interest in all
tangible and intangible personal property with respect to the Facility as
security for the Obligations.

     

    State:  The
state in which the Property is located.

     

    Title
Insurer:  Chicago Title Insurance Company, or such other title
insurance company licensed in the State as may be approved in writing by
Lender.

    


    
      
        
           


        

        
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    Title
Policy:  An ALTA Mortgagee’s Loan Title Insurance Policy with
extended coverage issued by the Title Insurer and approved by Lender insuring
the lien of the Mortgage as a valid first, prior and paramount lien upon the
Property and all appurtenant easements, and subject to no other exceptions other
than the Permitted Exceptions and containing such endorsements as Lender may
require.

     

    Transfer:  (a)
Any sale, transfer, lease, conveyance, alienation, pledge, assignment, mortgage,
encumbrance, hypothecation or other disposition of (i) all or any portion of the
Property or any portion of any other security for the Loan, or (ii) all or any
portion of Borrower’s right, title and interest (legal or equitable) in and to
the Property or any portion of any other security for the Loan, (b) any
issuance, sale, transfer, alienation, pledge, assignment, encumbrance,
hypothecation or other disposition of (i) any membership interest in
Borrower, or (ii) any ownership interest in any member of Borrower or in any
entity which holds an interest in, or directly or indirectly controls any member
of Borrower, or (c) any change in the identity of the manager or managing member
of Borrower.

     

    UCC-1
Financing Statement:  As defined in Section
4.2.

     

    Unit:  Each
apartment unit in the Facility.

     

    2.2 Other
Definitional Provisions.

     

    All terms
defined in this Agreement shall have the same meanings when used in the Note,
Mortgage, any other Loan Documents, or any certificate or other document made or
delivered pursuant hereto.  The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement.

     

    ARTICLE
3.       

    BORROWER’S
REPRESENTATIONS AND WARRANTIES

     

     

    3.1 Representations
and Warranties.

     

    To induce
Lender to execute this Agreement and perform its obligations hereunder, Borrower
hereby represents and warrants to Lender as follows, which representations and
warranties shall be true on the date of each disbursement of Loan proceeds as if
made on and as of such date, except as otherwise disclosed by Borrower to Lender
in writing prior to the date of such disbursement:

     

    (a) Borrower
has good and marketable fee simple title to the Property subject only to the
Permitted Exceptions.

     

    (b) Except as
previously disclosed to Lender in writing, no litigation or proceedings are
pending, or to the best of Borrower’s knowledge threatened in writing, against
Borrower or Guarantor, which could, if adversely determined, cause a Material
Adverse Change with respect to Borrower, Guarantor or the
Property.  There are no pending Environmental Proceedings and Borrower
has no knowledge of any Environmental Proceedings threatened in writing or any
facts or circumstances which may give rise to any future Environmental
Proceedings.

    


    
      
        
           


        

        
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    (c) Borrower
is a duly organized and validly existing limited liability company and has full
power and authority to execute, deliver and perform all Loan Documents to which
Borrower is a party, and such execution, delivery and performance have been duly
authorized by all requisite action on the part of Borrower.

     

    (d) Guarantor
is a duly organized and validly existing corporation and has full power and
authority to execute, deliver and perform all Loan Documents to which Guarantor
is a party, and such execution, delivery and performance have been duly
authorized by all requisite action on the part of Guarantor.

     

    (e) Except to
the extent the same have been obtained in writing and copies thereof provided to
Lender prior to the Loan Closing Date, no consent, approval or authorization of
or declaration, registration or filing with any Governmental Authority or
nongovernmental person or entity, including any creditor or partner of Borrower
or Guarantor, is required in connection with the execution, delivery and
performance of this Agreement or any of the Loan Documents other than the
recordation of the Mortgage and the Assignment of Rents and the filing of the
UCC-1 Financing Statements, except for such consents, approvals or
authorizations of or declarations or filings with any Governmental Authority or
non-governmental person or entity where the failure to so obtain would not have
an adverse effect on Borrower or Guarantor or which have been obtained as of any
date on which this representation is made or remade.

     

    (f) The
execution, delivery and performance of this Agreement, the execution and payment
of the Note and the granting of the Mortgage and other security interests under
the other Loan Documents have not constituted and will not constitute, upon the
giving of notice or lapse of time or both, a breach or default under any other
agreement to which Borrower or Guarantor is a party or may be bound or affected,
or a violation of any law or court order which may affect the Property, any part
thereof, any interest therein, or the use thereof.

     

    (g) There is
no Default or Event of Default under this Agreement or the other Loan
Documents.

     

    (h) (i) No
condemnation of any portion of the Property, (ii) no condemnation or
relocation of any roadways abutting the Property, and (iii) no proceeding
to deny access to the Property from any point or planned point of access to the
Property, has commenced or, to the best of Borrower’s knowledge, is contemplated
by any Governmental Authority.

     

    (i) The
Property and the use thereof does not violate (i) any Laws (including
subdivision, zoning, building, environmental protection and wetland protection
Laws), or (ii) any building permits, restrictions of record, or agreements
affecting the Property or any part thereof.  Neither the zoning
authorizations, approvals or variances nor any other right to use the Property
is to any extent dependent upon or related to any real estate other than the
Land.  Borrower has obtained or shall diligently pursue obtaining all
Required Permits, and all Required Permits already issued are in full force and
effect, true and correct copies of which have been provided to Lender. The
Facility is duly licensed as an “assisted living residence” by the Kansas
Department of Health and is in compliance with all applicable Laws and
regulations.

     

    (j) No
brokerage fees or commissions are payable by or to any person in connection with
this Agreement or the Loan to be disbursed hereunder.

    


    
      
        
           


        

        
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    (k) All
financial statements and other information previously furnished by Borrower or
Guarantor to Lender in connection with the Loan are true, complete and correct
and fairly present the financial conditions of the subjects thereof as of the
respective dates thereof and do not fail to state any material fact necessary to
make such statements or information not misleading, and no Material Adverse
Change with respect to Borrower or Guarantor has occurred since the respective
dates of such statements and information.  Neither Borrower nor
Guarantor has any material liability, contingent or otherwise, not disclosed in
such financial statements.

     

    (l) Except as
disclosed by Borrower to Lender in writing, (i) the Property is in a clean, safe
and healthful condition, and, except for materials used in the ordinary course
of construction, maintenance and operation of the Property, is free of all
Hazardous Material and is in compliance with all applicable Environmental Laws;
(ii) neither Borrower nor, to the best knowledge of Borrower, any other person
or entity, has ever caused or permitted any Hazardous Material to be placed,
held, located or disposed of on, under, at or in a manner to affect the
Property, or any part thereof, and the Property has never been used (whether by
Borrower or, to the best knowledge of Borrower, by any other person or entity)
for any activities involving, directly or indirectly, the use, generation,
treatment, storage, transportation, or disposal of any Hazardous Material; (iii)
neither the Property nor Borrower is subject to any existing, pending, or, to
the best of Borrower’s knowledge, threatened investigation or inquiry by any
Governmental Authority, and the Property is not subject to any remedial
obligations under any applicable Environmental Laws; and (iv) there is no
underground tank, vessel, or similar facility for the storage, containment or
accumulation of Hazardous Materials of any sort on, under or affecting the
Property.

     

    (m) The
Property is comprised of one or more parcels, each of which is taxed separately
without regard to any other property and for all purposes the Property may be
mortgaged, conveyed and otherwise dealt with as an independent
parcel.

     

    (n) Except
for Residency Agreements which have been entered into in the ordinary course of
operation of the Facility and disclosed to Lender in writing, Borrower has not
entered into any Leases, subleases or other arrangements for occupancy of space
within the Property.

     

    (o) The Loan
is not being made for the purpose of purchasing or carrying “margin stock”
within the meaning of Regulation G, T, U or X issued by the Board of
Governors of the Federal Reserve System, and Borrower agrees to execute all
instruments necessary to comply with all the requirements of Regulation U
of the Federal Reserve System.

     

    (p) Borrower
is not a party in interest to any plan defined or regulated under ERISA, and the
assets of Borrower are not “plan assets” of any employee benefit plan covered by
ERISA or Section 4975 of the Internal Revenue Code.

     

    (q) Borrower
is not a “foreign person” within the meaning of Section 1445 or 7701 of the
Internal Revenue Code.

     

    (r) Borrower
uses no trade name other than its actual name set forth herein.  The
principal place of business of Borrower is as stated in Section 13.15.

    


    
      
        
           


        

        
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    (s) Borrower’s
place of formation or organization is the State of Delaware and Borrower is duly
qualified to conduct business in the State of Kansas.

     

    (t) Neither
Borrower nor Guarantor is (or will be) a person with whom Lender is restricted
from doing business under OFAC (including, those Persons named on OFAC’s
Specially Designated and Blocked Persons list) or under any statute, executive
order (including, the September 24, 2001 Executive Order Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action and is not and shall not engage in any
dealings or transactions or otherwise be associated with such
persons.  In addition, Borrower hereby agrees to provide to Lender
with any additional information that Lender deems necessary from time to time in
order to ensure compliance with all applicable Laws concerning money laundering
and similar activities.

     

    (u) All
statements set forth in the Recitals are true and correct.

     

    3.2 Survival
of Representations and Warranties.

     

    Borrower
agrees that all of the representations and warranties set forth in Section 3.1 and elsewhere
in this Agreement are true as of the date hereof, will be true at the Loan
Closing and, except for matters which have been disclosed by Borrower and
approved by Lender in writing, at all times thereafter.  It shall be a
condition precedent to the Loan Closing and each subsequent disbursement that
each of said representations and warranties is true and correct as of the date
of such requested disbursement.  Each disbursement of Loan proceeds
shall be deemed to be a reaffirmation by Borrower that each of the
representations and warranties is true and correct as of the date of such
disbursement.  In addition, at Lender’s request, Borrower shall
reaffirm such representations and warranties in writing prior to each
disbursement hereunder.

     

    ARTICLE
4.    

    LOAN
AND LOAN DOCUMENTS

     

     

    4.1 Agreement
to Borrow and Lend.

     

    Subject
to the terms, provisions and conditions of this Agreement and the other Loan
Documents, Borrower agrees to borrow from Lender agrees to lend to Borrower the
Loan in the principal amount of FOUR MILLION, EIGHTY SEVEN THOUSAND, FIVE
HUNDRED and NO/100 DOLLARS ($4,087,500.00), for the purposes and subject to all
of the terms, provisions and conditions contained in this
Agreement.  If Lender consists of more than one party, the obligations
of each such party with respect to the amount it has agreed to loan to Borrower
shall be several (and not joint and several) and shall be limited to its
proportionate share of the Loan and of each advance.

    


    
      
        
           


        

        
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    4.2 Loan
Documents.

     

    Borrower
agrees that it will, on or before the Loan Closing Date, execute and deliver or
cause to be executed and delivered to Lender the following documents in form and
substance acceptable to Lender:

     

    (a) The
Note.

     

    (b) The
Mortgage.

     

    (c) The
Assignment of Rents.

     

    (d) The
Payment Guaranty.

     

    (e) The
Environmental Indemnity.

     

    (f) The
Security Agreement.

     

    (g) An
Assignment and Subordination of Master Lease from Borrower and the Master Tenant
in favor of Lender whereby the Master Lease is assigned to Lender as security
for the Obligations and the Master Lease is subordinated to the Mortgage and the
Obligations.

     

    (h) Such
other documents, instruments or certificates as Lender may reasonably require,
including such documents as Lender in its sole discretion deems necessary or
appropriate to effectuate the terms and conditions of this Agreement and the
Loan Documents, and to comply with the laws of the State.

     

    Borrower
authorizes Lender to file such UCC financing statements (each, a “UCC-1 Financing
Statement”) as Lender determines are advisable or necessary to perfect or
notify third parties of the security interests intended to be created by the
Loan Documents.  The foregoing authorization includes Borrower’s
irrevocable authorization for Lender at any time and from time to time to file
any initial financing statements and amendments thereto that describe the
collateral as “all assets” of Borrower or words of similar effect.

     

    4.3 Term of
the Loan; Extension Terms.

     

    (a) All
principal, interest and other sums due under the Loan Documents shall be due and
payable in full on the Maturity Date.  Borrower shall have one (1)
option to extend the Maturity Date (the “Extension
Option”), for an additional twelve (12) month term (the “Extension
Term”).

     

    (b) Borrower
may only exercise the Extension Option upon satisfying the following
conditions:

     

    (i) Borrower
delivers written notice to Lender requesting the extension not more than sixty
(60) days or less than thirty (30) days before the initial Maturity
Date.

     

    (ii) Borrower
pays Lender an extension fee in the amount of $10,219.

    


    
      
        
           


        

        
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    (iii) As of the
date the Extension Term is to commence, no less than 45 beds in the Facility
shall be occupied by Residents under Residency Agreements meeting the
requirements of this Agreement.

     

    (iv) The Debt
Service Coverage Ratio A for Borrower’s fiscal quarter ending March 31, 2011, is
no less than 1.40 to 1.00.

     

    (v) The Debt
Service Coverage Ratio C for the immediately preceding three months is no less
than 1.35 to 1.00.

     

    (vi) There is
then no Default or Event of Default hereunder, and no Default or Event of
Default by the Broadmoor Borrower under the Broadmoor Loan
Documents.

     

    4.4 Payments.

     

    (a) Borrower
shall pay interest in arrears on the tenth (10th) day of
every calendar month in the amount of all interest accrued and unpaid through
the last day of the immediately preceding calendar month.

     

    (b) On the
tenth (10th) day of
each month throughout the Extension Term, in addition to the monthly payments of
interest on the Loan required hereunder, Borrower shall make payments of
principal, each in the amount of $4,400.00.

     

    (c) If at the
time the Interest and Working Capital Reserve has been fully disbursed, the Debt
Service Coverage Ratio B is less than 1.00 to 1.00, then within ten (10)
Business Days after notice from Lender, Borrower agrees to make a payment of
principal of the Loan in the amount necessary to achieve a Debt Service Coverage
Ratio B of at least 1.00 to 1.00.  In lieu of such principal payment,
Borrower may deposit an unconditional, irrevocable letter of credit in such
amount with Lender, or pledge such other collateral for the Obligations as may
be satisfactory to Lender in its sole and absolute discretion.  Any
letter of credit shall be from an issuer and in form reasonable satisfactory to
Lender.

     

    (d) All
payments (whether of principal or of interest) shall be deemed credited to
Borrower’s account only if received by 12:00 noon Seattle time on a Business
Day; otherwise, such payment shall be deemed received on the next Business
Day.

     

    (e) All
principal shall be due and payable in full on the Maturity Date, as it may be
extended hereunder.

     

    4.5 Prepayments.

     

    Borrower
shall have the right to make prepayments of the Loan, in whole or in part,
without prepayment penalty, upon not less than seven (7) days prior written
notice to Lender.

     

    4.6 Late
Charge.

     

    Any and
all amounts due hereunder or under the other Loan Documents which remain unpaid
more than five (5) days after the date said amount was due and payable shall
incur a fee (the “Late
Charge”) equal to the greater of four percent (4%) of the amount of such
payment or

    


    
      
        
           


        

        
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    Twenty-Five
Dollars ($25.00), which payment shall be in addition to all of Lender’s other
rights and remedies under the Loan Documents, provided that no Late Charge shall
apply to the final payment of principal on the Maturity Date.

     

    ARTICLE
5.

    INTEREST

     

     

    5.1 Interest
Rate.

     

    (a) The Loan
will bear interest at the Adjusted LIBOR Rate which will be the Applicable Rate
hereunder, unless the Default Rate is applicable.  Adjustments in the
Adjusted LIBOR Rate shall occur on the first day of each calendar month
throughout the initial term and any Extension Term.

     

    (b) If Lender
determines (which determination shall be conclusive and binding upon Borrower,
absent manifest error) (i) that no adequate basis exists for determining the
LIBOR Rate, or (ii) that, due to circumstances affecting the London interbank
market generally, the LIBOR Rate will not adequately and fairly reflect the cost
to Lender of funding the Loan, or (iii) that any applicable Law or regulation or
compliance therewith by Lender prohibits or restricts or makes impossible the
charging of interest based on the LIBOR Rate, or (iv) that the Adjusted LIBOR
Rate would be in excess of the maximum interest rate which Borrower may by law
pay and Lender so notifies Borrower in writing, then until Lender notifies
Borrower in writing that the circumstances giving rise to such suspension no
longer exist, interest shall accrue and be payable at the Adjusted Prime
Rate.

     

    (c) Interest
at the Applicable Rate (whether the Adjusted LIBOR Rate or Default Rate, as
applicable) shall be calculated for the actual number of days elapsed on the
basis of a 360-day year, including the first date of the applicable period to,
but not including, the date of repayment.

     

    5.2 Interest
Rate Agreements.

     

    (a) If
Borrower institutes an interest rate hedging program through the purchase of an
interest rate swap, cap or such other interest rate protection product (“Interest Rate
Protection Product”) from Lender, Borrower shall enter into such party’s
customary form of agreement (“Interest Rate
Agreement”) relating to such Interest Rate Protection
Product.  Any indebtedness incurred pursuant to an Interest Rate
Agreement entered into by Borrower and Lender shall constitute indebtedness
evidenced by the Note and secured by the Mortgage and the other Loan Documents
to the same extent and effect as if the terms and provisions of such Interest
Rate Agreement were set forth herein, whether or not the aggregate of such
indebtedness, together with the disbursements made by Lender of the proceeds of
the Loan, shall exceed the face amount of the Note.

     

    (b) Borrower
hereby collaterally assigns to Lender any and all Interest Rate Protection
Products purchased or to be purchased by Borrower in connection with the Loan,
as additional security for the Loan, and agrees to provide Lender with any
additional documentation requested by Lender in order to confirm or perfect such
security interest during the term of the Loan.  If Borrower obtains an
Interest Rate Protection Product from a party other than Lender, Borrower shall
deliver to Lender such third party’s consent to such collateral

    


    
      
        
           


        

        
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    assignment.  No
Interest Rate Protection Product purchased from a third party may be secured by
an interest in Borrower or the Property.

     

    ARTICLE
6.

    COSTS
OF MAINTAINING LOAN

     

     

    6.1 Increased
Costs and Capital Adequacy.

     

    (a) Borrower
recognizes that the cost to Lender of maintaining the Loan or any portion
thereof may fluctuate and, Borrower agrees to pay Lender additional amounts to
compensate Lender for any increase in its actual costs incurred in maintaining
the Loan or any portion thereof outstanding or for the reduction of any amounts
received or receivable from Borrower as a result of:

     

    (i) any
change after the date hereof in any applicable Law, regulation or treaty, or in
the interpretation or administration thereof, or by any domestic or foreign
court, (A) changing the basis of taxation of payments under this Agreement to
Lender (other than taxes imposed on all or any portion of the overall net income
or receipts of Lender), or (B) imposing, modifying or applying any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, credit extended by, or any other acquisition of funds for loans
by Lender (which includes the Loan or any applicable portion thereof), or
(C) imposing on Lender, or the London interbank market generally, any other
condition affecting the Loan, provided that the result of the foregoing is to
increase the cost to Lender of maintaining the Loan or any portion thereof or to
reduce the amount of any sum received or receivable from Borrower by Lender
under the Loan Documents; or

     

    (ii) the
maintenance by Lender of reserves in accordance with reserve requirements
promulgated by the Board of Governors of the Federal Reserve System of the
United States with respect to “Eurocurrency Liabilities” of a similar term to
that of the applicable portion of the Loan (without duplication for reserves
already accounted for in the calculation of a LIBOR Rate pursuant to the terms
hereof).

     

    (b) If the
application of any Law, rule, regulation or guideline adopted or arising out of
the July, 1988 report of the Basel Committee on Banking Regulations and
Supervisory Practices entitled “International Convergence of Capital Measurement
and Capital Standards”, or the adoption after the date hereof of any other Law,
rule, regulation or guideline regarding capital adequacy, or any change after
the date hereof in any of the foregoing, or in the interpretation or
administration thereof by any domestic or foreign Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender, with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has the effect of reducing the
rate of return on such Lender’s capital to a level below that which such Lender
would have achieved but for such application, adoption, change or compliance
(taking into consideration the policies of such Lender with respect to capital
adequacy), then, from time to time Borrower shall pay to such Lender such
additional amounts as will compensate such Lender for such reduction with
respect to any portion of the Loan outstanding.

     

    (c) Any
amount payable by Borrower under Section 6.1 (a) or
(b) shall be paid within five (5) days of receipt by Borrower of a
certificate signed by an authorized officer of

    


    
      
        
           


        

        
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    Lender
setting forth the amount due and the basis for the determination of such amount,
which statement shall be conclusive and binding upon Borrower, absent manifest
error.  Failure on the part of Lender to demand payment from Borrower
for any such amount attributable to any particular period shall not constitute a
waiver of Lender’s right to demand payment of such amount for any subsequent or
prior period.  Lender shall use reasonable efforts to deliver to
Borrower prompt notice of any event described in Section 6.1(a) or
6.1(b) of the amount of the reserve and capital adequacy payments
resulting therefrom and the reasons therefor and of the basis of calculation of
such amount; provided, however, that any failure by Lender to so notify Borrower
shall not affect Borrower’s obligation to pay the reserve and capital adequacy
payment resulting therefrom.

     

    6.2 Borrower
Withholding.

     

    If by
reason of a change in any applicable Laws occurring after the date hereof,
Borrower is required by Law to make any deduction or withholding in respect of
any taxes (other than taxes imposed on or measured by the net income of Lender
or any franchise tax imposed on Lender), duties or other charges from any
payment due under the Note to the maximum extent permitted by law, the sum due
from Borrower in respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding,
Lender receives and retains a net sum equal to the sum which it would have
received had no such deduction or withholding been required to be
made.

     

    ARTICLE
7.

    LOAN
EXPENSE AND ADVANCES

     

     

    7.1 Loan and
Administration Expenses.

     

    Except as
otherwise provided in this Agreement and the other Loan Documents, Borrower
unconditionally agrees to pay all reasonable out-of-pocket expenses of the Loan,
including all amounts payable pursuant to Sections 7.2 and 7.3
and any and all other fees owing to Lender pursuant to the Loan
Documents, and also including, without limiting the generality of the foregoing,
all recording, filing and registration fees and charges, mortgage or documentary
taxes, all insurance premiums, title insurance premiums and other charges of the
Title Insurer, printing and photocopying expenses, survey fees and charges, cost
of certified copies of instruments, cost of premiums on surety company bonds and
the Title Policy, charges of the Title Insurer or other escrowee for
administering disbursements, all fees and disbursements of Lender’s Consultant
and Lender’s Environmental Consultant, all appraisal fees, insurance
consultant’s fees, travel related expenses and all costs and expenses incurred
by Lender in connection with the determination of whether or not Borrower has
performed the obligations undertaken by Borrower hereunder or has satisfied any
conditions precedent to the obligations of Lender hereunder and, if any Default
or Event of Default occurs hereunder or under any of the Loan Documents or if
the Loan or Note or any portion thereof is not paid in full when and as due, all
costs and expenses of Lender (including, without limitation, court costs and
reasonable counsel’s fees and disbursements and fees and costs of paralegals)
incurred in attempting to enforce payment of the Loan and expenses of Lender
incurred (including court costs and reasonable counsel’s fees and disbursements
and fees and costs of paralegals) in attempting to realize, while a Default or
Event of Default exists, on any security or incurred in connection with the sale
or disposition (or preparation for sale or disposition) of any security
for

    


    
      
        
           


        

        
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    the
Loan.  Borrower agrees to pay all brokerage, finder or similar fees or
commissions payable in connection with the transactions contemplated hereby and
shall indemnify and hold Lender harmless against all claims, liabilities, costs
and expenses (including attorneys’ fees and expenses) incurred in relation to
any claim by broker, finder or similar person.

     

    7.2 Loan
Origination Fee.

     

    Borrower
shall pay to Lender on or before the Loan Closing Date a loan origination fee in
the amount of $30,656.00.  Such fee is fully earned and
non-refundable.

     

    7.3 Lender’s
Attorney Fees and Disbursements.

     

    Borrower
agrees to pay Lender’s reasonable attorney fees and disbursements incurred in
connection with this Loan, including (i) the preparation of this Agreement,
any intercreditor agreements and the other Loan Documents and the preparation of
the closing binders, (ii) the disbursement, syndication and administration
of the Loan and (iii) the enforcement of the terms of this Agreement and
the other Loan Documents.

     

    7.4 Time of
Payment of Fees and Expenses.

     

    Borrower
shall pay all expenses and fees incurred by Lender as of the Loan Closing as
described in Section
7.1 above on the Loan Closing Date (unless sooner required
herein).  At the time of the Loan Closing, Lender may pay from the
proceeds of the initial disbursement of the Loan (to the extent provided for in
the Budget) all Loan expenses.  Lender may require the payment of
outstanding fees and expenses as a condition to any disbursement of the
Loan.  Lender is hereby authorized, without any specific request or
direction by Borrower, to make disbursements from time to time in payment of or
to reimburse Lender for all such Loan expenses and fees (whether or not, at such
time, there may be any undisbursed amounts of the Loan allocated in the Budget
for the same).

     

    7.5 Expenses
and Advances Secured by Loan Documents.

     

    Any and
all advances or payments made by Lender under this Article 7 from time
to time, and any amounts expended by Lender pursuant to Section 12.2, shall, as
and when advanced or incurred, constitute additional indebtedness evidenced by
the Note and secured by the Mortgage and the other Loan Documents.

     

    7.6 Right of
Lender to Make Advances to Cure Borrower’s Defaults.

     

    In the
event that Borrower fails to perform any of Borrower’s covenants, agreements or
obligations contained in this Agreement or any of the other Loan Documents
(including the obligation to pay accrued interest upon the Loan when due) (after
the expiration of applicable grace periods, except in the event of an emergency
or other exigent circumstances), Lender may (but shall not be required to)
perform any of such covenants, agreements and obligations, and any amounts
expended by Lender in so doing and shall constitute additional indebtedness
evidenced by the Note and secured by the Mortgage and the other Loan Documents
and shall bear interest at a rate per annum equal to the Applicable Rate (or
Default Rate following an Event of Default).

    


    
      
        
           


        

        
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    ARTICLE
8.      

    CONDITIONS
TO CLOSING AND DISBURSEMENT OF THE LOAN

     

     

    8.1 Conditions to
Closing.

     

    Borrower
agrees that Lender’s obligation to close the Loan and to make the initial
advance of the Loan in accordance with Section 8.2 is
conditioned upon Borrower’s delivery, performance and satisfaction of the
following conditions precedent in form and substance satisfactory to Lender in
its sole discretion:

     

    (a) Loan
Documents.  The Loan Documents shall have been duly executed
and delivered to Lender and the Mortgage and the Assignment of Rents shall have
been duly recorded and the UCC-1 Financing Statement duly filed.

     

    (b) Title
Policy.  Borrower shall have or shall have caused to be
furnished to Lender the Title Policy together with legible copies of all title
exception documents cited in the Title Policy and all other legal documents
affecting the Property or the use thereof.

     

    (c) Survey.  Borrower
shall have or shall have caused to be furnished to Lender an ALTA/ACSM “Class A”
Land Title Survey of the Property.  The survey shall be made (and
certified to have been made) as set forth in Exhibit
B.  Such survey shall be sufficient to permit issuance of the
Title Policy in the form required by this Agreement.  Such survey
shall include the legal description of the Property.

     

    (d) Insurance
Requirements.  Lender shall have received and approved
certificates of insurance evidencing that insurance coverage is in effect with
respect to the Property and Borrower, in accordance with the Insurance
Requirements attached hereto as Exhibit C, for which
the premiums have been fully prepaid with endorsements reasonably satisfactory
to Lender.

     

    (e) No
Litigation.  No litigation or proceedings shall be pending or
threatened in writing which could reasonably be expected to cause a Material
Adverse Change with respect to Borrower, Guarantor, or the
Property.

     

    (f) Required
Permits.  To the extent the same have been issued, Lender shall
have received and approved copies of all Required Permits for operation and
occupancy of the Property.

     

    (g) Residency
Agreements and Rent Roll.  Lender shall have received and
approved all Leases (if any) and Residency Agreements in effect, the form of
Borrower’s standard Residency Agreement for the Property, and a current rent
roll of the Property certified by Borrower to be complete and correct in all
material respects.

     

    (h) Attorney
Opinion Letter.  Borrower shall have furnished to Lender a
customary legal opinion from counsel for Borrower and Guarantor covering due
authorization, execution and delivery and enforceability of the Loan
Documents.

     

    (i) Appraisal.  Lender
shall have received and approved an Appraisal of the Property.

    


    
      
        
           


        

        
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    (j) Lien
Searches.  Borrower shall have furnished to Lender current
bankruptcy, federal tax lien and judgment searches and searches of all Uniform
Commercial Code financing statements with respect to each Borrower,
demonstrating the absence of adverse claims.

     

    (k) Financial
Statements.  Borrower shall have furnished to Lender current
annual financial statements of Borrower, Guarantors and such other persons or
entities connected with the Loan as Lender may reasonably request, each in form
and substance and certified as acceptable to Lender.  Borrower and
Guarantors shall provide such other additional financial information as Lender
reasonably requires.

     

    (l) Pro Forma
Projection.  Borrower shall have furnished to Lender a Pro
Forma Projection covering the succeeding five year period.

     

    (m) Management
Agreements.  Lender shall have received and approved any and
all consulting and management agreements with respect to operation of the
Facility and the same shall have been assigned to Lender as security for the
Loan and subordinated to the Loan and the security for the Loan under assignment
and subordination agreements satisfactory to Lender as set forth in Section 4.2(g)
hereof.

     

    (n) Flood
Hazard.  Lender shall have received and approved evidence that
the Property is not located in an area designated by the Secretary of Housing
and Urban Development as a special flood hazard area, or flood hazard insurance
acceptable to Lender in its sole discretion.

     

    (o) Zoning.  If
the Title Policy does not include a zoning endorsement, Borrower shall have
furnished to Lender a zoning letter or other evidence satisfactory to Lender
regarding the zoning of the Property and compliance of the Property with zoning
and similar laws.

     

    (p) Organizational
Documents.  Lender shall have received and approved the
Organizational Documents for Borrower and Guarantor, together with certified
resolutions in form and content satisfactory to Lender, authorizing execution,
delivery and performance of the Loan Documents, and such other documentation as
Lender may reasonably require to evidence the authority of the persons executing
the Loan Documents.

     

    (q) No
Default.  There shall be no Default or Event of Default by
Borrower hereunder or by the Broadmoor Borrower under the Broadmoor Loan
Documents.

     

    (r) Environmental
Report.  Lender shall have received and approved the
Environmental Report which shall, at a minimum, (A) demonstrate the absence of
any existing or potential Hazardous Material contamination or violations of
environmental Laws at the Property, except as acceptable to Lender in its sole
and absolute discretion, (B) include the results of all sampling or monitoring
to confirm the extent of existing or potential Hazardous Material contamination
at the Property, including the results of leak detection tests for each
underground storage tank located at the Property, if any, (C) describe response
actions appropriate to remedy any existing or potential Hazardous Material
contamination, and report the estimated cost of any such appropriate response,
(D) confirm that any prior removal of Hazardous Material or underground storage
tanks from the Property was completed in

    


    
      
        
           


        

        
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    accordance
with applicable Laws, and (E) confirm whether or not the Property is located in
a wetlands district.

     

    (s) Additional
Documents.  Borrower shall have furnished to Lender such other
materials, documents, papers or requirements regarding the Property, Borrower
and Guarantor as Lender shall reasonably request.

     

    8.2 Disbursements
of Interest and Working Capital Reserve.

     

    Provided
there is then no Default or Event of Default, Lender will make monthly
disbursements of the Interest and Working Capital Reserve in an amount equal to
the interest accrued on the principal balance of the Loan for the immediately
preceding month plus the amount of any Operating Deficit for the immediately
preceding month.  As a condition to each such disbursement, by no
later than the 10th day of
each month, Borrower shall provide Lender with a request for disbursement (“Draw
Request”) in such form as Lender may reasonably require which shall
designate the amount of the requested disbursement from the Interest and Working
Capital Reserve, shall calculate the Operating Deficit for the immediately
preceding calendar month and shall be accompanied by such operating statements
for the Property and other information as Lender may reasonably require in order
to verify Borrower’s calculation of the Operating Deficit and Lender will use
reasonable efforts to disburse such funds within five (5) Business Days after
Lender’s receipt of the Draw Request and accompanying
documentation.  Lender will apply that portion of each such
disbursement allocated to payment of interest on the Loan to make such payments
but nothing herein is intended or shall be construed to condition Borrower’s
obligation to make the payments on the Note as and when the same are due if the
funds in the Interest and Working Capital Reserve are not sufficient to make
such payments or if Borrower has not met any conditions or requirements for any
such disbursement from the Interest and Working Capital Reserve.

     

    8.3 Disbursement of Capital
Improvement Funds.

     

    Subject
to satisfaction of the conditions to closing set out in Section 8.1, Loan
proceeds in the amount of $977,500, allocated for capital improvements to the
Facility (“Capital
Improvement Funds”), shall not be disbursed at the Loan Closing, but
shall be disbursed as provided in this Section
8.3.  Capital Improvement Funds shall only be disbursed as a
single lump sum, and Lender shall have no obligation to disburse Capital
Improvement Funds until each of the following conditions and requirements has
been satisfied:

     

    (a) Borrower
has obtained all Required Permits, if any, relating to the capital improvements
to the Facility.

     

    (b) Borrower
has provided Lender with lien waivers covering all work related to the capital
improvements to the Facility, together with such invoices, contracts or other
supporting data as Lender may require to evidence that all costs for which the
Capital Improvements Funds are sought have been incurred;

     

    (c) Borrower
has provided Lender with paid invoices or other evidence satisfactory to Lender
that fixtures and equipment have been paid for and are free of any lien or
security interest therein;

    


    
      
        
           


        

        
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    (d) There is
then no Default or Event of Default;

     

    (e) There has
been no Material Adverse Change with respect to Borrower, Guarantor, or the
Facility;

     

    (f) All
representations and warranties of Borrower under Agreement and under the other
Loan Documents are true and correct as of the date of disbursement;

     

    (g) Borrower
is in full compliance with the covenants in Section 9.22 of this
Agreement; and

     

    (h) Lender,
in Lender’s reasonable opinion, is not prohibited from disbursing under any
applicable lien laws or stop notice statutes.

     

    Lender
will use reasonable efforts to disburse such funds within five (5) Business Days
after Lender’s receipt of the Draw Request and accompanying
documentation.  If Lender has acquiesced to noncompliance with any
conditions precedent to the Loan Closing or conditions precedent to any
subsequent disbursement of Loan proceeds, such acquiescence shall not constitute
a waiver by Lender, and Lender may at any time after such acquiescence require
Borrower to comply with all such requirements.

     

    ARTICLE
9.

    OTHER
COVENANTS

     

     

    Borrower
further covenants and agrees as follows:

     

    9.1 Balancing
Obligation.

     

    If at the
time the Interest and Working Capital Reserve has been fully disbursed, the Debt
Service Coverage Ratio B is less than 1.00 to 1.00, within ten (10) Business
Days after notice from Lender to Borrower of the last disbursement of the
Interest and Working Capital Reserve, Borrower agrees to provide to Lender a Pro
Forma Projection covering the next twelve (12) month period, which Pro Forma
Projection shall be in form and substance reasonably satisfactory to Lender and
shall estimate the Operating Deficit for such twelve (12) month period (taking
into account any principal reduction [or letter of credit or other collateral
which shall be treated as if it were a principal reduction] required under Section 4.4(c)
above).  Pursuant to such approved Pro Forma Projection, Borrower
shall deposit or shall cause to be deposited the amount of the estimated
Operating Deficit, as approved by Lender, with Lender and Lender will disburse
the amount deposited to cover Operating Deficits on the same terms and
conditions as disbursements from the Interest and Working Capital
Reserve.  Any such funds which have not been disbursed by the end of
the twelve (12) month period covered by the Pro Forma Projection shall be
disbursed to Borrower within five (5) days after Borrower’s written request to
Lender provided there is then no Default or Event of
Default.  Borrower pledges and assigns any funds so deposited with
Lender to Lender as security for the Obligations and grants Lender a security
interest therein and agrees with Lender that upon the occurrence of an Event of
Default, Lender may apply such funds against the Obligations in such order as
Lender may determine in its sole and absolute discretion.

    


    
      
        
           


        

        
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    9.2 Mechanics’
Liens and Contest Thereof.

     

    Borrower
will not suffer or permit any mechanics’ lien claims to be filed or otherwise
asserted against the Property, and will promptly discharge the same in case of
the filing of any claims for lien or proceedings for the enforcement
thereof.

     

    9.3 Renewal
of Insurance.

     

    Borrower
shall cause insurance policies to be maintained in compliance with this
Agreement at all times.  Borrower shall timely pay all premiums on all
insurance policies required hereunder, and as and when any policies of insurance
may expire, furnish to Lender, premiums prepaid, additional and renewal
insurance policies with companies, coverage and in amounts satisfactory to
Lender in accordance with Section 8.1(d).

     

    9.4 Payment
of Taxes.

     

    Borrower
shall pay all real estate taxes and assessments and charges of every kind upon
the Property before the same become delinquent, provided, however, that Borrower
shall have the right to pay such tax under protest or to otherwise contest in
good faith any such tax or assessment, but only if (i) such contest has the
effect of preventing the collection of such taxes so contested and also of
preventing the sale or forfeiture of the Property or any part thereof or any
interest therein, (ii) Borrower has notified Lender of Borrower’s intent to
contest such taxes, and (iii) Borrower has deposited security in form and
amount reasonably satisfactory to Lender, and has increased the amount of such
security so deposited promptly after Lender’s reasonably request
therefor.  If Borrower fails to commence such contest or, having
commenced to contest the same, and having deposited such security required by
Lender for its full amount, shall thereafter fail to prosecute such contest in
good faith or with due diligence, or, upon adverse conclusion of any such
contest, shall fail to pay such tax, assessment or charge, Lender may, at its
election (but shall not be required to), pay and discharge any such tax,
assessment or charge, and any interest or penalty thereon, and any amounts so
expended by Lender shall be deemed to constitute disbursements of the Loan
proceeds hereunder (even if the total amount of disbursements would exceed the
face amount of the Note).  Borrower shall furnish to Lender evidence
that taxes are paid at least five (5) days prior to the last date for payment of
such taxes and before imposition of any penalty or accrual of
interest.

     

    9.5 Tax and
Insurance Escrow Accounts.

     

    Borrower
shall, following the written request of Lender after the occurrence of any
delinquency in payment of taxes or insurance premiums or after the occurrence of
any Event of Default, make insurance and tax escrow deposits, in amounts
reasonably determined by Lender from time to time as being needed to pay taxes
and insurance premiums when due, in an interest bearing escrow account held by
Lender in Lender’s name and under its sole dominion and control.  All
payments deposited in the escrow account, and all interest accruing thereon, are
pledged as additional collateral for the Loan. Notwithstanding Lender’s holding
of the escrow account, nothing herein shall obligate Lender to pay any insurance
premiums or real property taxes with respect to any portion of the Property
unless any Event of Default has been cured to the satisfaction of
Lender.  If the Event of Default has been satisfactorily cured, Lender
shall make available to Borrower such funds as may be deposited in the escrow
account from time to

    


    
      
        
           


        

        
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    time for
Borrower’s payment of insurance premiums or real property taxes due with respect
to the Property.

     

    9.6 Personal
Property.

     

    All of
Borrower’s personal property, fixtures, attachments and equipment delivered
upon, attached to or used in connection with the operation of the Property shall
always be located at the Property and shall be kept free and clear of all liens,
encumbrances and security interests.

     

    9.7 Leasing
Restrictions.

     

    Without
the prior written consent of Lender (such consent not to be unreasonably
withheld, conditioned or delayed), Borrower shall not (i) enter into any
non-residential Lease other than arms-length Leases of non-residential space in
the Facility entered into in the ordinary course of business, (ii) accept
any rental payment under any Lease more than one month in advance of its due
date (except in circumstances where a Resident of the Property intends to be
away from the Property for a period in excess of one month), or (iii) enter into
any Lease or occupancy agreement other than arms-length transactions in the
ordinary course of operation of the Property.  Borrower will not enter
into any residential Lease for a term of more than one year without Lender’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned, or delayed, and all residential Leases shall be on a form approved
by Lender without material modification.  All rents, including all
pre-paid rents, will be promptly deposited in Borrower’s operating account
maintained with Lender.

     

    9.8 Defaults
Under Leases.

     

    Borrower
will not suffer or permit any material breach or default to occur in any of
Borrower’s obligations under any of the Leases nor suffer or permit the same to
terminate by reason of any failure of Borrower to meet any material requirement
of any Lease.  Borrower will promptly notify Lender in the event of
any default by a non-residential tenant under its Lease.

     

    9.9 Condition
of Property.

     

    Borrower
will keep all buildings, improvements and equipment located on or used or useful
in connection with the Property in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needed and
proper repairs, renewals, replacements, additions, and improvements thereto to
keep the same in good operating condition.

     

    9.10 Inventory
and Equipment.

     

    Borrower
will maintain sufficient inventory and equipment of types and quantities at the
Property to adequately operate the Property.

     

    9.11 Lender’s
Attorneys’ Fees for Enforcement of Agreement.

     

    In case
of any Default or Event of Default hereunder, Borrower (in addition to Lender’s
attorneys’ fees, if any, to be paid pursuant to Section 7.3) will pay
Lender’s reasonable attorneys’ and paralegal fees (including, without
limitation, any reasonable attorney and

    


    
      
        
           


        

        
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    paralegal
fees and costs incurred in connection with any litigation or bankruptcy or
administrative hearing and any appeals therefrom and any post-judgment
enforcement action including, without limitation, supplementary proceedings) in
connection with the enforcement of this Agreement; without limiting the
generality of the foregoing, if at any time or times hereafter Lender employs
counsel (whether or not any suit has been or shall be filed and whether or not
other legal proceedings have been or shall be instituted) for advice or other
representation with respect to the Property, this Agreement, or any of the other
Loan Documents, or to protect, collect, lease, sell, take possession of, or
liquidate any of the Property, or to attempt to enforce any security interest or
lien in any portion of the Property, or to enforce any rights of Lender or
Borrower’s obligations hereunder, then in any of such events all of the
reasonable attorneys’ fees arising from such services, and any reasonable
out-of-pocket expenses, costs and charges relating thereto (including fees and
costs of paralegals), shall constitute an additional liability owing by Borrower
to Lender, payable on demand.

     

    9.12 Appraisals.

     

    Lender
shall have the right to obtain a new or updated Appraisal of the Property from
time to time.  Borrower shall cooperate with Lender in this
regard.  If the Appraisal is obtained to comply with this Agreement or
any applicable law or regulatory requirement, or bank policy promulgated to
comply therewith, or if an Event of Default exists, Borrower shall pay for any
such Appraisal upon Lender’s request.

     

    9.13 Financial
Information.

     

    Borrower
shall deliver or cause to be delivered to Lender the following, all of which
shall be in form satisfactory to Lender:

     

    (a) Internally
prepared monthly financial statements for the Borrower, including occupancy
statistics for the Property, within 30 days after the end of each calendar
month;

     

    (b) Quarterly
internally prepared financial statements for Guarantor within 60 days after the
end of each fiscal quarter, certified as correct and complete by the chief
financial officer of Guarantor.

     

    (c) Annual
consolidated and consolidating financial statements for Guarantor, within 120
days after the end of each fiscal year, which financial statements shall be
audited by a CPA acceptable to Lender.

     

    (d) Quarterly
internally prepared financial statements for Borrower within 30 days after the
end of each fiscal quarter, certified as correct and complete by the chief
financial officer of Borrower.

     

    (e) Quarterly
Compliance Certificates in the form of Exhibit D attached
with respect to the financial covenants described in Section 9.22 below,
within 30 days after the end of each fiscal quarter.

     

    (f) Annual
financial statements for Borrower within 120 days after the end of each fiscal
year.

    


    
      
        
           


        

        
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    (g) Copies of
all state or federal regulatory, survey or reimbursement reports or
documentation regarding the Property, promptly after the issuance
thereof.

     

    All such
financial statements shall be in a format approved by
Lender.  Borrower shall provide such additional financial information
Lender reasonably requires.  Borrower shall during regular business
hours permit Lender or any of its agents or representatives to have access to
and examine all of its books and records regarding the Property.

     

    9.14 Lost
Note.

     

    Upon
Lender’s furnishing to Borrower an affidavit to such effect, Borrower shall, if
the Note is mutilated, destroyed, lost or stolen, deliver to Lender, in
substitution therefor, a new note containing the same terms and conditions as
the Note.

     

    9.15 Indemnification.

     

    Borrower
shall indemnify Lender, including each party owning an interest in the Loan and
their respective officers, directors, employees and consultants (each, an “Indemnified
Party”) and defend and hold each Indemnified Party harmless from and
against all claims, injury, damage, loss and liability, cost and expense
(including attorneys’ fees, costs and expenses) of any and every kind to any
persons or property by reason of (i) the operation or maintenance of the
Property; (ii) any breach of representation or warranty, Default or Event
of Default; or (iii) any other matter arising in connection with the Loan,
Borrower or the Property.  No Indemnified Party shall be entitled to
be indemnified against its own gross negligence or willful
misconduct.  The foregoing indemnification shall survive repayment of
the Loan and shall continue to benefit Lender following any assignment of the
Loan with respect to matters arising or accruing prior to such
assignment.

     

    9.16 No
Additional Debt.

     

    Except
for the Loan, Borrower shall not incur any indebtedness (whether personal or
nonrecourse, secured or unsecured) other than customary trade payables paid
within sixty (60) days after they are incurred.

     

    9.17 Compliance
With Laws.

     

    Borrower
shall comply with all applicable and material requirements (including applicable
Laws) of any Governmental Authority having jurisdiction over Borrower or the
Property.

     

    9.18 Organizational
Documents.

     

    Without
the prior written consent of Lender, not to be unreasonably withheld, Borrower
shall not permit or suffer (i) a material amendment or modification of its
Organizational Documents, (ii) the admission of any new member, or (iii) any
dissolution or termination of its existence.

    


    
      
        
           


        

        
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    9.19 Management
Contracts.

     

    Borrower
shall not enter into, modify, amend, terminate or cancel any management
contracts for the Property or agreements with agents or brokers, without the
prior written approval of Lender, such approval not to be unreasonably withheld,
conditioned or delayed.

     

    9.20 Furnishing
Notices.

     

    Borrower
shall provide Lender with copies of all material notices pertaining to the
Property received by Borrower from Guarantor, any Governmental Authority or
insurance company within seven (7) days after such notice is
received.

     

    9.21 Authorized
Representative.

     

    Borrower
hereby appoints Eric Mendelsohn as its authorized representative (“Authorized
Representative”) for purposes of dealing with Lender on behalf of
Borrower in respect of any and all matters in connection with this Agreement,
the other Loan Documents, and the Loan.  The Authorized Representative
shall have the power, in his discretion, to give and receive all notices,
monies, approvals, and other documents and instruments, and to take any other
action on behalf of Borrower.  All actions by the Authorized
Representative shall be final and binding on Borrower.  Lender may
rely on the authority given to the Authorized Representative until actual
receipt by Lender of a duly authorized resolution substituting a different
person as the Authorized Representative.  No more than one person
shall serve as Authorized Representative at any given time.

     

    9.22 Financial
Covenants.

     

    (a) Minimum
Occupancy.  Borrower covenants to make progress in occupancy of
the Facility in accordance with the following schedule:  An apartment
Unit in the Facility shall be considered occupied when a Resident is in actual
occupancy on a full rent-paying basis under a Residency Agreement in the form
approved by Lender without material modification.

    


    
      	
              Covenant Test Date

            	
              Required No. of Units
    Occupied

            
	
              June
      30, 2008

            	
              19

            
	
              September
      30, 2008

            	
              25

            
	
              December
      31, 2008

            	
              28

            
	
              March
      31, 2009

            	
              32

            
	
              June
      30, 2009

            	
              36

            
	
              September
      30, 2009

            	
              41

            
	
              December
      31, 2009

            	
              43

            
	
              March
      31, 2010

            	
              45

            
	
              June
      30, 2010

            	
              45

            
	
              September
      30, 2010

            	
              45

            
	
              December
      31, 2010

            	
              45

            
	
              March
      31, 2011

            	
              45

            


    

     

    


    


    
      
        
           


        

        
          27

          
            

          

        

        
           


        

      

    

    


    (b) Minimum
Debt Service Coverage.  Borrower agrees that the minimum Debt
Service Coverage Ratio A will meet the following schedule:

    


    
      	
              Covenant Test Date

            	
              Required Debt Service Coverage Ratio
      A

            
	
              June
      30, 2009

            	
              1.00

            
	
              September
      30, 2009

            	
              1.00

            
	
              December
      31, 2009

            	
              1.00

            
	
              March
      31, 2010

            	
              1.10

            
	
              June
      30, 2010

            	
              1.25

            
	
              September
      30, 2010

            	
              1.40

            
	
              December
      31, 2010

            	
              1.40

            
	
              March
      31,  2011

            	
              1.40

            
	
              June
      30, 20111

            	
              1.40

            
	
              September
      30, 2011

            	
              1.40

            
	
              December
      31, 2011

            	
              1.40

            
	
              March
      31, 2012

            	
              1.40

            


    

     

    9.23 Single
Purpose Entity Provisions.

     

    (a) The sole
purpose for which Borrower is organized is to acquire, own, hold, maintain and
operate the Property, together with such other activities as may be necessary or
advisable in connection with such limited purpose.  Borrower shall not
engage in any business, and it shall have no purpose, unrelated to the foregoing
purpose and shall not acquire any real property or own assets other than those
in furtherance of the limited purposes of Borrower.

     

    (b) Borrower
shall have no authority to perform any act in violation of any
(i) applicable laws or regulations or (ii) the Loan Documents.

     

    (c) Borrower
shall not during the term of the Loan and/or prior to the full and indefeasible
repayment of the Loan:

     

    (i) except as
permitted by Lender in writing, make any loans to any member of Borrower or any
Affiliate of any member;

     

    (ii) dissolve,
wind up or liquidate Borrower;

     

    (iii) merge,
consolidate or acquire all or substantially all of the assets of any other
entity; or

     

    (iv) change
the nature of the business of Borrower.

     

    (d) Borrower
shall not, and no person or entity on behalf of Borrower shall: (a) institute
proceedings to be adjudicated bankrupt or insolvent; (b) consent to the
institution of

    

      

    

     

      1
Commencing with this quarter, the Debt Service component of Debt Service
Coverage includes principal amortization.

    

    


    
      
        
           


        

        
          28

          
            

          

        

        
           


        

      

    

    


    bankruptcy
or insolvency proceedings against Borrower; (c) file a petition seeking, or
consenting to, reorganization or relief under any applicable federal or state
law relating to bankruptcy; (d) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
Borrower or a substantial part of its property; (e) make any assignment for the
benefit of creditors; (f) admit in writing Borrower’s inability to pay its debts
generally as they become due or declare or effect a moratorium on its debts; or
(g) take any action in furtherance of any such action.

     

    (e) Borrower
shall at times observe the applicable legal requirements for the recognition of
Borrower as a legal entity separate from any of its Affiliates, including,
without limitation, as follows:

     

    (i) Borrower
shall hold itself out to the public (including any of its Affiliates’ creditors)
under Borrower’s own name and as a separate and distinct entity and not as a
department, division or otherwise of any Affiliate.

     

    (ii) Borrower
shall observe all customary formalities regarding the existence of
Borrower.

     

    (iii) Borrower
shall hold title to its assets in its own name and act solely in its own name
and through its own duly authorized members and agents.  No Affiliate
shall be appointed or act as agent of Borrower, other than, as applicable, a
property manager with respect to the Property.

     

    (iv) Investments
shall be made in the name of Borrower directly by Borrower or on its behalf by
brokers engaged and paid by Borrower or its agents.

     

    (v) Borrower
is and will be solvent.

     

    (vi) Borrower
shall maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any
Affiliate or other person or entity.

     

    (vii) Borrower
shall pay or cause to be paid its own liabilities and expenses of any kind,
including but not limited to salaries of its employees, if any, only out of its
own separate funds and assets.

     

    (viii) Borrower
shall at all times be adequately capitalized to engage in the transactions
contemplated at its formation.

     

    (ix) Borrower
shall not do any act which would make it impossible to carry on the ordinary
business of Borrower.

     

    (x) None of
Borrower’s funds shall be invested in securities issued by, nor shall Borrower
acquire the indebtedness or obligation of, any Affiliate.

     

    (xi) Borrower
shall correct any misunderstanding that is known by Borrower regarding its name
or separate identity.

    


    
      
        
           


        

        
          29

          
            

          

        

        
           


        

      

    

    


    (f) Any
indemnification obligation of Borrower in favor of its members or any other
Affiliate shall (i) be fully subordinated to the Loan and (ii) not constitute a
claim against Borrower or its assets until such time as the Loan has been
indefeasibly paid in accordance with its terms and otherwise has been fully
discharged.

     

    9.24 Right of
First Refusal.

     

    Borrower
grants Lender a right of first refusal (“Lender’s
ROFR”) with respect to any refinancing of the Loan.  Lender
(which, as used in this paragraph includes any Affiliate of Lender) shall have
the right, but not the obligation, to match the terms of any such financing
offered to Borrower by any reputable institutional real estate
lender.  If within 30 days after Lender receives a copy of any such
firm financing offer to Borrower from a reputable institutional real estate
lender, Lender offers Borrower financing on terms which, in the reasonable
judgment of Borrower and Lender, are comparable in all material respects to the
terms of any such offered financing, Borrower may decline to accept the
financing offered by Lender only if Borrower pays Lender a fee in the amount of
$40,875.00 (the “Termination
Fee”), due and payable when the Loan is due in full or is paid in full,
whichever is earlier, and such fee shall be included in the indebtedness secured
by the Mortgage.  If Lender does not offer Borrower financing on terms
which, in the reasonable judgment of Borrower and Lender, are comparable in all
material respects to the terms of any such offered financing, Borrower shall not
be obligated to pay any Termination Fee or any other fees to Lender in
connection with the refinancing of the Loan.  Lender’s ROFR is
personal to Lender and shall not be subject to any assignment by Lender without
Borrower’s prior written consent.

     

    9.25 Post-Closing Property
Condition Report.

     

    On or
before May 30, 2008, time being of the essence, Borrower shall cause to be
furnished to Lender, in form and substance satisfactory to Lender, a property
condition report (“Property

     

    Condition
Report”) which describes the condition of the Facility and identifies
defects and all reasonably necessary or prudent repairs and/or
replacements.

     

    ARTICLE
10.   

    CASUALTIES
AND CONDEMNATION

     

     

    10.1 Lender’s
Election to Apply Proceeds on Indebtedness.

     

    (a) Subject
to the provisions of Section 10.1(b) below,
Lender may elect to collect, retain and apply upon the indebtedness of Borrower
under this Agreement or any of the other Loan Documents all proceeds of
insurance or condemnation (individually and collectively referred to as “Proceeds”)
after deduction of all expenses of collection and settlement, including
attorneys’ and adjusters’ fees and charges.  Any proceeds remaining
after repayment of the indebtedness under the Loan Documents shall be paid by
Lender to Borrower.

     

    (b) Notwithstanding
anything in Section
10.1(a) to the
contrary, in the event of any casualty to the Property or any condemnation of
part of the Property, Lender agrees to make the Proceeds available to pay costs
of restoration of the Property if (i) there is then no Default or Event of
Default, (ii) all Proceeds are deposited with Lender, (iii) in Lender’s
reasonable judgment, the amount of Proceeds available for restoration of the
Property (together with any sums or other security acceptable to Lender
deposited with Lender by Borrower for such

    


    
      
        
           


        

        
          30

          
            

          

        

        
           


        

      

    

    


    purpose)
is sufficient to pay the full and complete costs of such restoration,
(iv) if the cost of restoration exceeds ten percent (10%) of the Loan
Amount, in Lender’s sole determination after completion of restoration the Loan
Amount will not exceed 65% of the fair market value of the Property,
(vi) in Lender’s reasonable determination, the Property can be restored to
an architecturally and economically viable project in compliance with applicable
Laws, (vii) Guarantor reaffirms its Guaranty in writing, and (viii) in
Lender’s reasonable determination, such restoration is likely to be completed
not later than three (3) months prior to the Maturity Date.

     

    10.2 Borrower’s
Obligation to Rebuild and Use of Proceeds Therefor.

     

    In case
Lender does not elect to apply or does not have the right to apply the Proceeds
to the indebtedness of Borrower under this Agreement or any of the other Loan
Documents, as provided in Section 10.1 above,
Borrower shall:

     

    (a) Proceed
with diligence to make settlement with insurers or the appropriate governmental
authorities and cause the Proceeds to be deposited with Lender;

     

    (b) In the
event of any delay in making settlement with insurers or the appropriate
governmental authorities or effecting collection of the Proceeds, deposit with
Lender the full amount required to complete construction as aforesaid;
and

     

    (c) Promptly
proceed with construction of the Property, including the repair of all damage
resulting from such fire, condemnation or other cause and restoration to its
former condition.

     

    Lender
may condition the disbursement of Proceeds and other funds deposited with Lender
for the cost of restoration on Lender’s reasonable approval of the plans and
specifications for the restoration, contractor’s cost estimates, architect’s
certificates, waivers of liens, sworn statements of mechanics and materialmen,
and such other evidence of costs, percentage completion of construction,
application of payments and satisfaction of liens as Lender may reasonably
require.

     

    ARTICLE
11.     

    ASSIGNMENTS
BY LENDER AND BORROWER

     

     

    11.1 Assignments
and Participations.

     

    Lender
may from time to time sell the Loan and the Loan Documents (or any interest
therein) and may grant participations in the Loan.  Borrower agrees to
cooperate with Lender’s efforts to do any of the foregoing and to execute all
documents reasonably required by Lender in connection therewith which do not
materially adversely affect Borrower’s rights under the Loan
Documents.

     

    11.2 Prohibition
of Assignments and Transfers by Borrower.

     

    Borrower
shall not assign or attempt to assign its rights under this Agreement and any
purported assignment shall be void.  Without the prior written consent
of Lender, in Lender’s

    


    
      
        
           


        

        
          31

          
            

          

        

        
           


        

      

    

    


    sole
discretion, Borrower shall not suffer or permit any Transfer other than a
Permitted Transfer.

     

    11.3 Prohibition
of Transfers in Violation of ERISA.

     

    In
addition to the prohibitions set forth in Section 11.2 above,
Borrower shall not assign, sell, pledge, encumber, transfer, hypothecate or
otherwise dispose of its interest or rights in this Agreement or in the
Property, or attempt to do any of the foregoing or suffer any of the foregoing,
nor shall any party owning a direct or indirect interest in Borrower assign,
sell, pledge, encumber, transfer, hypothecate or otherwise dispose of any of its
rights or interest (direct or indirect) in Borrower, attempt to do any of the
foregoing or suffer any of the foregoing, if such action would cause the Loan,
or the exercise of any of Lender’s rights in connection therewith, to constitute
a prohibited transaction under ERISA or the Internal Revenue Code or otherwise
result in Lender being deemed in violation of any applicable provision of
ERISA.  Borrower agrees to indemnify and hold Lender free and harmless
from and against all losses, reasonable out-of-pocket costs (including
reasonable attorneys’ fees and expenses), taxes, damages and reasonable expenses
Lender may suffer by reason of the investigation, defense and settlement of
claims and in obtaining any prohibited transaction exemption under ERISA
necessary or desirable in Lender’s sole judgment or by reason of a breach of the
foregoing prohibitions.  The foregoing indemnification shall be a
recourse obligation of Borrower and shall survive repayment of the Note,
notwithstanding any limitations on recourse contained herein or in any of the
Loan Documents.

     

    11.4 Successors
and Assigns.

     

    Subject
to the foregoing restrictions on transfer and assignment contained in this Article 11, this
Agreement shall inure to the benefit of and shall be binding on the parties
hereto and their respective successors and permitted assigns.

     

    ARTICLE
12. 

    DEFAULT

     

     

    12.1 Events of
Default.

     

    The
occurrence of any one or more of the following shall constitute an “Event of
Default” as said term is used herein:

     

    (a) Failure
of Borrower to make any payment of principal or interest on the Note within five
(5) days after the date when due.

     

    (b) Failure
by Borrower to pay the Loan in full by the Maturity Date.

     

    (c) Failure
of Borrower to observe or perform any of the other covenants or conditions by
Borrower to be performed under the terms of this Agreement or any other Loan
Document concerning the payment of money, for a period of ten (10) days after
written notice from Lender that the same is due and payable.

     

    (d) Failure
of Borrower for a period of thirty (30) days after written notice from Lender,
to observe or perform any non-monetary covenant or condition contained in
this

    


    
      
        
           


        

        
          32

          
            

          

        

        
           


        

      

    

    


    Agreement
or any other Loan Documents; provided that if any such failure concerning a
non-monetary covenant or condition is susceptible to cure and cannot reasonably
be cured within said thirty (30) day period, then Borrower shall have an
additional sixty (60) day period to cure such failure and no Event of Default
shall be deemed to exist hereunder so long as Borrower commences such cure
within the initial thirty (30) day period and diligently and in good faith
pursues such cure to completion within such resulting ninety (90) day period
from the date of Lender’s written notice; provided however that if a different
notice or grace period is specified under any other subsection of this Section 12.1 with respect
to a particular breach, the specific provision shall control.

     

    (e) Any
Transfer or other disposition in violation of Article
11.

     

    (f) If any
material warranty, representation, statement, report or certificate made now or
hereafter by Borrower or Guarantor is untrue or incorrect at the time made or
delivered, provided that if such breach is reasonably susceptible of cure, then
no Event of Default shall exist so long as Borrower cures (or causes the cure
of) said breach (i) within the notice and cure period provided in Section 12.1(c) above for
a breach that can be cured by the payment of money or (ii) within the
notice and cure period provided in Section 12.1(d) above for
any other breach.

     

    (g) Borrower
or Guarantor shall commence a voluntary case concerning Borrower or Guarantor
under the Bankruptcy Code; or an involuntary proceeding is commenced against
Borrower or Guarantor under Bankruptcy Code and relief is ordered against
Borrower or Guarantor, or the petition is controverted but not dismissed or
stayed within sixty (60) days after the commencement of the case, or a custodian
(as defined in Bankruptcy Code) is appointed for or takes charge of all or
substantially all of the property of Borrower or Guarantor; or Borrower or
Guarantor commences any other proceedings under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar Law of any jurisdiction whether now or hereafter in effect relating
to Borrower or Guarantor; or there is commenced against Borrower or Guarantor
any such proceeding which remains undismissed or unstayed for a period of sixty
(60) days; or Borrower or Guarantor fails to controvert in a timely manner any
such case under Bankruptcy Code or any such proceeding, or any order of relief
or other order approving any such case or proceeding is entered; or Borrower or
Guarantor by any act or failure to act indicates its consent to, approval of, or
acquiescence in any such case or proceeding or the appointment of any custodian
or the like of or for it for any substantial part of its property or suffers any
such appointment to continue undischarged or unstayed for a period of sixty (60)
days.

     

    (h) Borrower
or Guarantor shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall consent to the appointment of a receiver or trustee or liquidator of all
of its property or the major part thereof or if all or a substantial part of the
assets of Borrower or Guarantor are attached, seized, subjected to a writ or
distress warrant, or are levied upon, or come into the possession of any
receiver, trustee, custodian or assignee for the benefit of
creditors.

     

    (i) If
Borrower is enjoined, restrained or in any way prevented by any court order from
operating the Property.

    


    
      
        
           


        

        
          33

          
            

          

        

        
           


        

      

    

    


    (j) One or
more final judgments are entered (i) against Borrower in amounts aggregating in
excess of $100,000 or (ii) against Guarantor in amounts aggregating in excess of
$250,000, and said judgments are not satisfied, stayed or bonded over within
thirty (30) days after entry.

     

    (k) If
Borrower or Guarantor shall fail to pay any debt (which term shall not include
judgments under clause (j) above) owed by it or is in default under any
agreement with Lender or any other party (other than a failure or default for
which Borrower’s maximum liability does not exceed $100,000 and Guarantor’s
maximum liability does not exceed $250,000) and such failure or default
continues after any applicable grace period specified in the instrument or
agreement relating thereto.

     

    (l) If a
Material Adverse Change occurs with respect to Borrower, the Property or
Guarantor.

     

    (m) The
occurrence of any other event or circumstance denominated as an Event of Default
herein or under any of the other Loan Documents and the expiration of any
applicable grace or cure periods, if any, specified for such Event of Default
herein or therein, as the case may be.

     

    (n) The
occurrence of an “Event of Default” as defined in the Loan
Agreement  dated April 25, 2008 between Lender and Emerikeyt LO of
Broadmoor LLC, a Delaware limited liability company (“Broadmoor
Borrower”), providing for a loan from Lender to Broadmoor Borrower in the
amount of Nine Million, Two Hundred Fifty Thousand and No/100 Dollars
($9,250,000.00) (the “Broadmoor
Loan”), or any of the ancillary loan documents of even date therewith
(“the
Broadmoor Loan Documents”), including but not limited to the Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing (“Broadmoor Deed of
Trust”) on real property located in the City of Colorado Springs, County
of El Paso, State of Colorado, and legally described in the Broadmoor Deet of
Trust (the “Broadmoor
Property”).

     

    12.2 Remedies
Conferred Upon Lender.

     

    Upon the
occurrence of any Event of Default, Lender may pursue any one or more of the
following remedies concurrently or successively, it being the intent hereof that
none of such remedies shall be to the exclusion of any other:

     

    (a) Take
possession of the Property and do anything which is necessary or appropriate in
its sole judgment to fulfill the obligations of Borrower under this Agreement
and the other Loan Documents;

     

    (b) Withhold
further disbursement of the proceeds of the Loan and/or terminate Lender’s
obligations to make further disbursements hereunder;

     

    (c) Declare
the Note to be immediately due and payable;

     

    (d) Use and
apply any monies or letters of credit deposited by Borrower with Lender,
regardless of the purposes for which the same was deposited, to cure any such
Event of Default or to apply on account of any indebtedness under this Agreement
which is due and owing to Lender;

    


    
      
        
           


        

        
          34

          
            

          

        

        
           


        

      

    

    


    (e) Exercise
or pursue any other remedy or cause of action permitted under this Agreement or
any other Loan Documents, or conferred upon Lender by operation of
Law.

     

    Notwithstanding
the foregoing, upon the occurrence of any Event of Default under Section 12.1(g), all
amounts evidenced by the Note shall automatically become due and payable,
without any presentment, demand, protest or notice of any kind to
Borrower.

     

     

    ARTICLE
13.  

     GENERAL
PROVISIONS

     

     

    13.1 Time is
of the Essence.

     

    Borrower
agrees that time is of the essence under this Agreement; provided, however, that
if any payment or performance is due on day that is not a Business Day, such
payment or performance shall be due on the Business Day immediately following
such date.

     

    13.2 Captions.

     

    The
captions and headings of various Articles, Sections and subsections of this
Agreement and Exhibits pertaining hereto are for convenience only and are not to
be considered as defining or limiting in any way the scope or intent of the
provisions hereof.

     

    13.3 Modification;
Waiver.

     

    No
modification, waiver, amendment or discharge of this Agreement or any other Loan
Document shall be valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver, amendment or
discharge is sought.

     

    13.4 Governing
Law.

     

    Borrower’s
and Guarantor’s principal offices are located within the State of Washington,
and Lender is making the Loan to Borrower within the State of
Washington.  Accordingly, Borrower and Lender agree that this
Agreement, the other Loan Documents and the Environmental Indemnity shall be
construed, enforced and otherwise governed by the laws of the State of
Washington without regard to its conflict of laws rules, except that the laws of
the State of Kansas (the state in which the Property is located) shall govern
the validity and enforcement of the lien of the Mortgage and the Assignment of
Rents.  Borrower agrees that to the fullest extent permitted by law,
the courts of the State of Washington, at Lender’s sole and exclusive election,
shall have exclusive jurisdiction of all actions, proceedings, defenses or
remedies arising out of the execution or enforcement of this
Agreement.  Borrower consents to personal jurisdiction in the courts
of Ohio and Washington as provided herein.  Venue in any action to
enforce this Agreement may be either in King County, Washington, or Butler
County, Kansas, at Lender’s sole and exclusive option.  Borrower
waives any objection based upon forum non
conveniens.

     

    13.5 Acquiescence
Not to Constitute Waiver of Lender’s Requirements.

     

    Each and
every covenant and condition for the benefit of Lender contained in this
Agreement may be waived by Lender, provided, however, that to the extent that
Lender may have acquiesced in any noncompliance with any conditions precedent to
the Loan Closing or to any

    


    
      
        
           


        

        
          35

          
            

          

        

        
           


        

      

    

    


    subsequent
disbursement of Loan proceeds, such acquiescence shall not be deemed to
constitute a waiver by Lender of such requirements with respect to any future
disbursements of Loan proceeds.

     

    13.6 Disclaimer.

     

    This
Agreement is made for the sole benefit of Borrower and Lender and no other
person or persons shall have any benefits, rights or remedies under or by reason
of this Agreement, or by reason of any actions taken by Lender pursuant to this
Agreement.  Lender shall not be liable for any debts or claims
accruing in favor of any such parties against Borrower or others or against the
Property.  By making the Loan or taking any action pursuant to any of
the Loan Documents, Lender shall not be deemed a partner or a joint venturer
with Borrower or a fiduciary of Borrower.

     

    13.7 Partial
Invalidity; Severability.

     

    If any of
the provisions of this Agreement, or the application thereof to any person,
party or circumstances, shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or the application of such provision or provisions
to persons, parties or circumstances other than those as to whom or which it is
held invalid or unenforceable, shall not be affected thereby, and every
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.

     

    13.8 Definitions
Include Amendments.

     

    Definitions
contained in this Agreement which identify documents, including, but not limited
to, the Loan Documents, shall be deemed to include all amendments and
supplements to such documents from the date hereof, and all future amendments
and supplements thereto entered into from time to time to satisfy the
requirements of this Agreement or otherwise with the consent of
Lender.  Reference to this Agreement contained in any of the foregoing
documents shall be deemed to include all amendments and supplements to this
Agreement.

     

    13.9 Execution
in Counterparts.

     

    This
Agreement may be executed in any number of counterparts and by different parties
hereto 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.

     

    13.10 Entire
Agreement.

     

    This
Agreement, taken together with all of the other Loan Documents and all
certificates and other documents delivered by Borrower to Lender, embody the
entire agreement and supersede all prior agreements, written or oral, relating
to the subject matter hereof.

     

    13.11 Waiver of
Damages.

     

    In no
event shall Lender be liable to Borrower for punitive, exemplary or
consequential damages, including, without limitation, lost profits, whatever the
nature of a breach by Lender

    


    
      
        
           


        

        
          36

          
            

          

        

        
           


        

      

    

    


    of its
obligations under this Agreement or any of the Loan Documents, and Borrower
waives all claims for punitive, exemplary or consequential damages.

     

    13.12 Claims
Against Lender.

     

    Lender
shall not be in default under this Agreement, or under any other Loan Documents,
unless a written notice specifically setting forth the claim of Borrower shall
have been given to Lender within three (3) months after Borrower first had
knowledge of the occurrence of the event which Borrower alleges gave rise to
such claim and Lender does not remedy or cure the default, if any there be,
promptly thereafter.  Borrower waives any claim, set-off or defense
against Lender arising by reason of any alleged default by Lender as to which
Borrower does not give such notice timely as aforesaid.  Borrower
acknowledges that such waiver is or may be essential to Lender’s ability to
enforce its remedies without delay and that such waiver therefore constitutes a
substantial part of the bargain between Lender and Borrower with regard to the
Loan.

     

    13.13 Jurisdiction.

     

    TO THE
GREATEST EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES ANY AND ALL RIGHTS TO
REQUIRE MARSHALING OF ASSETS BY LENDER.  WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”),
BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF SEATTLE, STATE OF
WASHINGTON, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM
THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES
THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT
HAVE JURISDICTION OVER SUCH PARTY.  NOTHING IN THIS AGREEMENT SHALL
PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL
THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE
BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION.  BORROWER FURTHER
AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS
PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN
ANY WASHINGTON STATE OR UNITED STATES COURT SITTING IN THE STATE OF WASHINGTON
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED
TO BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE
COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL REFUSE TO ACCEPT DELIVERY,
SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
MAILED.

     

    13.14 Set-Offs.

     

    After the
occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably authorizes and directs Lender from time to time to charge Borrower’s
accounts and deposits with Lender (or its Affiliates), and to pay over to Lender
an amount equal to any amounts from time to time due and payable to Lender
hereunder, under the Note or under any

    


    
      
        
           


        

        
          37

          
            

          

        

        
           


        

      

    

    


    other
Loan Document.  Borrower hereby grants to Lender a security interest
in and to all such accounts and deposits maintained by Borrower with Lender (or
its Affiliates).

     

    13.15 Notices.

     

    All
notices required or permitted hereunder shall be in writing and shall be given
to the parties as follows:

     

    
      	
               
      

            	
              If
      to Lender:

            	
              KeyBank
      National Association

            


    

     

    
      	
               
      

            	
              Healthcare
      Services

            


    

     

    
      	
               
      

            	
              800
      Superior Avenue, 6th
      Floor

            


    

     

    
      	
               
      

            	
              Cleveland,
      OH  44114

            


    

     

    
      	
               
      

            	
              Attn:  CRE
      Client Services

            


    

     

    
      	
               
      

            	
              Mail
      Code:  OH-01-02-0628

            


    

     

    
      	
               
      

            	
              Fax
      No.:

            	
              216-828-7521

            


    

     

    
      	
               
      

            	
              If
      to Borrower:

            	
              Emerikeyt
      Fairways of Augusta LLC

            


    

     

    
      	
               
      

            	
              c/o
      Emeritus Corporation

            


    

     

    
      	
               
      

            	
              3131
      Elliott Avenue #500

            


    

     

    
      	
               
      

            	
              Seattle,
      WA  98121

            


    

     

    
      	
               
      

            	
              Attn:
      Eric Mendelsohn

            


    

     

    
      	
               
      

            	
              Fax
      No.:

            	
              206-204-1490

            


    

     

    Any such
notices shall be sent by (a) a nationally recognized overnight courier, in which
case notice shall be deemed delivered one Business Day after deposit with such
courier; or (b) served personally, in which case notice shall be deemed
given on the date of such service, or (c) delivered by facsimile
transmission followed by delivery by personal service or nationally recognized
courier service on the next business day after facsimile transmission, in which
case notice shall be deemed to have been given on the date of facsimile
transmission.  The above addresses may be changed by written notice to
the other party; provided that no notice of a change of address shall be
effective until actual receipt of such notice.

     

    13.16 Waiver of
Jury Trial.

     

    BORROWER
AND LENDER EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

     

    13.17 Statutory
Notice.

     

    ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

    


    
      
        
           


        

        
          38

          
            

          

        

        
           


        

      

    

    


     

    IN
WITNESS WHEREOF, the parties have signed this Agreement as of the date written
above.

     

    “Borrower”

     

    EMERIKEYT
FAIRWAYS OF AUGUSTA LLC, aDelaware limited liability company

     

                  By:  Emeritus
Properties XVI, Inc., a Nevadacorporation, its Member/Manager

    


                     By:
/s/ Eric Mendelsohn __________

               Name:
Eric Mendelsohn

    Title: Senior VP Corporate
Development

     

     “Lender”

     

    KEYBANK
NATIONAL ASSOCIATION, a national banking association

     

    


    By:           /s/
Bellini Lacey________

    Name:                      __
Bellini Lacey _________________

    Title:                      _AVP-Closing
Officer______

    


    
      
        
           


        

        
          39