ex10_6711.htm


    
      
        

      

    

    Exhibit
      10.67.11

    


    LOAN
      AGREEMENT

    


    THIS
      LOAN AGREEMENT (this “Agreement”) is made as of August 15, 2007, by and among the eight (8) Delaware
      limited liability companies
      or limited partnerships listed on Schedule A attached hereto and made a
      part hereof (together with their respective successors and assigns, the
“Borrowers”, and individually, a “Borrower”), and CAPMARK FINANCE INC., a
      California corporation (together with its successors and assigns,
“Lender”).

    


    RECITALS

    


    A.           Borrowers
      have requested a loan in the principal amount of $49,800,000.00.

    


    B.           Lender
      has agreed to make such loan on the terms and conditions hereinafter set
      forth.

    


    AGREEMENT

    


    NOW,
      THEREFORE, it is hereby agreed as follows:

    


    ARTICLE
      I

    DEFINITIONS,
      ACCOUNTING PRINCIPLES, UCC TERMS.

    


    1.1  As
      used in this Agreement, the following terms shall have the following meanings
      unless the context hereof shall otherwise indicate:

    


    “Accounts”
      means any rights of Borrowers, if any, arising from the operation of a Facility
      to payment for goods sold or leased or for services rendered, not evidenced
      by
      an Instrument, including, without limitation, (i) all accounts arising from
      the
      operation of a Facility, (ii) all moneys and accounts held by or for the
      benefit of Lender of this Agreement and under the Mortgage, and (iii) all rights
      to payment from Medicare or Medicaid programs, or similar state or federal
      programs, boards, bureaus or agencies and rights to payment from residents,
      private insurers, and others arising from the operation of the Facility,
      including rights to payment pursuant to Reimbursement
      Contracts.  Accounts shall include the proceeds thereof (whether cash
      or noncash, moveable or immoveable, tangible or intangible) received from the
      sale, exchange, transfer, collection or other disposition or substitution
      thereof.

    


     “Affiliate”
      means, with respect to any Person, (a) each Person that controls, is
      controlled by or is under common control with such Person, (b) each Person
      that, directly or indirectly, owns or controls, whether beneficially or as
      a
      trustee, guardian or other fiduciary, any of the Stock of such Person, and
      (c) each of such Person’s officers, directors, members, joint venturers and
      partners.

    


    “Allocated
      Loan Amount” shall mean the amounts allocated to each Borrower and its
      respective Facility as set forth on Exhibit F.

    


    “Assignment
      of Leases and Rents” means that certain Assignment of Leases and Rents
      by each Borrower in favor of Lender.


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    “Assignment
      of Licenses” means, collectively, those certain Assignment of Licenses,
      Permits and Contracts to and for the benefit of Lender.

    


    “Assumed
      Management Fees” means assumed management fees of five percent (5%) of
      net patient revenues of the Facility (after Medicaid and Medicare contractual
      adjustments).

    


    “Business
      Day” means a day, other than Saturday or Sunday and legal holidays,
      when Lender is open for business.

    


    “Closing
      Date” means the date on which all or any part of the Loan is disbursed
      by Lender to or for the benefit of Borrower.

    


    “Collateral”
      means, collectively, the Borrowers’ interest in the Mortgaged Property,
      Improvements, Equipment, Rents, Accounts, General Intangibles, Instruments,
      Inventory, Money, Permits (to the full extent assignable), Reimbursement
      Contracts, and all Proceeds, all whether now owned or hereafter acquired, and
      including replacements, additions, accessions, substitutions, and products
      thereof and thereto, and all other property which is or hereafter may become
      subject to a Lien in favor of Lender as security for any of the Loan
      Obligations.

    


    “Commitment
      Letter” means the commitment letter issued by Lender to Borrowers dated
      of even date herewith.

    


    “Debt
      Service Coverage Ratio” means a ratio in which the first number is the
      sum of “net pre-tax income” of Borrowers from usual operations of the Facilities
      as set forth in the financial statements provided to Lender (without deduction
      for actual management fees or management expenses paid or incurred in connection
      with the operation of the Facility), calculated based upon the preceding twelve
      (12) months (or such lesser period of time as shall have elapsed following
      the
      closing of the Loan), plus Loan interest expense and non-cash expenses or
      allowances for depreciation and amortization of the Facilities for such period,
      to the extent the foregoing are deducted in determining “net pre-tax income”,
less Assumed Management Fees for such period and the second number is the
      interest due on the Loan for the applicable period.  In calculating
“net pre-tax income,” Extraordinary Income and Extraordinary Expenses shall be
      excluded.

    


    “Default”
      means the occurrence or existence of any event which, but for the giving of
      notice or expiration of time or both, would constitute an Event of
      Default.

    


    “Default
      Rate” has the meaning given to that term in the Note.

    


    “Emeritus”
      means Emeritus Corporation, a publicly-traded company organized under the laws
      of the State of Washington.

    


    “Environmental
      Permit” means any permit, license, or other authorization issued under
      any Hazardous Materials Law with respect to any activities or businesses
      conducted on or in relation to the Land and/or the
      Improvements.


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    “Equipment”
      means all beds, linens, televisions, carpeting, telephones, cash registers,
      computers, lamps, glassware, rehabilitation equipment, restaurant and kitchen
      equipment, and other fixtures and equipment, if any, owned by Borrowers located
      on, attached to or used or useful in connection with any of the Property or
      the
      Facilities and all renewals and replacements thereof and substitutions therefor;
      provided, however, that with respect to any items which are leased for the
      benefit of a Facility and not owned by a Borrower, the Equipment shall include
      the leasehold interest only of such Borrower together with any options to
      purchase any of said items and any additional or greater rights with respect
      to
      such items which such Borrower may hereafter acquire, but the foregoing shall
      not be construed to mean that such leasing shall be permitted hereunder and
      under the other Loan Documents.

    


    “Event
      of Default” means any “Event of Default” as defined in Article VII
      hereof.

    


    “Exhibit”
      means an Exhibit to this Agreement, unless the context refers to another
      document, and each such Exhibit shall be deemed a part of this Agreement to
      the
      same extent as if it were set forth in its entirety wherever reference is made
      thereto.

    


    “Extraordinary
      Income and Extraordinary Expenses” means material items of a character
      significantly different from the typical or customary business activities of
      Borrowers which would not be expected to recur frequently and which would not
      be
      considered as recurring factors in any evaluation of the ordinary operating
      processes of Borrowers’ business, and which would be treated as extraordinary
      income or extraordinary expenses under GAAP.

    


    “Facilities”
      means the eight (8) facilities listed on Schedule B
      attached hereto and made a part hereof located on the Land, as they may now
      or
      hereafter exist, together with any other general or specialized care facilities,
      if any (including any Alzheimer’s care unit, subacute, and any other healthcare
      related facility), now or hereafter operated on the Land, and, individually,
      a
“Facility”.

    


    “GAAP”
      means, as in effect from time to time, generally accepted accounting principles
      consistently applied as promulgated by the American Institute of Certified
      Public Accountants.

    


    “General
      Intangibles” means all intangible personal property of Borrowers
      arising out of or connected with the Mortgaged Property or the Facilities and
      all renewals and replacements thereof and substitutions therefor (other than
      Accounts, Rents, Instruments, Inventory, Money, Permits, and Reimbursement
      Contracts), including, without limitation, things in action, contract rights
      and
      other rights to payment of money.

    


    “Governmental
      Authority” means any nation or government, any state or other political
      subdivision thereof, and any Person exercising executive, legislative, judicial,
      regulatory or administrative functions of or pertaining to such
      government.

    


    “Guarantor”
      means Emeritus.

    


    “Guaranty
      Agreement” means that certain Payment and Performance Guaranty
      Agreement of even date herewith executed by Emeritus in favor of
      Lender.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    “Hazardous
      Materials” means petroleum and petroleum products and compounds
      containing them, including gasoline, diesel fuel and oil; explosives; flammable
      materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and
      compounds containing them; lead and lead-based paint; asbestos or
      asbestos-containing materials in any form that is or could become friable;
      underground storage tanks, whether empty or containing any substance; any
      substance the presence of which on the Land and/or the Improvements is
      prohibited by any federal, state or local authority; any substance that requires
      special handling; and any other material or substance now or in the future
      defined as a “hazardous substance,” “hazardous material,” “hazardous waste,”
“toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the
      meaning of any Hazardous Materials Law.

    


    “Hazardous
      Materials Laws” means all federal, state, and local laws, ordinances
      and regulations and standards, rules, policies and other governmental
      requirements, administrative rulings and court judgments and decrees in effect
      now or in the future and including all amendments, that relate to Hazardous
      Materials and apply to Borrower or to the Land and/or the
      Improvements.  Hazardous Materials Laws include, but are not limited
      to, the Comprehensive Environmental Response, Compensation and Liability Act,
      42
      U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42
      U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section
      2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the
      Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, and their state
      analogs.

    


    “Improvements”
      means all buildings, structures and improvements of every nature whatsoever
      now
      or hereafter situated on the Land, including but not limited to, all gas and
      electric fixtures, radiators, heaters, engines and machinery, boilers, ranges,
      elevators and motors, plumbing and heating fixtures, carpeting and other floor
      coverings, water heaters, awnings and storm sashes, and cleaning apparatuses
      which are or shall be attached to the Land or said buildings, structures or
      improvements.

    


    “Indebtedness”
      means any (a) obligations for borrowed money, (b) obligations, payment for
      which
      is being deferred by more than ninety (90) days, representing the deferred
      purchase price of property other than accounts payable arising in connection
      with the purchase of inventory customary in the trade and in the ordinary course
      of Borrower’s business, (c) obligations, whether or not assumed, secured by
      Liens or payable out of the proceeds or production from the Accounts and/or
      property now or hereafter owned or acquired, and (d) the amount of any other
      obligation (including obligations under financing leases) which would be shown
      as a liability on a balance sheet prepared in accordance with GAAP.

    


    “Instruments”
      means all instruments, chattel paper, documents or other writings obtained
      from
      or in connection with the operation of the Mortgaged Property or the Facilities
      (including, without limitation, all ledger sheets, computer records and
      printouts, data bases, programs, books of account and files relating
      thereto).

    


    “Inventory”
      means all inventories of food, beverages and other comestibles held
      by
      Borrowers for sale or use at or from the Mortgaged Property or the Facilities,
      and soap, paper supplies, medical supplies, drugs and all other such goods,
      wares and merchandise held by Borrowers for sale to or for consumption by
      guests, or residents of the Mortgaged Property or the Facilities and all such
      other goods returned to or repossessed by Borrowers.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    “Land”
      means the land described in Exhibit “A” attached hereto and made a part
      hereof.

    


    “Leases”
      has the meaning given to that term in the Mortgage.

    


    “Licensees”
      means those entities listed on Schedule C attached
      hereto and made a part hereof.

    


    “Lien”
      means any voluntary or involuntary mortgage, security deed, deed of trust,
      lien,
      pledge, assignment, security interest, title retention agreement, financing
      lease, levy, execution, seizure, judgment, attachment, garnishment, charge,
      lien
      or other encumbrance of any kind, including those contemplated by or permitted
      in this Agreement and the other Loan Documents.

    


    “Loan”
      means the loan in the principal sum of $49,800,000.00 made by Lender to
      Borrowers as of the date hereof.

    


    “Loan
      Documents” means, collectively, the Commitment Letter, this Agreement,
      the Note, the Mortgage, the Assignment of Leases and Rents, the Assignment
      of
      Licenses, the Guaranty Agreement, and the Subordination Agreement, together
      with
      any and all other documents executed by Borrowers, Guarantor or others,
      evidencing, securing or otherwise relating to the Loan.

    


    “Loan
      Obligations” means the aggregate of all principal and interest owing
      from time to time under the Note and all expenses, charges and other amounts
      from time to time owing under the Note, this Agreement or the other Loan
      Documents and all covenants, agreements and other obligations from time to
      time
      owing to, or for the benefit of, Lender pursuant to the Loan
      Documents.

    


    “Managed
      Care Plans” means any health maintenance organization, preferred
      provider organization, individual practice association, competitive medical
      plan, or similar arrangement, entity, organization, or Person.

    


    “Management
      Agreement” means those certain Management Agreements or, as applicable,
      Master Lease and Management Agreements between Manager and either a Borrower
      or,
      if applicable, a Licensee, obligating Manager to operate and manage the
      Facilities.

    


    “Manager”
      means Emeritus for the Facilities which are not located in Texas and ESC IV,
      L.P., a Washington limited partnership, for the Facilities which are located
      in
      Texas, and any successor manager of the Facilities approved by Lender in
      writing.

    


    “Master
      Lease” means collectively those certain master leases captioned “Lease”
by and between Borrowers and Licensees, and entered into as of August
      15, 2007,
      or to be entered into upon the consummation of the merger between Guarantor
      and
      Summerville Senior Living.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    “Maturity
      Date” means September 1, 2009, unless extended pursuant to the terms of
      the Note.

    


    “Medicaid”
      means that certain program of medical assistance, funded jointly by the federal
      government and the States, for impoverished individuals who are aged, blind
      and/or disabled, and/or members of families with dependent children, which
      program is more fully described in Title XIX of the Social Security Act (42
      U.S.C. §§ 1396 et seq.) and the regulations promulgated
      thereunder.

    


    “Medicare”
      means that certain federal program providing health insurance for eligible
      elderly and other individuals, under which physicians, hospitals, skilled
      nursing homes, home health care and other providers are reimbursed for certain
      covered services they provide to the beneficiaries of such program, which
      program is more fully described in Title XVIII of the Social Security Act (42
      U.S.C. §§ 1395 et seq.) and the regulations promulgated
      thereunder.

    


    “Money”
      means all monies, cash, rights to deposit or savings accounts or other items
      of
      legal tender obtained from or for use in connection with the operation of a
      Facility.

    


    “Mortgage”
      means collectively those certain four (4) Mortgages or Deeds of Trust
      and Security Agreements executed by Borrowers in favor of or for the benefit
      of
      Lender and covering each Borrower’s  respective Mortgaged
      Property.

    


    “Mortgaged
      Property” has the meaning given to that term in the
      Mortgage.

    


    “Note”
      means that certain Promissory Note of even date herewith in the principal amount
      of the Loan payable by Borrower to the order of Lender.

    


    “OFAC
      List” means the list of specially designated nationals and blocked
      persons subject to financial sanctions that is maintained by the U.S. Treasury
      Department, Office of Foreign Assets Control and any other similar list
      maintained by the U.S. Treasury Department, Office of Foreign Assets Control
      pursuant to any Requirements of Law, including, without limitation, trade
      embargo, economic sanctions, or other prohibitions imposed by Executive Order
      of
      the President of the United States.  The OFAC List currently is
      accessible through the internet website
      www.treas.gov/ofac/t11sdn.pdf.

    


    “O&M
      Program” means a written program of operations and maintenance
      established or approved in writing by Lender relating to any Hazardous Materials
      in, on or under the Land and/or the Improvements.

    


    “Permits”
      means all licenses, permits and certificates used or necessary in connection
      with the construction, ownership, operation, use or occupancy of the Mortgaged
      Property and/or the Facility, including, without limitation, business licenses,
      state health department licenses, food service licenses, licenses to conduct
      business, certificates of need and all such other permits, licenses and rights,
      obtained from any governmental, quasi-governmental or private person or entity
      whatsoever concerning ownership, operation, use or occupancy.

    


    “Permitted
      Encumbrances” has the meaning given to that term in Section 5.2
      hereof.


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    “Person”
      means an individual, partnership, limited partnership, corporation, limited
      liability company, business trust, joint stock company, trust, unincorporated
      association, joint venture, governmental authority or other entity of whatever
      nature.

    


    “Proceeds”
      means all proceeds (including proceeds of insurance and condemnation) from
      the
      sale, exchange, transfer, collection, loss, damage, disposition, substitution
      or
      replacement of any of the Collateral.

    


    “Reimbursement
      Contracts” means all third-party reimbursement contracts relating to
      the Facility which are now or hereafter in effect with respect to residents
      or
      patients qualifying for coverage under the same, including Medicare and
      Medicaid, Managed Care Plans and private insurance agreements, and any successor
      program or other similar reimbursement program and/or private insurance
      agreements, now or hereafter existing.

    


    “Rents”
      means all rent and other payments of whatever nature from time to time payable
      pursuant to leases of the Mortgaged Property or the Facilities, or for retail
      space or other space at the Mortgaged Property (including, without limitation,
      rights to payment earned under leases for space in the Improvements for the
      operation of ongoing retail businesses such as newsstands, barbershops, beauty
      shops, physicians’ offices, pharmacies and specialty shops).

    


    “Requirements
      of Law” means (a) the organizational documents of an entity, and (b)
      any law, regulation, ordinance, code, decree, treaty, ruling or determination
      of
      an arbitrator, court or other Governmental Authority, or any Executive Order
      issued by the President of the United States, in each case applicable to or
      binding upon such Person or to which such Person, any of its property or the
      conduct of its business is subject including, without limitation, laws,
      ordinances and regulations pertaining to the zoning, occupancy and subdivision
      of real property.

    


     “Single
      Purpose Entity” means a Person which complies with the requirements of
      Section 5.4.

    


    “Stock”
      means all shares, options, warrants, general or limited partnership interests,
      membership interests, participations or other equivalents (regardless of how
      designated) in a corporation, limited liability company, partnership or any
      equivalent entity, whether voting or nonvoting, including, without limitation,
      common stock, preferred stock, or any other “equity security” (as such term is
      defined in Rule 3a11-1 of the General Rules and Regulations promulgated by
      the
      Securities and Exchange Commission under the Securities Exchange Act of 1934,
      as
      amended).

    


    “Subordination
      Agreement” means that certain Subordination of Management Agreement of
      even date herewith by and among Borrower, Manager, Licensee and
      Lender.

    


    1.2  Singular
      terms shall include the plural forms and vice versa, as applicable, of the
      terms
      defined.

    


    1.3  Each
      term contained in this Agreement and defined in the Uniform Commercial Code
      (the
“UCC”) in effect from time to time in the state in which the Land is located
      shall have the meaning given to such term in the UCC, unless the context
      otherwise indicates, and shall include, without limitation, the meaning set
      forth in this Agreement.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    1.4  All
      accounting terms used in this Agreement shall be construed in accordance with
      GAAP, except as otherwise specified.

    


    1.5  All
      references to other documents or instruments shall be deemed to refer to such
      documents or instruments as they may hereafter be extended, renewed, modified,
      or amended and all replacements and substitutions therefor.

    


    1.6  All
      references herein to “Medicaid” and “Medicare” shall be deemed to include any
      successor program thereto.

     

    ARTICLE
      II

    TERMS
      OF THE LOAN

    


    2.1  The
      Loan.  Each Borrower has agreed to borrow the Loan from
      Lender, and Lender has agreed to make the Loan to Borrowers, subject to
      Borrowers’ compliance with and observance of the terms, conditions, covenants,
      and provisions of this Agreement and the other Loan Documents, and each Borrower
      has made the covenants, representations, and warranties herein and therein
      as a
      material inducement to Lender to make the Loan.

    


    2.2  Security
      for the Loan. The Loan will be evidenced, secured and guaranteed by
      the Loan Documents and the Collateral.

    


    2.3  Limitation
      on Interest.  All agreements between
      Borrowers and Lender, whether now existing or hereafter arising and whether
      written or oral, are hereby limited so that in no contingency, whether by reason
      of acceleration of the maturity of any indebtedness governed hereby or
      otherwise, shall the interest contracted for, charged or received by Lender
      exceed the maximum amount permissible under applicable law.  If, from
      any circumstance whatsoever, interest would otherwise be payable to Lender
      in
      excess of the maximum lawful amount, the interest payable to Lender shall be
      reduced to the maximum amount permitted under applicable law; and, if from
      any
      circumstance the Lender shall ever receive anything of value deemed interest
      by
      applicable law in excess of the maximum lawful amount, an amount equal to any
      excessive interest shall be applied to the reduction of the principal of the
      Loan and not to the payment of interest, or, if such excessive interest exceeds
      the unpaid balance of principal of the Loan, such excess shall be refunded
      to
      Borrowers.  All interest paid or agreed to be paid to Lender shall, to
      the extent permitted by applicable law, be amortized, prorated, allocated,
      and
      spread throughout the full period until payment in full of the principal of
      the
      Loan (including the period of any renewal or extension thereof) so that interest
      thereon for such full period shall not exceed the maximum amount permitted
      by
      applicable law.  This paragraph shall control all agreements between
      the Borrowers and Lender.

    


    2.4  Sale
      of Facility.  Lender has agreed that
      Borrowers may enter purchase contracts for the sale of any of the Facilities
      (each sale, a "Facility Sale" and collectively, the "Facility
      Sales").   Contemporaneously with the closing of any Facility
      Sale, Borrowers may obtain the release from the Mortgage of the Facility which
      is being sold upon the satisfaction of all of the following
      conditions:


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    (i)  
                payment to Lender of
      a release price equal to the lesser of (a) 100% of the net Facility Sale
      proceeds attributable to the to-be-released Facility after deduction of closing
      costs and brokerage fees or (b) 110% of the outstanding balance, including
      principal and all accrued and unpaid interest, of the Allocated Loan Amount
      attributed to the to-be-released Facility, but in no event less than the
      Allocated Loan Amount, together with all accrued interest thereon;

    


    (ii)  
               the release occurs in
      connection with the sale or other disposition of such Facility in a bona fide
      arms-length transaction with a Person other than a Borrower or an Affiliate
      of a
      Borrower;

    


    (iii)           delivery
      by Borrowers to Lender of a release of lien and related loan documentation
      in a
      form appropriate and satisfactory to Lender, which Lender shall execute and
      deliver to Borrower for recordation which the parties agree may occur after
      the
      applicable closing to the extent permitted by applicable law.

    


    (iv)           no
      Event of Default hereunder shall exist;

    


    (v) 
                Borrower shall pay
      or cause to be paid all reasonable costs and expenses incurred by Lender in
      connection with the release transaction;

    


    (vi)           such
      release shall be in compliance with all applicable legal requirements, and
      will
      not impair or otherwise adversely affect the liens, security interest and other
      rights of Lender relating to the Facilities which will continue to be security
      for the Loan after such sale; and

    


    (vii)          any
      other customary conditions as may be reasonably requested by
      Lender.

    


    2.5  Extension
      of Maturity Date.  The Maturity Date may be extended
      pursuant to the terms and conditions of the Note, including, without limitation,
      compliance with the Debt Service Coverage Ratio as set forth therein, and as
      defined herein.

    


    ARTICLE
      III

    BORROWER’S
      REPRESENTATIONS AND WARRANTIES

    


    To
      induce
      Lender to enter into this Agreement, and to make the Loan to Borrowers, each
      Borrower with respect to itself and its Facility, represents and warrants to
      Lender as follows:

    


    3.1  Existence,
      Power and Qualification.  Borrower is a duly organized
      and validly existing Delaware limited liability company or Delaware limited
      partnership, as the case may be, has the power to own its properties and to
      carry on its business as is now being conducted, and is duly qualified to do
      business and is in good standing in every jurisdiction in which the character
      of
      the properties owned by it or in which the transaction of its business makes
      its
      qualification necessary, specifically including, without limitation, the State
      in which its applicable Facility is located.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    3.2  Power
      and Authority.  Borrower has full power and authority to
      borrow the indebtedness evidenced by the Note and to incur the Loan Obligations
      provided for herein, all of which have been authorized by all proper and
      necessary action.  All consents, approvals authorizations, orders or
      filings of or with any court or governmental agency or body, if any, required
      for the execution, delivery and performance of the Loan Documents by Borrower
      have been obtained or made.

    


    3.3  Single
      Purpose Entity.  Borrower is a Single Purpose
      Entity.

    


    3.4  Due
      Execution and Enforcement.  Each of the Loan Documents to
      which Borrower is a party constitutes a valid and legally binding obligation
      of
      Borrower, enforceable in accordance with its respective terms (except as such
      enforcement may be limited by bankruptcy, insolvency, reorganization,
      receivership, moratorium, or other laws relating to the rights of creditors
      generally and by general principles of equity) and does not violate, conflict
      with, or constitute any default under any law, government regulation, decree,
      judgment, Borrower’s articles of organization, partnership agreement or
      operating agreement, as applicable, or any other agreement or instrument binding
      upon Borrower.

    


    3.5  Pending
      Matters.

    


    (a)  Operations;
      Financial Condition.  No action or investigation is pending or, to
      the best of Borrower’s knowledge, threatened before or by any court or
      administrative agency which might result in any material adverse change in
      the
      financial condition, operations or prospects of Borrower or any lower
      reimbursement rate under the Reimbursement Contracts.  Borrower is not
      in violation of any agreement, the violation of which might reasonably be
      expected to have a material adverse effect on its business or assets, and
      Borrower is not in violation of any order, judgment, or decree of any court,
      or
      any statute or governmental regulation to which it is subject.

    


    (b)  Land
      and Improvements.  There are no proceedings pending, or, to the
      best of Borrower’s knowledge, threatened, to acquire through the exercise of any
      power of condemnation, eminent domain or similar proceeding any part of the
      Land, the Improvements or any interest therein, or to enjoin or similarly
      prevent or restrict the use of the Land or the operation of the Facility in
      any
      manner.  None of the Improvements is subject to any unrepaired
      casualty or other damage.

    


    3.6  Financial
      Statements Accurate.  All financial statements heretofore
      or hereafter provided by Borrower are and will be true and complete in all
      material respects as of their respective dates and fairly present the financial
      condition of Borrower, and there are no material liabilities, direct or
      indirect, fixed or contingent, as of the respective dates of such statements
      which are not reflected therein or in the notes thereto or in a written
      certificate delivered with such statements.  The financial statements
      of Borrower have been prepared in accordance with GAAP.  There has
      been no material adverse change in the financial condition, operations, or
      prospects of Borrower since the dates of such statements except as fully
      disclosed in writing with the delivery of such statements.  All
      financial statements of the operations of the Facility heretofore or hereafter
      provided to Lender are and will be true and complete in all material respects
      as
      of their respective dates.


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    3.7  Compliance
      with Facility Laws.  Each Facility is duly licensed as an
      assisted living facility and is currently operated at the licensed unit/bed
      capacity set forth on Schedule B attached hereto and
      made a part hereof under the applicable laws of the state where the Facility
      is
      located.  To Borrower’s actual knowledge, Borrower or Manager has
      obtained all Permits for the Facility, including, without limitation, the
      Certificate of Need, if applicable, which (a) are in full force and effect,
      (b) constitute all of the permits, licenses and certificates required for
      the use, operation and occupancy thereof, (c) have not been pledged as
      collateral for any loan or Indebtedness other than the Loan, (d) are held
      free from restrictions or any encumbrance which would materially adversely
      affect the use or operation of the Facility, and (e) except as set forth on
Schedule 3.7 attached hereto and made a part hereof, are
      not provisional, probationary or restricted in any way.  Borrower, the
      Facility and, to Borrower's actual knowledge, Manager are in compliance in
      all
      material respects with the applicable provisions of assisted living facility
      laws, rules, regulations and published interpretations to which the Facility
      is
      subject.  No waivers of any laws, rules, regulations, or requirements
      (including, but not limited to, minimum foot requirements per bed) are required
      for the Facility to operate at the current licensed unit and/or bed
      capacity.  To the extent required, Borrower is and, to Borrower’s
      actual knowledge, Manager is in good standing with all the respective agencies
      governing such applicable licenses and program
      certification.  Borrower and/or the Facility is current in the payment
      of all so-called provider specific taxes or other assessments, if
      applicable.  Borrower will maintain or cause to be maintained by
      Manager (without allowing to lapse) the Certificate of Need, if applicable,
      and
      any required Permits.

    


    3.8  Maintain
      Unit Capacity.  Neither Borrower nor Manager has granted
      to any third party the right to reduce the number of licensed beds or units
      in
      the Facility or to apply for approval to transfer the right to any or all of
      the
      licensed Facility units to any other location.

    


    3.9  Medicare
      and Medicaid Compliance.  The Facilities described in
Schedule 3.9 are certified to participate in
      Medicaid.  Except as set forth in Schedule
      3.9, none of the Facilities participates in any other Third-Party
      Payors’ Programs (as defined in Section 3.10 below).

    


    3.10  Third
      Party Payors.  There is no threatened or pending
      revocation, suspension, termination, probation, restriction, limitation, or
      nonrenewal affecting Borrower, Manager or the Facility or any participation
      or
      provider agreement with any third-party payor, including Medicare, Medicaid,
      Blue Cross and/or Blue Shield, and any other private commercial insurance
      managed care and employee assistance program (such programs, the “Third-Party
      Payors’ Programs”) to which Borrower or Manager presently is
      subject.  All Medicare (if any), Medicaid (if any) and private
      insurance cost reports and financial reports submitted by Borrower or Manager
      are and will be materially accurate and complete and have not been and will
      not
      be misleading in any material respects.  No cost reports for the
      Facility remain “open” or unsettled except as otherwise disclosed.

    


    3.11  Governmental
      Proceedings and Notices.  Neither Borrower nor Guarantor
      nor Manager nor the Facility is currently the subject of any proceeding by
      any
      governmental agency, and no notice of any violation has been received from
      any
      federal, state or local government or quasi-governmental body or agency or
      any
      administrative or investigative body that would, directly or indirectly, or
      with
      the passage of time:


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    (a)  have
      a material adverse impact on Borrower’s or Manager’s ability to accept and/or
      retain residents or result in the imposition of a fine, a sanction, a lower
      rate
      certification or a lower reimbursement rate for services rendered to eligible
      residents;

    


    (b)  modify,
      limit or annul or result in the transfer, suspension, revocation or imposition
      of probationary use of any of the Permits; or

    


    (c)  affect
      Borrower’s continued participation in the Medicare or Medicaid programs or any
      other Third-Party Payors’ Programs, or any successor programs thereto, at
      current rate certifications.

    


    3.12  Physical
      Plant Standards.  The Facility and the use thereof comply
      in all material respects with all applicable local, state and federal building
      codes, fire codes, health care, nursing/assisted living/senior housing facility
      (as applicable) and other similar regulatory requirements (the “Physical Plant
      Standards”), and no waivers of Physical Plant Standards exist at the
      Facility.

    


    3.13  Pledge
      of Receivables.  Borrower has not pledged its Accounts as
      collateral security for any loan or Indebtedness other than, if applicable,
      the
      Loan.

    


    3.14  Payment
      of Taxes and Property Impositions.  Borrower has filed
      all federal, state, and local tax returns which it is required to file and
      has
      paid, or made adequate provision for the payment of, all taxes and assessments
      which are shown pursuant to such returns or are required to be shown thereon,
      including, without limitation, provider taxes which are due and owing as of
      the
      date hereof.  All such returns are complete and accurate in all
      respects.  Borrower has paid or made adequate provision for the
      payment of all applicable water and sewer charges, ground rents (if applicable)
      and Taxes (as defined in the Mortgage) with respect to the Land and/or the
      Improvements which are due and owing as of the date hereof.

    


    3.15  Title
      to Mortgaged Property.  Borrower has good and marketable
      title to all of the Mortgaged Property, subject to no lien, mortgage, pledge,
      encroachment, zoning violation, or encumbrance, except Permitted Encumbrances
      (specifically including special exceptions reflected in Lender’s title insurance
      policies insuring the Mortgage) which do not materially interfere with the
      security intended to be provided by the Mortgage or the current use or operation
      of the Land and the Improvements or the current ability of the Facility to
      generate net operating income sufficient to service the Loan.  All
      Improvements situated on the Land are situated wholly within the boundaries
      of
      the Land.

    


    3.16  Priority
      of Mortgage.  The Mortgage constitutes a valid first lien
      against the real and personal property described therein, prior to all other
      liens or encumbrances, including those which may hereafter accrue, excepting
      only Permitted Encumbrances.

    


    3.17  Location
      of Chief Executive Offices.  The location of Borrower’s
      chief executive office is set forth on Exhibit “B”
      hereto.  Borrower has no place of business other than the locations of
      the Facilities listed on Schedule “B”.


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    3.18  Disclosure.  All
      information furnished or to be furnished by Borrower to Lender in connection
      with the Loan or any of the Loan Documents is, or will be at the time the same
      is furnished, accurate and correct in all material respects and complete insofar
      as completeness may be necessary to provide Lender with true and accurate
      knowledge of the subject matter.

    


    3.19  Trade
      Names.  Borrower has not changed its name, been known by
      any other name, or been a party to a merger, reorganization or similar
      transaction within the last five (5) years.

    


    3.20  ERISA.  As
      of the date hereof and throughout the term of this Agreement,

    


    (a)  Borrower
      is not an “employee benefit plan,” as defined in Section 3(3) of the Employee
      Retirement Income Security Act of 1974, as amended (“ERISA”), subject to Title I
      of ERISA, and none of the assets of Borrower constitute “plan assets” (within
      the meaning of Department of Labor Regulation Section 2510.3-101) of one or
      more
      such plans, and

    


    (b)  Borrower
      is not a “governmental plan” within the meaning of Section 3(32) of ERISA, and
      transactions by or with Borrower are not be subject to state statutes regulating
      investments of, and fiduciary obligations with respect to, governmental
      plans.

    


    The
      execution and delivery of the Loan Documents and the borrowing of indebtedness
      hereunder do not constitute a non-exempt prohibited transaction under Section
      406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
      (the “Code”).

    


    3.21  Ownership.  The
      ownership interests of the Persons comprising Borrower and each of the
      respective interests in Borrower are correctly and accurately set forth on
      Exhibit “C” hereto.

    


    3.22  Compliance
      with Applicable Laws.  The Facility and its operations
      and the Land and Improvements comply in all material respects with all covenants
      and restrictions of record and applicable laws, ordinances, rules and
      regulations, including, without limitation, the Americans with Disabilities
      Act
      and the regulations thereunder, and all laws, ordinances, rules and regulations
      relating to zoning, setback requirements and building codes and there are no
      waivers of any building codes currently in existence for the
      Facility.

    


    3.23  Solvency.  Borrower
      is solvent for purposes of 11 U.S.C. § 548, and the borrowing of the Loan will
      not render Borrower insolvent for purposes of 11 U.S.C. § 548.

    


    3.24  Management
      Agreement.  The Management Agreement is in full force and
      effect, and there are no defaults (either monetarily or non-monetarily) by
      Manager or Borrower thereunder.

    


    3.25  Other
      Indebtedness.  Borrower has no outstanding Indebtedness,
      secured or unsecured, direct or contingent (including any guaranties), other
      than indebtedness which represents trade payables or accrued expenses incurred
      in the ordinary course of business of owning and operating the Mortgaged
      Property; no other debt incurred by Borrower after the date hereof will be
      secured (senior, subordinate or pari passu) by the Mortgaged
      Property.


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    3.26  Other
      Obligations.  Borrower has no material financial
      obligation under any indenture, mortgage, deed of trust, loan agreement or
      other
      agreement or instrument to which Borrower is a party or by which Borrower or
      the
      Mortgaged Property is otherwise bound, other than obligations incurred in the
      ordinary course of the operation of the Mortgaged Property and other than
      obligations under the Mortgage and the other Loan Documents.

    


    3.27  Fraudulent
      Conveyances.  Borrower (a) has not entered into this
      Agreement or any of the other Loan Documents with the actual intent to hinder,
      delay, or defraud any creditor and (b) Borrowers together have received
      reasonably equivalent value in exchange for their collective obligations under
      the Loan Documents.  Giving effect to the transactions contemplated by
      the Loan Documents, the fair saleable value of Borrower’s assets exceeds and
      will, immediately following the execution and delivery of the Loan Documents,
      be
      greater than Borrower’s probable liabilities, including the maximum amount of
      its contingent liabilities or its debts as such debts become absolute and
      mature.  Borrower’s assets do not and, immediately following the
      execution and delivery of the Loan Documents will not, constitute unreasonably
      small capital to carry out its business as conducted or as proposed to be
      conducted.  Borrower does not intend to, and does not believe that it
      will, incur debts and liabilities (including, without limitation, contingent
      liabilities and other commitments) beyond its ability to pay such debts as
      they
      mature (taking into account the timing and amounts to be payable on or in
      respect of obligations of Borrower).

    


    3.28  Representations
      and Warranties.  Borrower agrees that its representations
      and warranties and covenants contained herein are true and correct as of the
      date hereof and shall survive the making of the Loan and the assignment and
      delivery of the Loan to any participant of the Loan.

    


    3.29  Use
      of Loan Proceeds.  The Loan is primarily for commercial
      or business purposes and are not primarily for personal, family or household
      purposes.

    


    3.30  No
      Change in Facts or Circumstances.  All information in any
      application for the Loan submitted to Lender (the “Loan Application”) and in all
      financial statements, rent rolls, reports, certificates and other documents
      submitted in connection with the Loan Application are complete and accurate
      in
      all material respects.  There has been no material adverse change in
      any fact or circumstance that would make any such information incomplete or
      inaccurate.

    


    3.31  Fraud
      and Abuse.

    


    (a)           Anti-Kickback
      Law.  After consultation with counsel concerning the federal
      anti-kickback law (42 U.S.C.A. SEC. 1320a-7b(b)), neither Borrower nor its
      agent
      have offered or given any remuneration or thing of value to any person to
      encourage referral to the facility nor has Borrower or its agent solicited
      or
      received any remuneration or thing of value in exchange for Borrower’s agreement
      to make referrals or to purchase goods or services for the
      Facility.

    


    (b)           Relationships.  No
      physician or other healthcare practitioner has an ownership interest in, or
      financial relationship with, Borrower, Manager or the Facility.


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    (c)           Required
      Adjustments.  All cost report periods for all Facility payors have
      been closed and settled, and all required adjustments have been fully paid
      and/or implemented, if applicable.

    


    3.32  No
      Illegal Activity as Source of Funds.  No portion of the
      Mortgaged Property has been or will be purchased, improved, equipped or
      furnished with proceeds of any illegal activity.

    


    3.33  Compliance
      with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
      Laws.   Borrower, and to the best of Borrower's
      knowledge, after having made diligent inquiry, (a) each Person owning an
      interest of 20% or more in Borrower and in the Single Purpose Entity that is
      the
      managing member or general partner of Borrower, (b) Guarantor,
 and (c) Manager: (i) is not currently identified on OFAC
      List, and (ii) is not a Person with whom a citizen of the United States is
      prohibited to engage in transactions by any trade embargo, economic sanction,
      or
      other prohibition of United States law, regulation, or Executive Order of the
      President of the United States.  Borrower has implemented procedures,
      and will consistently apply those procedures throughout the term of the Loan,
      to
      ensure the foregoing representations and warranties remain true and correct
      during the term of the Loan.

    


    ARTICLE
      IV

    AFFIRMATIVE
      COVENANTS OF BORROWER

    


    Each
      Borrower agrees with and covenants unto Lender that until the Loan Obligations
      have been paid in full, Borrower shall, or shall cause the applicable Licensee
      to, with respect to such Borrower’s Facility:

    


    4.1  Payment
      of Loan/Performance of Loan Obligations.  Duly and
      punctually pay or cause to be paid the principal and interest of the Note in
      accordance with its terms and duly and punctually pay and perform or cause
      to be
      paid or performed all Loan Obligations hereunder and under the other Loan
      Documents.

    


    4.2  Maintenance
      of Existence.  Maintain Borrower’s existence as a
      Delaware limited liability company or Delaware limited partnership, as
      applicable, and, in each jurisdiction in which the character of the property
      owned by it or in which the transaction of its business makes qualification
      necessary, maintain good standing, and qualification to do
      business.

    


    4.3  Maintenance
      of Single Purpose Status.  Maintain its existence as a
      Single Purpose Entity.

    


    4.4  Accrual
      and Payment of Taxes.  During each fiscal year, make
      accurate provision for the payment in full of all current tax liabilities of
      all
      kinds including, without limitation, federal and state income taxes, franchise
      taxes, payroll taxes, provider taxes (to the extent necessary to participate
      in
      and receive maximum funding pursuant to Reimbursement Contracts), Taxes (as
      defined in the Mortgage), all required withholding of income taxes of employees,
      all required old age and unemployment contributions, and all required payments
      to employee benefit plans, and pay the same when they become
      due.


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    4.5  Insurance.  Maintain,
      at its expense, the following insurance coverages and policies with respect
      to
      the Mortgaged Property and the Facility, which coverages and policies must
      be
      acceptable to Lender’s insurance consultant in its sole discretion:

    


    (a)  Comprehensive
      “all risk” or “special” cause of loss insurance, including coverage for
      windstorms and hail, in an amount equal to 100% of the full replacement cost
      of
      the Facility, which replacement cost shall be determined by the “Insurable
      Value” or “Cost Approach to Value” reflected in the most recent Lender approved
      appraisal for the Facility, without deduction for depreciation.  Such
      insurance shall also include (i) agreed insurance amount endorsement waiving
      all
      co-insurance provisions, and (ii) an “Ordinance or Law Coverage” endorsement if
      the Facility or the use thereof shall constitute a legal non-conforming
      structure or use.

    


    (b)  Commercial
      general liability insurance against claims for sexual harassment abuse of
      residents and/or patients, personal injury, bodily injury, death or property
      damage, in or about the Facility to be on a so-called “occurrence” basis for at
      least $1,000,000.00 per occurrence and $3,000,000.00 in the aggregate with
      a
      $10,000,000.00 umbrella coverage.

    


    (c)  Professional
      liability insurance against claims for personal injury, bodily injury or death,
      in or about the Facility to be on a so-called “occurrence” basis for at least
      $1,000,000.00 per occurrence and $5,000,000.00 in the aggregate.

    


    (d)  Business
      interruption income insurance for the Facility in an amount equal to 100% of
      the
      net income plus carrying costs and extraordinary expenses of the Facility for
      a
      period of eighteen (18) months as projected by Lender, containing a 180-day
      extended period of indemnity endorsement.

    


    (e)  Flood
      Hazard insurance if any portion of the Improvements is located in a “flood zone
      area,” as identified in the Federal Register by the Federal Emergency Management
      Agency as a 100-year flood zone or “special flood hazard area” and in which
      flood insurance is available.  In lieu thereof, Lender will accept
      proof, satisfactory to it in its sole discretion, that the Improvements are
      not
      within the boundaries of a designated area.

    


    (f)  Workers’
      compensation insurance, if applicable and required by state law, subject to
      applicable state statutory limits, and employer’s liability insurance with a
      limit of $1,000,000.00 per accident and per disease per employee with respect
      to
      the Facility.

    


    (g)  Comprehensive
      boiler and machinery insurance, including property damage coverage and time
      element coverage in an amount equal to 100% of the full replacement cost,
      without deduction for depreciation, of the Facility housing the machinery,
      if
      steam boilers, pipes, turbines, engines or any other pressure vessels are in
      operation with respect to the Facility.  Such insurance coverage shall
      include a “joint loss” clause if such coverage is provided by an insurance
      carrier other than that which provides the comprehensive “all risk” insurance
      described above.

    


    (h)  During
      the period of any construction and/or renovation of capital improvements with
      respect to the Facility or any new construction at the Facility, builder’s risk
      insurance for any improvements under construction and/or renovation, including,
      without limitation, costs of demolition and increased cost of construction
      or
      renovation, in an amount equal the amount of the general contract plus the
      value
      of any existing purchase money financing for improvements and materials stored
      on or off the Property, including “soft cost” coverage.


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    


    (i)  If
      the Facility is located in a seismically active area or an area prone to
      geologic instability and mine subsidence, Lender may require an inspection
      by a
      qualified structural or geological engineer satisfactory to Lender, and at
      Borrower’s expense.  The Facility must be structurally and
      geologically sound and capable of withstanding normal seismic activity or
      geological movement.  Lender reserves the right to require earthquake
      insurance or Maximum Probable Loss insurance on a case by case basis in amounts
      determined by Lender.

    


    (j)  Such
      other insurance coverages as may be deemed necessary at any time during the
      term
      of the Loan and as shall be provided within such time periods as Lender may
      determine, in each case, in its commercially reasonable discretion.

    


    All
      insurance policies shall have a term of not less than one year and shall be
      in
      the form and amount and with deductibles as, from time to time, shall be
      acceptable to Lender in its sole discretion.  All such policies shall
      provide for loss payable solely to Lender and shall contain a standard
“non-contributory mortgagee” endorsement or its equivalent relating, among other
      things, to recovery by Lender notwithstanding the negligent or willful acts
      or
      omissions of Borrower and notwithstanding (i) occupancy or use of the
      Facility for purposes more hazardous than those permitted by the terms of such
      policy, (ii) any foreclosure or other action taken by Lender pursuant to the
      Mortgage upon the occurrence of an Event of Default thereunder, or (iii) any
      change in title or ownership of the Facility.

    


    All
      insurance policies must be written by an admitted carrier licensed in the State
      in which the Facility is located and such insurance carrier must have a
      long-term senior debt rating of at least “A” by Standard and Poor’s Rating
      Service; provided, that if the initial principal balance of the Loan is in
      excess of $25,000,000.00, such insurance carrier must have a long-term senior
      debt rating of at least “AA” by Standard & Poor’s Rating
      Service.

    


    All
      liability insurance policies (including, but not limited to, general liability,
      professional liability and any applicable blanket and/or umbrella policies)
      must
      name “Capmark Finance Inc. and its successors and/or assigns” as additional
      insureds, and all property insurance policies must name “Capmark Finance Inc.
      and its successors and/or assigns” as the named mortgage holder entitled to all
      insurance proceeds.  Lender shall have the right, without Borrower’s
      consent, by notice to the insurance company, to change the additional insured
      and named mortgagee endorsements in connection with any sale of the
      Loan.

    


    All
      insurance policies for the above-required insurance must provide for thirty
      (30)
      days prior written notice of cancellation to Lender.

    


    Policies
      or binders, together with evidence of the above required insurance on ACORD
      Form
      27 or its equivalent, must be submitted to Lender prior to setting the interest
      rate on the Loan.


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


    With
      respect to insurance policies which require payment of premiums annually, not
      less than thirty (30) days prior to the expiration dates of the insurance
      policies obtained pursuant to this Agreement, Borrower shall pay such amount,
      except to the extent Lender is escrowing sums therefor pursuant to the Loan
      Documents.  Not less than thirty (30) days prior to the expiration
      dates of the insurance policies obtained pursuant to this Agreement, originals
      or certified copies of renewals of such policies (or certificates evidencing
      such renewals) bearing notations evidencing the payment of premiums or
      accompanied by other evidence satisfactory to Lender of such payment, which
      premiums shall not be paid by Borrower through or by any financing arrangement,
      shall be delivered by Borrower to Lender at the address set forth in Section
      8.7
      hereof.  Borrower shall not carry separate insurance, concurrent in
      kind or form or contributing in the event of loss, with any insurance required
      under this Section 4.5.  If the limits of any policy required
      hereunder are reduced or eliminated due to a covered loss, Borrower shall pay
      the additional premium, if any, in order to have the original limits of
      insurance reinstated, or Borrower shall purchase new insurance in the same
      type
      and amount that existed immediately prior to the loss.

    


    If
      Borrower fails to maintain and deliver to Lender the original policies or
      certificates of insurance required by this Agreement, Lender may, at its option,
      procure such insurance and Borrower shall pay or, as the case may be, reimburse
      Lender for, all premiums thereon promptly, upon demand by Lender, with interest
      thereon at the Default Rate from the date paid by Lender to the date of
      repayment and such sum shall constitute a part of the Loan
      Obligations.

    


    The
      insurance required by this Agreement may, at the option of Borrower, be effected
      by blanket and/or umbrella policies issued to Borrower or to an Affiliate of
      Borrower covering the Facility and the properties of such Affiliate; provided
      that, in each case, the policies otherwise comply with the provisions of this
      Agreement and allocate to the Facility, from time to time, the coverage
      specified by this Agreement, without possibility of reduction or coinsurance
      by
      reason of, or damage to, any other property (real or personal) named
      therein.  If the insurance required by this Agreement shall be
      effected by any such blanket or umbrella policies, Borrower shall furnish to
      Lender original policies or certified copies thereof, with schedules attached
      thereto showing the amount of the insurance provided under such policies which
      is applicable to the Facility.

    


    Neither
      Lender nor its agents or employees shall be liable for any loss or damage
      insured by the insurance policies required to be maintained under this
      Agreement; it being understood that (a) Borrower shall look solely to its
      insurance company for the recovery of such loss or damage, (b) such
      insurance company shall have no rights of subrogation against Lender, its agents
      or employees, and (c) Borrower shall use its best efforts to procure from
      such insurance company a waiver of subrogation rights against
      Lender.  If, however, such insurance policies do not provide for a
      waiver of subrogation rights against Lender (whether because such a waiver
      is
      unavailable or otherwise), then Borrower hereby agrees, to the extent permitted
      by law and to the extent not prohibited by such insurance policies, to waive
      its
      rights of recovery, if any, against Lender, its agents and employees, whether
      resulting from any damage to the Facility, any liability claim in connection
      with the Facility or otherwise.  If any such insurance policy shall
      prohibit Borrower from waiving such claims, then Borrower must obtain from
      such
      insurance company a waiver of subrogation rights against
      Lender.


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    Borrower
      appoints Lender as Borrower’s attorney-in-fact, which appointment shall be
      deemed irrevocable and coupled with an interest, to cause the issuance of an
      endorsement of any insurance policy to bring Borrower into compliance herewith
      and, as limited above, at Lender’s sole option, to make any claim for, receive
      payment for, and execute and endorse any documents, checks or other instruments
      in payment for loss, theft, or damage covered under any such insurance policy;
      provided, however, that in no event will Lender be liable for failure to collect
      any amounts payable under any insurance policy.

    


    Subject
      to the terms of any forbearance letter issued by Lender in connection with
      the
      Loan, each Borrower appoints Lender as Borrower’s attorney-in-fact to cause the
      issuance of an endorsement of any insurance policy to bring Borrower into
      compliance herewith and, as limited above, at Lender’s sole reasonable option,
      to make any claim for, receive payment for, and execute and endorse any
      documents, checks or other instruments in payment for loss, theft, or damage
      covered under any such insurance policy; provided, however, that in no event
      will Lender be liable for failure to collect any amounts payable under any
      insurance policy.

    


    4.6  Proceeds
      of Insurance or Condemnation.  If, after damage to or
      destruction of or condemnation of the Mortgaged Property (or any part thereof),
      the net Proceeds of insurance or condemnation (after payment of Lender’s
      reasonable costs and expenses in connection with the administration thereof)
      are:

    


    (a)  less
      than Two Hundred Fifty Thousand Dollars ($250,000.00), Lender shall deliver
      such
      proceeds to Borrower to be applied within thirty (30) days thereafter to the
      repair, restoration and replacement by Borrower of the Improvements, Equipment
      and Inventory damaged, destroyed or taken,

    


    or

    


    (b)  Two
      Hundred Fifty Thousand Dollars ($250,000.00) or more and Lender agrees, at
      its
      option, to make such net Proceeds available to Borrower, Lender shall make
      such
      net Proceeds available to Borrower on the following terms:

    


    (i) 
                The aggregate amount
      of all such Proceeds shall not exceed the aggregate amount of all such Loan
      Obligations;

    


    (ii)           At
      the time of such loss or damage and at all times thereafter while Lender is
      holding any portion of such Proceeds, there shall exist no Default or Event
      of
      Default;

    


    (iii)           The
      Improvements, Equipment, and Inventory to which loss or damage has resulted
      shall be capable of being restored to its preexisting condition and utility
      in
      all material respects with a value equal to or greater than that which existed
      prior to such loss or damage and such restoration shall be capable of being
      completed prior to the earlier to occur of (i) the expiration of business
      interruption insurance as determined by an independent inspector or (ii) the
      Maturity Date;

    


    (iv)           Within
      thirty (30) days from the date of such loss or damage Borrower shall have given
      Lender a written notice electing to have the Proceeds applied for such
      purpose;


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    


    (v)           Within
      sixty (60) days following the date of notice under the preceding subparagraph
      (iv) and prior to any Proceeds being disbursed to Borrower, Borrower shall
      have
      provided to Lender all of the following:

    


    (A)          
      complete plans and specifications for restoration, repair and replacement of
      the
      Improvements, Equipment and Inventory damaged to the condition, utility and
      value required by (iii) above,

    


    (B)           if
      loss or damage exceeds Fifty Thousand Dollars ($50,000), fixed-price or
      guaranteed maximum cost bonded construction contracts for completion of the
      repair and restoration work in accordance with such plans and
      specifications,

    


    (C)           builder’s
      risk insurance for the full cost of construction with Lender named under a
      standard mortgagee loss-payable clause

    


    (D)           such
      additional funds as in Lender’s reasonable opinion are necessary to complete
      such repair, restoration and replacement, and

    


    (E)           copies
      of all permits and licenses necessary to complete the work in accordance with
      the plans and specifications;

    


    (vi)           Lender
      may, at Borrower’s expense, retain an independent inspector to review and
      approve plans and specifications and completed construction and to approve
      all
      requests for disbursement, which approvals shall be conditions precedent to
      release of Proceeds as work progresses;

    


    (vii)          No
      portion of such Proceeds shall be made available by Lender for architectural
      reviews or for any other purposes which are not directly attributable to the
      cost of repairing, restoring or replacing the Improvements, Equipment and
      Inventory to which a loss or damage has occurred unless the same are covered
      by
      such insurance;

    


    (viii)         Borrower
      shall diligently pursue such work and shall complete such work prior to the
      earlier to occur of the expiration of business interruption insurance or the
      Maturity Date;

    


    (ix)           Each
      disbursement by Lender of such Proceeds and deposits shall be funded subject
      to
      conditions and in accordance with disbursement procedures which a commercial
      construction lender would typically establish in the exercise of sound banking
      practices and shall be made only upon receipt of disbursement requests on an
      AIA
      G702/703 form (or similar form approved by Lender) signed and certified by
      Borrower and, if required by Lender, its architect and general contractor with
      appropriate invoices and lien waivers as required by Lender; and

    


    (x) 
                Lender shall have a
      first lien on and security interest in all building materials and completed
      repair and restoration work and in all fixtures and equipment acquired with
      such
      Proceeds, and Borrower shall execute and deliver such mortgages, deeds of trust,
      security agreements, financing statements and other instruments as Lender shall
      request to create, evidence, or perfect such lien and security
      interest.


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


    In
      the
      event and to the extent that such Proceeds are not required to be used for
      the
      repair, restoration and replacement of the Improvements, Equipment and Inventory
      to which a loss or damage has occurred, or, if the conditions set forth herein
      for such application are otherwise not satisfied, then Lender shall be entitled
      without notice to or consent from Borrower to apply such Proceeds, or the
      balance thereof, at Lender’s option either (a) to the full or partial payment or
      prepayment of the Loan Obligations (without premium) in the manner aforesaid
      or
      (b) to the repair, restoration and/or replacement of all or any part of such
      Improvements, Equipment and Inventory to which a loss or damage has
      occurred.  Any excess Proceeds after such application by Lender shall
      be paid to Borrower.

    


    4.7  Financial
      and Other Information.  Provide Lender, and cause
      Guarantor and Manager to provide to Lender, at its address set forth in Section
      8.7 and at Capmark Finance Inc., 2801 Highway 280 South, Suite 305, Birmingham,
      AL 35223, the following financial statements and information on a continuing
      basis during the term of the Loan:

    


    (a)  Within
      one hundred twenty (120) days after the end of each fiscal year of Borrower,
      unaudited financial statements prepared in accordance with GAAP by a nationally
      recognized accounting firm or independent certified public accounting firm
      acceptable to the Lender, which statements shall include a balance sheet and
      a
      statement of income and expenses for the year then ended.

    


    (b)  Within
      one hundred twenty (120) days after the end of each fiscal year of Emeritus
      audited financial statements of Emeritus prepared in accordance with GAAP by
      a
      nationally recognized accounting firm or independent certified public accounting
      firm acceptable to the Lender, which statements shall include a balance sheet
      and a statement of income and expenses for the year then ended.  In
      lieu of its obligations hereunder, Emeritus may submit to Lender, upon its
      filing thereof, a copy of its Form 10-K as filed with the United States
      Securities and Exchange Commission.

    


    (c)  Within
      one hundred twenty (120) days after the end of each of the first three (3)
      fiscal quarters, and within ninety (90) days after the end of the fourth fiscal
      quarter of each Facility, unaudited interim financial statements of the
      operations of each Facility, certified as true and correct in all material
      respects by a financial officer of Borrower, prepared in accordance with GAAP,
      which statements shall include a balance sheet, statement of income and expenses
      and occupancy information for the quarter then ended.  Such statements
      of the Facility shall be accompanied by the Summary of Financial Statements
      and
      Census Data attached hereto as Exhibit “D”.

    


    (d)  Within
      sixty (60) days after the end of each of the first three (3) fiscal quarters
      of
      Emeritus, financial statements of Emeritus, including a balance sheet and a
      statement of income and expenses for the quarter then ended, which shall be
      satisfied by providing a copy of Form 8-K as filed by Emeritus with the United
      States Securities and Exchange Commission.

    


    (e)  If
      requested by Lender, within thirty (30) days after the filing deadline, as
      may
      be extended from time to time, copies of all federal, state and local tax
      returns of Borrower and Emeritus, together with all supporting documentation
      and
      required schedules.


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    


    (f)  If
      and to the extent applicable, within twenty (20) days after filing or receipt,
      all Medicaid cost reports and any amendments thereto filed with respect to
      the
      Facility and all responses, audit reports, or other inquiries with respect
      to
      such cost reports.

    


    (g)  If
      and to the extent applicable, within twenty (20) days after receipt, copies
      of
      all licensure and certification survey reports and statements of deficiencies
      (with plans of correction attached thereto).

    


    (h)  If
      and to the extent applicable, within ten (10) days after receipt, a copy of
      the
“Medicaid Rate Calculation Worksheet” (or the equivalent thereof) from the
      applicable agency.

    


    (i)  If
      and to the extent applicable, within ten (10) days of receipt, a statement
      of
      the number of resident days for which the Facility has received the Medicare
      default rate for any applicable period.  For purposes herein, “default
      rate” shall have the meaning ascribed to it in that certain applicable Medicare
      rate notification letter prepared in connection with any review or survey of
      the
      Facility.

    


    (j)  Within
      three (3) days after receipt, any and all notices (regardless of form) from
      any
      and all licensing and/or certifying agencies, including but not limited to,
      that
      the Facility’s license is being downgraded to a substandard category, revoked or
      suspended, or that action is pending or being considered to downgrade to a
      substandard category, revoke or suspend the Facility’s license or
      certification.

    


    (k)  If
      requested by Lender, evidence of payment by Borrower or
      Manager of any applicable provider bed taxes or similar
      taxes.

    


    (l)  If
      requested by Lender, within forty-five (45) days after the end of each June
      and
      December, and more frequently if requested by Lender, an aged accounts
      receivable report for each Facility in sufficient detail to show amounts due
      from each class of resident-mix, if applicable (i.e., private, Medicare,
      Medicaid and V.A.), by the account age classifications of 30 days, 60 days,
      90
      days, 120 days, and over 120 days.

    


    Lender
      reserves the right to require that the annual and/or quarterly financial
      statements of each Borrower and Emeritus be audited and prepared by a nationally
      recognized accounting firm or independent certified public accounting firm
      acceptable to Lender, at their respective sole cost and expense, if (i) an
      Event
      of Default exists, (ii) if required by internal policy or by any investor in
      any
      securities backed in whole or in part by the Loan or any rating agency rating
      such securities, or (iii) if Lender has reasonable grounds to believe that
      the
      unaudited financial statements do not accurately represent the financial
      condition of Borrower or Guarantor, as the case may be.

    


    Lender
      further reserves the right to require such other financial information of
      Borrower, Emeritus, Manager and/or each Facility, at such
      other times (including monthly or more frequently) as it shall deem
      necessary.  All financial statements must be in the form and detail as
      Lender shall from time to time request.


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


    4.8  Compliance
      Certificate.  At the time of furnishing the quarterly
      operating statements required under Section 4.7 herein, furnish to Lender a
      compliance certificate in the form attached hereto as Exhibit “E”
      executed by a financial officer of Borrower.

    


    4.9  Books
      and Records.  Keep and maintain at all times at the
      Facility or Manager’s offices, and upon Lender’s request make available at the
      Facility, complete and accurate books of account and records (including copies
      of supporting bills and invoices) adequate to reflect correctly the results
      of
      the operation of the Facility, and copies of all written contracts, leases
      (if
      any), and other instruments which affect the Mortgaged Property, which books,
      records, contracts, leases (if any) and other instruments shall be subject
      to
      examination and inspection at any reasonable time by Lender (upon reasonable
      advance notice, which for such purposes only may be given orally, except in
      the
      case of an emergency or following an Event of Default, in which case no advance
      notice shall be required); provided, however, that if an Event of Default has
      occurred and is continuing, Borrower shall deliver to Lender upon written demand
      all books, records, contracts, leases (if any) and other instruments relating
      to
      the Facility or its operation and Borrower authorizes Lender to obtain a credit
      report on Borrower at any time.

    


    4.10  Payment
      of Indebtedness.  Duly and punctually pay or cause to be
      paid all other Indebtedness now owing or hereafter incurred by Borrower in
      accordance with the terms of such Indebtedness, except such Indebtedness owing
      to those other than Lender which is being contested in good faith and with
      respect to which any execution against properties of Borrower has been
      effectively stayed and for which reserves and collateral for the payment and
      security thereof have been established in sufficient amounts as determined
      by
      Lender in its sole commercially reasonable discretion.

    


    4.11  Records
      of Accounts.  Maintain all records, including records
      pertaining to the Accounts of Borrower, at the principal place of business
      of
      Borrower as set forth in this Agreement.

    


    4.12  Conduct
      of Business.  Conduct, or cause Manager to conduct, the
      operation of the Facility at all times in a manner consistent with the level
      of
      operation of the Facility as of the date hereof, including without limitation,
      the following:

    


    (a)  to
      maintain the standard of care for the residents of the Facility at all times
      at
      a level necessary to ensure quality care for the residents of the Facility
      in
      accordance with customary and prudent industry standards;

    


    (b)  to
      operate the Facility in a prudent manner and in compliance with applicable
      laws
      and regulations relating thereto and cause all Permits, Reimbursement Contracts
      (if any), and any other agreements necessary for the use and operation of the
      Facility or, if applicable, as may be necessary for participation in the
      Medicaid, Medicare, or other applicable reimbursement programs (if any) to
      remain in effect without reduction in the number of licensed beds authorized
      for
      use in the Medicaid, Medicare, or other applicable reimbursement
      programs;

    


    (c)  to
      maintain sufficient Inventory and Equipment of types and quantities at the
      Facility to enable Borrower to perform operations of the Facility
      adequately;


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    


    (d)  to
      keep all Improvements and Equipment located on or used or useful in connection
      with the Facility 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;

    


    (e)  to
      complete the repairs described on Schedule 4.12 attached
      hereto within 120 days of the date hereof;

    


    (f)  to
      maintain sufficient cash in the operating accounts of the Facility in order
      to
      satisfy the working capital needs of the Facility; and

    


    (g)  to
      keep all required Permits current and in full force and effect.

    


    4.13  Periodic
      Surveys.  Furnish or cause Manager to furnish to Lender,
      within twenty (20) days of receipt, a copy of any Medicare, Medicaid, or other
      licensing agency survey or report and any statement of deficiencies and/or
      any
      other report indicating that any action is pending or being considered to
      downgrade the Facility to a substandard category, and within the time period
      required by the particular agency for furnishing a plan of correction also
      furnish or cause to be furnished to Lender a copy of the plan of correction
      generated from such survey or report for the Facility, and correct or cause
      to
      be corrected any deficiency, the curing of which is a condition of continued
      licensure or for full participation in Medicaid, Medicare or other reimbursement
      program pursuant to any Reimbursement Contract for existing residents or for
      new
      residents to be admitted with Medicaid or Medicare coverage, by the date
      required for cure by such agency (plus extensions granted by such
      agency).

    


    4.14  Capital
      Expenditures.  Maintain, and/or cause Manager to
      maintain, the Facility in good condition and make minimum capital expenditures
      for the Facility in each fiscal year, in an amount equal to
      $400 per unit (or the appropriate prorated amount for any
      partial fiscal year), (which capital expenditures may include ordinary repairs
      and routine maintenance), commencing the first year of the Loan term and
      continuing throughout the Loan term, and, within forty-five (45) days after
      the
      end of each fiscal year, provide evidence thereof satisfactory to
      Lender.  In the event that Borrower shall fail to meet such
      requirement or to provide such evidence, Borrower shall, upon Lender’s written
      request, immediately establish and maintain a capital expenditures reserve
      fund
      with Lender equal to the difference between the required amount per unit and
      the
      amount per unit actually spent by Borrower.  Borrower grants to Lender
      a lien on and a right of setoff against all moneys in the capital expenditures
      reserve fund, and Borrower shall not permit any other Lien to exist upon such
      fund.  Moneys on deposit in such capital expenditures reserve fund
      will be disbursed to Borrower monthly upon Lender’s receipt of satisfactory
      evidence that Borrower has caused to be made the required capital
      expenditures.  Upon Borrower’s or Manager’s failure to adequately
      maintain the Facility in good condition, Lender may, but shall not be obligated
      to, make such capital expenditures and may apply the moneys in the capital
      expenditures reserve fund for such purpose.  To the extent there are
      insufficient moneys in such capital expenditures reserve fund for such purposes,
      all funds advanced by Lender to make such capital expenditures shall constitute
      a portion of the Loan Obligations, shall be secured by the Mortgage and shall
      accrue interest at the Default Rate until paid.  Upon the occurrence
      of an Event of Default, Lender may apply any moneys in the capital expenditures
      reserve fund to the Loan Obligations, in such order and manner as Lender may
      elect.  For any partial fiscal year during which the Loan is
      outstanding, the required expenditure amount shall be prorated by multiplying
      the required amount per unit amount by a fraction, the numerator of which is
      the
      number of days during such year for which all or part of the Loan is outstanding
      and the denominator of which is the number of days in such
      year.  During the term of the Loan, Lender may, from time to time,
      engage a professional building inspector to conduct an inspection of the
      Facility.  If the inspector’s report indicates that repairs or
      replacements are necessary over and above the $400 per unit requirement in
      this
      Section 4.14, then Lender shall require a non-interest bearing repair escrow
      fund to ensure completion of such necessary repairs or
      replacements.  The amount of any such repair escrow fund shall be one
      hundred twenty-five percent (125%) of the estimated cost of repairs as
      determined by such inspector and Lender.  Lender also shall require an
      agreement satisfactory to Lender, in its commercially reasonable discretion,
      which will provide for completion of the repairs and the disbursement of the
      escrow funds.  All commercially reasonable fees and costs associated
      with the inspection, report and subsequent inspections (if required) shall
      be
      paid by Borrower.


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    4.15  Management
      Agreement.  Maintain the Management Agreement in full
      force and effect and timely perform all of Borrower’s obligations thereunder and
      enforce performance of all obligations of Manager thereunder and not permit
      the
      termination, amendment or assignment of the Management Agreement unless the
      prior written consent of Lender is first obtained, which consent may be in
      the
      sole and absolute discretion of Lender.  Borrower will enter into and
      cause Manager to enter into the Subordination Agreement.  Borrower
      will not enter into any other management agreement without Lender’s prior
      written consent, which consent may be in the sole and absolute discretion of
      Lender.  Upon the consummation of the merger of Guarantor and
      Summerville Senior Living, cause Summerville at Lakeland Hills Associates LP,
      a
      Delaware limited partnership, Summerville at Venice LLC, a Delaware limited
      liability company, and Summerville at New Port Richey LLC, a Delaware limited
      liability company, to execute and deliver to Lender a Lessee Security Agreement,
      a Master Lease, a Subordination, Non-Disturbance and Attornment Agreement and
      such other documents as are necessary to be consistent with the Loan Documents
      for the other Facilities.

    


    4.16  Updated
      Appraisals.  For so long as the Loan remains outstanding,
      if any Event of Default shall occur hereunder, or if, in Lender’s judgment, a
      material depreciation in the value of the Land and/or the Improvements shall
      have occurred, then in any such event, Lender, may cause the Land and
      Improvements to be appraised by an appraiser selected by Lender, and in
      accordance with Lender’s appraisal guidelines and procedures then in effect, and
      Borrower agrees to cooperate in all respects with such appraisals and furnish
      to
      the appraisers all requested information regarding the Land and Improvements
      and
      the Facility.  Borrower agrees to pay all reasonable costs incurred by
      Lender in connection with such appraisal which costs shall be secured by the
      Mortgage and shall accrue interest at the Default Rate until paid.

    


    4.17  Comply
      with Covenants and Laws.  Comply, in all material
      respects, with all applicable covenants and restrictions of record and all
      laws,
      ordinances, rules and regulations and keep the Facility and the Land and
      Improvements in compliance with all applicable laws, ordinances, rules and
      regulations, including, without limitation, the Americans with Disabilities
      Act
      and regulations promulgated thereunder, and laws, ordinances, rules and
      regulations relating to zoning, health, building codes, setback requirements,
      Medicaid and Medicare laws and keep the Permits for the Facility in full force
      and effect.  Promptly after the date of this Agreement, initiate and
      thereafter diligently pursue the re-zoning action required to cause the Facility
      known as Park Place, in New Port Richey, Florida, to be in compliance with
      local
      zoning codes and ordinances within 180 days from the date
      hereof.


    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


    4.18  Taxes
      and Other Charges.  Subject to Borrower’s right to
      contest the same as set forth in Section 9(c) of the Mortgage, pay all taxes,
      assessments, charges, claims for labor, supplies, rent, and other obligations
      which, if unpaid, might give rise to a Lien against real or personal property
      of
      the Borrower, except Liens to the extent permitted by this
      Agreement.

    


    4.19  Commitment
      Letter.  Provide all items and pay all amounts required
      by the Commitment Letter. If any term of the Commitment Letter shall conflict
      with the terms of this Agreement, this Agreement shall govern and
      control.  As to any matter contained in the Commitment Letter, and as
      to which no mention is made in this Agreement or the other Loan Documents,
      the
      Commitment Letter shall continue to be in effect and shall survive the execution
      of this Agreement and all other Loan Documents.

    


    4.20  Certificate.  Upon
      Lender’s written request, furnish Lender with a certificate stating that
      Borrower has complied with and is in compliance with all terms, covenants and
      conditions of the Loan Documents to which Borrower is a party and that there
      exists no Default or Event of Default or, if such is not the case, that one
      or
      more specified events have occurred, and that the representations and warranties
      contained herein are true and correct with the same effect as though made on
      the
      date of such certificate.

    


    4.21  Notice
      of Fees or Penalties.  Immediately notify Lender, upon
      Borrower’s knowledge thereof, of the assessment by any state or, if applicable,
      any Medicare, Medicaid, health or licensing agency of any fines or penalties
      against Borrower, Manager, or the Facility.

    


    4.22  Loan
      Closing Certification.  Immediately notify Lender in
      writing, in the event any representation or warranty contained in that certain
      Loan Closing Certification of even date herewith, executed by Borrower for
      the
      benefit of Lender, becomes untrue or there shall have been any material adverse
      change in any such representation or warranty.

    


    4.23  Compliance
      with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
      Laws. Borrower shall comply with all Requirements
      of Law relating to money laundering, anti-terrorism, trade embargos and economic
      sanctions, now or hereafter in effect.  Upon Lender's request from
      time to time during the term of the Loan, Borrower shall certify in writing
      to
      Lender that Borrower's representations, warranties and obligations under
      Sections 3.32 and 3.33 and this Section 4.23 remain true and correct and have
      not been breached.  Borrower shall immediately notify Lender in
      writing if any of such representations, warranties or covenants are no longer
      true or have been breached or if Borrower has a reasonable basis to believe
      that
      they may no longer be true or have been breached.  In connection with
      such an event, Borrower shall comply with all Requirements of Law and directives
      of Governmental Authorities and, at Lender's request, provide to Lender copies
      of all notices, reports and other communications exchanged with, or received
      from, Governmental Authorities relating to such an event.  Borrower
      shall also reimburse Lender any expense incurred by Lender in evaluating the
      effect of such an event on the Loan and Lender's interest in the collateral
      for
      the Loan, in obtaining any necessary license from Governmental Authorities
      as
      may be necessary for Lender to enforce its rights under the Loan Documents,
      and
      in complying with all Requirements of Law applicable to Lender as the result
      of
      the existence of such an event and for any penalties or fines imposed upon
      Lender as a result thereof.


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


    4.24  Renovations.  Obtain
      the prior written consent from Lender for any renovations or expansions of
      a
      Facility costing in excess of $750,000.00.

    


    ARTICLE
      V

    NEGATIVE
      COVENANTS OF BORROWER

    


    Until
      the
      Loan Obligations have been paid in full, no Borrower shall:

    


    5.1  Assignment
      of Licenses and Permits.  Assign or transfer any of its
      interest in any Permits or Reimbursement Contracts (including rights to payment
      thereunder) pertaining to the Facility, or assign, transfer, or remove or permit
      any other Person to assign, transfer, or remove any records pertaining to the
      Facility including, without limitation, resident records, medical and clinical
      records (except for removal of such resident records as
      directed by the residents owning such records and except as may be required
      by
      law), without Lender’s prior written consent, which consent may be granted or
      refused in Lender’s sole discretion.

    


    5.2  No
      Liens; Exceptions.  Create, incur, assume or suffer to
      exist any Lien upon or with respect to the Facility, any of its properties,
      rights, income or other assets relating thereto, including, without limitation,
      the Mortgaged Property whether now owned or hereafter acquired, other than
      the
      following permitted Liens (“Permitted Encumbrances”):

    


    (a)  Liens
      at any time existing in favor of Lender;

    


    (b)  Inchoate
      Liens arising by operation of law for the purchase of labor, services,
      materials, equipment or supplies, provided payment shall not be delinquent
      and,
      if such Lien is a lien upon any of the Land or Improvements, such Lien must
      be
      fully disclosed to Lender and bonded off and removed from the Land and
      Improvements within thirty (30) days of its creation, in a manner satisfactory
      to Lender in its reasonable discretion;

    


    (c)  Liens
      incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance
      or
      benefits, or to secure performance of tenders, statutory obligations, leases
      and
      contracts (other than for money borrowed or for credit received with respect
      to
      property acquired) entered into in the ordinary course of business as presently
      conducted or to secure obligations for surety or appeal bonds; and

    


    (d)  Liens
      for current year’s taxes, assessments or governmental charges or levies provided
      payment thereof shall not be delinquent.

    


    5.3  Merger,
      Consolidation, etc.  Except as otherwise provided in the
      Mortgage, consummate any merger, consolidation or similar transaction, or sell,
      assign, lease or otherwise dispose of (whether in one transaction or in a series
      of transactions), all or substantially all of its assets (whether now or
      hereafter acquired), without the prior written consent of Lender, which consent
      may be granted or refused in Lender’s sole discretion.


    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


    5.4  Maintain
      Single Purpose Entity Status.

    


    (a)  Engage
      in any business or activity other than the ownership, operation and maintenance
      of the Mortgaged Property, and activities incidental thereto;

    


    (b)  Acquire
      or own any material assets other than (i) the Mortgaged Property, and (ii)
      such
      incidental machinery, equipment, fixtures and other personal property as may
      be
      necessary for the operation of the Mortgaged Property;

    


    (c)  Merge
      into or consolidate with any Person or dissolve, terminate or liquidate in
      whole
      or in part, transfer or otherwise dispose of all or substantially all of its
      assets (except as permitted in the Loan Documents) or change its legal
      structure, without in each case Lender’s consent;

    


    (d)  Without
      the prior written consent of Lender, amend, modify, terminate or fail to comply
      with the provisions of its Limited Liability Company or Partnership Agreement
      or
      Articles of Organization, as same may be further amended or supplemented, if
      such amendment, modification, termination or failure to comply would adversely
      affect its status as a Single Purpose Entity or its ability to perform its
      obligations hereunder, under the Note or any other document evidencing or
      securing the Loan;

    


    (e)  Own
      any subsidiary or make any investment in, any Person without the consent of
      Lender;

    


    (f)  Commingle
      its funds or assets with assets of, or pledge its assets with or for, any of
      its
      general partners, members, shareholders, Affiliates, principals or any other
      Person, except as permitted under the Loan Documents or the Management
      Agreement;

    


    (g)  Incur
      any debt, secured or unsecured, direct or contingent (including guaranteeing
      any
      obligation), other than the Loan and trade payables incurred in the ordinary
      course of business, payable within 90 days of the date incurred, based on
      historical amounts;

    


    (h)  Fail
      to maintain its records, books of account and bank accounts separate and apart
      from those of its general partners, members, shareholders, principals and
      Affiliates, the Affiliates of any of its general partners, members,
      shareholders, principals, and any other Person;

    


    (i)  Except
      for the Master Leases to the Licensees, enter into any contract or agreement
      with any of its general partners, members, shareholders, principals or
      Affiliates, or the Affiliates of any of its general partners, members,
      shareholders, principals except upon terms and conditions that are intrinsically
      fair and substantially similar to those that would be available on an
      arms-length basis with third parties;

    


    (j)  Seek
      its dissolution or winding up in whole, or in part;

    


    (k)  Maintain
      its assets in such a manner that it will be costly or difficult to segregate,
      ascertain or identify its individual assets from those of any of its general
      partners, members, shareholders, principals and Affiliates, the Affiliates
      of
      any of its general partners, members, shareholders, principals or any other
      Person;


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    


    (l)  Hold
      itself out to be responsible for the debts of another Person or pay another
      Person’s liabilities out of its own funds, except as expressly provided in the
      Loan Documents;

    


    (m)  Make
      any loans or advances to any third party, including any of its general partners,
      members, shareholders, principals or Affiliates, or the Affiliates of any of
      its
      general partners, members, shareholders, principals;

    


    (n)  Fail
      to have prepared and filed its own tax returns, to the extent required by
      law;

    


    (o)  Fail
      either to hold itself out to the public as a legal Person separate and distinct
      from any other Person or to conduct its business solely in its own name, in
      order not (i) to mislead others as to the identity with which such other party
      is transacting business, or (ii) to suggest that it is responsible for the
      debts
      of any third party (including any of its members or Affiliates, or any general
      partner, member, principal or Affiliate thereof);

    


    (p)  Fail
      to maintain adequate capital for the normal obligations reasonably foreseeable
      in a business of its size and character and in light of its contemplated
      business operations; or

    


    (q)  Cause
      or permit its board of directors to take any action which, under the terms
      of
      any certificate of incorporation, bylaws or any voting trust agreement with
      respect to any common stock, requires a vote of the board of directors unless
      at
      the time of such action there shall be at least one member of the limited
      liability company Borrower, or limited liability company general partner of
      a
      Borrower, who is an independent director.

    


    5.5  Change
      of Business.  Make any material change in the nature of
      its business as it is being conducted as of the date hereof.

    


    5.6  Changes
      in Accounting.  Change its methods of accounting, unless
      such change is permitted by GAAP, and provided such change does not have the
      effect of curing or preventing what would otherwise be an Event of Default
      or
      Default had such change not taken place.

    


    5.7  ERISA.

    


    (a)  Agree
      to, enter into or consummate any transaction which would render it unable to
      confirm that (i) it is not an “employee benefit plan” as defined in Section
      3(32) of ERISA, which is subject to Title I of ERISA, or a “governmental plan”
within the meaning of Section 3(32) of ERISA; (ii) it is not subject to state
      statutes regulating investments and fiduciary obligations with respect to
      governmental plans; and (iii) less than twenty-five percent (25%) of each of
      its
      outstanding class of equity interests are held by “benefit plan investors”
within the meaning of 29 C.F.R. § 2510.3-101(f)(2);

    


    (b)  Engage
      in a non-exempt prohibited transaction described in Section 406 of ERISA or
      Section 4975 of the Code, as such sections relate to Borrower, or in any
      transaction that would cause any obligation or action taken or to be taken
      hereunder (or the exercise by Lender of any of its rights under the Loan
      Documents) to be a non-exempt prohibited transaction under
      ERISA.


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


    5.8  Transactions
      with Affiliates.  Except for the Master Leases to
      Licensees, enter into any transaction with a Person which is an Affiliate of
      Borrower other than in the ordinary course of its business and on fair and
      reasonable terms no less favorable to Borrower, than those they could obtain
      in
      a comparable arms-length transaction with a Person not an
      Affiliate.

    


    5.9  Transfer
      of Ownership Interests.  Except as
      otherwise allowable under the Mortgage, permit a change in the percentage
      ownership interest of the Persons owning the Borrower, unless the written
      consent of Lender is first obtained, which consent may be granted or refused
      in
      Lender’s sole discretion.

    


    5.10  Change
      of Use.  Alter or change the use of the Facility or enter
      into any management agreement for the Facility other than the Management
      Agreement or, except for the Master Leases to Licensees, enter into any
      operating lease for the Facility, unless Borrower first notifies Lender and
      provides Lender a copy of the proposed lease agreement or management agreement,
      obtains Lender’s written consent thereto, which consent may be withheld in
      Lender’s sole discretion, and obtains and provides Lender with a subordination
      agreement in form satisfactory to Lender, as determined by Lender in its sole
      discretion, from such manager or lessee subordinating to all rights of
      Lender.

    


    5.11  Place
      of Business.  Change its chief executive office or its
      principal place of business without first giving Lender at least thirty (30)
      days prior written notice thereof and promptly providing Lender such information
      and amendatory financing statements as Lender may request in connection
      therewith.

    


    5.12  Acquisitions.  Directly
      or indirectly, purchase, lease, manage, own, operate, or otherwise acquire
      any
      property or other assets (or any interest therein) which are not used in
      connection with the operation of the Facility.

    


    5.13  Dividends,
      Distributions and Redemptions.  Except as hereinafter
      provided or as otherwise consented to by Lender in writing, declare or pay
      any
      distributions to its shareholders, members or partners, as applicable, or
      purchase, redeem, retire, or otherwise acquire for value, any ownership
      interests in Borrower now or hereafter outstanding, return any capital to its
      shareholders, members or partners, as applicable, or make any distribution
      of
      assets to its shareholders, members, or partners, as applicable.

    


    5.14  Indebtedness.  Incur,
      create, assume or permit to exist any indebtedness or liability on account
      of
      deposits or advances or any indebtedness or liability for borrowed money, or
      any
      other indebtedness or liability evidenced by notes, bonds, debentures or similar
      obligations, except (a) indebtedness evidenced by the Note, and any of the
      other
      Loan Obligations and (b) only if Borrower assumes responsibility for the
      operations of the Facility, indebtedness incurred in the ordinary course of
      business.

    


    ARTICLE
      VI

    ENVIRONMENTAL
      HAZARDS

    


    6.1  Prohibited
      Activities and Conditions.  Except for matters covered by
      a written program of operations and maintenance approved in writing by Lender
      (an “O&M Program”) or matters described in Section 6.2, Borrower shall not
      cause or permit to exist any of the following:


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    (a)  The
      presence, use, generation, release, treatment, processing, storage (including
      storage in above ground and underground storage tanks), handling, or disposal
      of
      any Hazardous Materials in, on or under the Land or any Improvements, in
      violation of applicable Hazardous Materials Laws;

    


    (b)  The
      transportation of any Hazardous Materials to, from, or across the Land in
      violation of Hazardous Materials Laws;

    


    (c)  Any
      occurrence or condition on the Land or in the Improvements, which occurrence
      or
      condition is or may be in violation of Hazardous Materials Laws;

    


    (d)  Any
      violation of or noncompliance with the terms of any Environmental Permit with
      respect to the Land or the Improvements; or

    


    (e)  Any
      Lien (whether or not such Lien has priority over the Lien created by the
      Mortgage) upon the Land or any Improvements imposed pursuant to any Hazardous
      Materials Laws.

    


    The
      matters described in clauses (a) through (e) above are referred to collectively
      in this Article VI as “Prohibited Activities and Conditions” and individually as
      a “Prohibited Activity and Condition.”

    


    6.2  Exclusions.  Notwithstanding
      any other provision of Article VI to the contrary, “Prohibited Activities and
      Conditions” shall not include the safe and lawful use and storage of quantities
      of (a) pre-packaged supplies, medical waste, Hazardous Materials, cleaning
      materials and petroleum products customarily used in the operation and
      maintenance of comparable facilities, (b) cleaning materials, personal grooming
      items and other items sold in pre-packaged containers for consumer use and
      used
      by occupants of the Facility, and (c) petroleum products used in the operation
      and maintenance of motor vehicles from time to time located on the Land’s
      parking areas, so long as all of the foregoing are used, stored, handled,
      transported and disposed of in compliance with Hazardous Materials
      Laws.

    


    6.3  Preventive
      Action.  Borrower shall take all appropriate and
      reasonable steps (including the inclusion of appropriate provisions in any
      Leases approved by Lender which are executed after the date of this Agreement)
      to prevent its employees, agents, contractors, tenants and occupants of the
      Facility from causing or permitting any Prohibited Activities and
      Conditions.

    


    6.4  O
      & M Program Compliance.  If an O&M Program has
      been established with respect to Hazardous Materials, Borrower shall comply
      in a
      timely manner with, and cause all employees, agents and contractors of Borrower
      and any other Persons (excluding trespassers) present on the Land to comply
      with
      the O&M Program.  All costs of performance of Borrower’s
      obligations under any O&M Program shall be paid by Borrower, and Lender’s
      out-of-pocket costs incurred in connection with the monitoring and review of
      the
      O&M Program and Borrower’s performance shall be paid by Borrower upon demand
      by Lender.  Any such out-of-pocket costs of Lender which Borrower
      fails to pay promptly shall become an additional part of the Loan
      Obligations.


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    6.5  Borrower’s
      Environmental Representations and Warranties.  Borrower
      represents and warrants to Lender that, except as previously disclosed by
      Borrower to Lender in writing:

    


    (a)  Borrower
      has not at any time caused or permitted any Prohibited Activities and
      Conditions.

    


    (b)  No
      Prohibited Activities and Conditions exist or, to Borrower’s knowledge, have
      existed.

    


    (c)  The
      Land and the Improvements do not now contain any underground storage tanks,
      and,
      to the best of Borrower’s knowledge, the Land and the Improvements have not
      contained any underground storage tanks in the past.  If there is an
      underground storage tank located on the Land or the Improvements which has
      been
      previously disclosed by Borrower to Lender in writing, that tank complies with
      all requirements of Hazardous Materials Laws.

    


    (d)  Borrower
      has complied with all Hazardous Materials Laws, including all requirements
      for
      notification regarding releases of Hazardous Materials, relating to the
      Land.  Without limiting the generality of the foregoing, Borrower has
      obtained all Environmental Permits required for the operation of the Land and
      the Improvements in accordance with Hazardous Materials Laws now in effect
      and
      all such Environmental Permits are in full force and effect.  During
      Borrower’s ownership of the Land, and, to the best of Borrower’s knowledge, no
      event has occurred with respect to the Land and/or Improvements that constitutes
      or, with the passing of time or the giving of notice, would constitute,
      noncompliance with the terms of any Environmental Permit.

    


    (e)  There
      are no actions, suits, claims or proceedings pending or, to the best of
      Borrower’s knowledge, threatened that involve the Land and/or the Improvements
      and allege, arise out of, or relate to any Prohibited Activity and
      Condition.

    


    (f)  Borrower
      has not received any written complaint, order, notice of violation or other
      communication from any Governmental Authority with regard to air emissions,
      water discharges, noise emissions or Hazardous Materials, or any other
      environmental, health or safety matters affecting the Land or the
      Improvements.  The representations and warranties in this Article VI
      shall be continuing representations and warranties that shall be deemed to
      be
      made by Borrower throughout the term of the Loan evidenced by the Note and
      until
      all of the Loan Obligations have been paid in full.

    


    6.6  Notice
      of Certain Events.  Borrower shall promptly notify Lender
      in writing of any and all of the following that may occur:

    


    (a)  Borrower’s
      discovery of any Prohibited Activity and Condition.

    


    (b)  Borrower’s
      receipt of or knowledge of any complaint, order, notice of violation or other
      communication from any Governmental Authority or other Person with regard to
      present or future alleged Prohibited Activities and Conditions or any other
      environmental, health or safety matters affecting the Land or the
      Improvements.


    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    (c)  Any
      representation or warranty in this Article VI which becomes untrue at any time
      after the date of this Agreement.

    


    Any
      such
      notice given by Borrower shall not relieve Borrower of, or result in a waiver
      of, any obligation under this Agreement, the Note, or any of the other Loan
      Documents.

    


    6.7  Costs
      of Inspection.  Borrower shall pay promptly the
      reasonable costs of any environmental inspections, tests or audits
      (“Environmental Inspections”) required by Lender in connection with any
      foreclosure or deed in lieu of foreclosure or, if required by Lender, as a
      condition of Lender’s consent to any “Transfer” (as defined in the Mortgage), or
      required by Lender following a commercially reasonable determination by Lender
      that Prohibited Activities and Conditions may exist.  Any such costs
      incurred by Lender (including the reasonable fees and out-of-pocket costs of
      attorneys and technical consultants whether incurred in connection with any
      judicial or administrative process or otherwise) which Borrower fails to pay
      promptly shall become an additional part of the Loan Obligations.  The
      results of all Environmental Inspections made by Lender shall at all times
      remain the property of Lender, and Lender shall have no obligation to disclose
      or otherwise make available to Borrower or any other party such results or
      any
      other information obtained by Lender in connection with its Environmental
      Inspections.  Lender hereby reserves the right, and Borrower hereby
      expressly authorizes Lender, to make available to any prospective bidder at
      a
      foreclosure sale of the Mortgaged Property, the results of any Environmental
      Inspections made by Lender with respect to the Mortgaged
      Property.  Borrower consents to Lender notifying said party of the
      results of any of Lender’s Environmental Inspections.  Borrower
      acknowledges that Lender cannot control or otherwise assure the truthfulness
      or
      accuracy of the results of any of its Environmental Inspections and that the
      release of such results to prospective bidders at a foreclosure sale of the
      Mortgaged Property may have a material and adverse effect upon the amount which
      a party may bid at such sale.  Borrower agrees that Lender shall have
      no liability whatsoever as a result of delivering the results of any of its
      Environmental Inspections to said third party, and Borrower hereby releases
      and
      forever discharges Lender from any and all claims, damages, or causes of action,
      arising out of, connected with or incidental to the results of, such delivery
      of
      any of Lender’s Environmental Inspections.

    


    6.8  Remedial
      Work.  If any investigation, site monitoring,
      containment, clean-up, restoration or other remedial work (“Remedial Work”) is
      required to bring Borrower into compliance with any Hazardous Materials Law
      or
      order of any Governmental Authority that has or acquires jurisdiction over
      the
      Land, the Improvements or the use, operation or improvement of the Land under
      any Hazardous Materials Law, Borrower shall, by the earlier of (a) the
      applicable deadline required by Hazardous Materials Law or (b) thirty (30)
      days
      after notice from Lender demanding such action, begin performing the Remedial
      Work, and thereafter diligently prosecute it to completion, and shall in any
      event complete such work by the time required by applicable Hazardous Materials
      Law.  If Borrower fails to begin on a timely basis or diligently
      prosecute any required Remedial Work, Lender may, at its option, cause the
      Remedial Work to be completed, in which case Borrower shall reimburse Lender
      on
      demand for the cost of doing so.  Any reimbursement due from Borrower
      to Lender shall become part of the Loan Obligations.


    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    6.9  Cooperation
      with Governmental Authorities.  Borrower shall cooperate
      with any inquiry by any Governmental Authority and shall comply with any
      governmental or judicial order which arises from any alleged Prohibited Activity
      and Condition.  Notwithstanding the foregoing, Borrower shall be
      entitled to challenge in good faith the validity, scope or extent of any such
      governmental or judicial order.

    


    6.10  Indemnity.

    


    (a)  Borrower
      shall hold harmless, defend and indemnify (i) Lender, (ii) any prior owner
      or
      holder of the Note, (iii) any Person who is or will have been involved in the
      servicing of the Note, (iv) the officers, directors, partners, agents,
      shareholders, employees and trustees of any of the foregoing, and (v) the heirs,
      legal representatives, successors and assigns of each of the foregoing
      (together, the “Indemnitees”) from and against all proceedings, claims, damages,
      losses, expenses, penalties and costs (whether initiated or sought by any
      Governmental Authority or private parties), including fees and out of pocket
      expenses of attorneys and expert witnesses, investigatory fees, and remediation
      costs, whether incurred in connection with any judicial or administrative
      process or otherwise, arising directly or indirectly from any of the
      following:

    


    (i) 
                 Any breach of
      any representation or warranty of Borrower in this Article VI;

    


    (ii)
                 Any failure by
      Borrower to perform any of its obligations under this Article VI;

    


    (iii)           The
      existence or alleged existence of any Prohibited Activity and
      Condition;

    


    (iv)           The
      presence or alleged presence of Hazardous Materials in, on, around or under
      the
      Land or the Improvements; or

    


    (v)
                 The actual or
      alleged violation of any Hazardous Materials Law.

    


    (b)  Counsel
      selected by Borrower to defend Indemnitees shall be subject to the reasonable
      approval of those Indemnitees.  Notwithstanding anything contained
      herein, any Indemnitee may elect to defend any claim or legal or administrative
      proceeding at Borrower’s reasonable expense.  Nothing contained herein
      shall prevent an Indemnitee from employing separate counsel in any such action
      at any time and participating in the defense thereof at its own
      expense.

    


    (c)  Borrower
      shall not, without the prior written consent of those Indemnitees who are named
      as parties to a claim or legal or administrative proceeding (a “Claim”) settle
      or compromise the Claim if the settlement (i) results in the entry of any
      judgment that does not include as an unconditional term the delivery by the
      claimant or plaintiff to Lender of a written release of those Indemnitees,
      reasonably satisfactory in form and substance to Lender; or (ii) may materially
      and adversely affect any Indemnitee, as determined by such Indemnitee in its
      sole discretion.


    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    (d)  The
      liability of Borrower to indemnify the Indemnitees shall not be limited or
      impaired by any of the following, or by any failure of Borrower or any guarantor
      to receive notice of or consideration for any of the following:

    


    (i)
    Any
      amendment
      or modification of any Loan Document;

    


    (ii)    Any
      extensions of time for performance required by any of the Loan
      Documents;

    


    (iii)   The
      accuracy or
      inaccuracy of any representations and warranties made by Borrower under this
      Agreement or any other Loan Document;

    


    (iv)   The
      release of
      Borrower or any other Person, by Lender or by operation of law, from performance
      of any obligation under any of the Loan Documents;

    


    (v)    The
      release
      or substitution in whole or in part of any security for the Loan Obligations;
      or

    


    (vi)   Lender’s
      failure to
      properly perfect any lien or security interest given as security for the Loan
      Obligations; or

    


    (vii)  
        Any provision in
      any of the Loan Documents limiting Lender’s recourse to property securing the
      Loan or limiting the personal liability of Borrower or any party for payment
      of
      all or any part of the Loan.

    


    (e)  Borrower
      shall, at its own cost and expense, do all of the following:

    


    (i)    Pay
      or satisfy any
      judgment or decree that may be entered against any Indemnitee or Indemnitees
      in
      any legal or administrative proceeding incident to any matters against which
      Indemnitees are entitled to be indemnified under this Article VI, subject to
      Borrower’s right to lawfully defend and challenge same;

    


    (ii)    Reimburse
      Indemnitees for any reasonable expenses paid or incurred in connection with
      any
      matters against which Indemnitees are entitled to be indemnified under this
      Article VI; and

    


    (iii)   Reimburse
      Indemnitees for any and all reasonable expenses, including fees and costs of
      attorneys and expert witnesses, paid or incurred in connection with the
      enforcement by Indemnitees of their rights under this Article VI, or in
      monitoring and participating in any legal or administrative
      proceeding.

    


    (f)  In
      any circumstances in which the indemnity under this Article VI applies, Lender
      may employ its own legal counsel and consultants to prosecute, defend or
      negotiate any claim or legal or administrative proceeding and Lender, with
      the
      prior written consent of Borrower (which shall not be unreasonably withheld,
      delayed or conditioned) may settle or compromise any action or legal or
      administrative proceeding.  Borrower shall reimburse Lender upon
      demand for all reasonable costs and expenses incurred by Lender, including
      all
      costs of settlements entered into in good faith, and the reasonable fees and
      out
      of pocket expenses of such attorneys and consultants.


    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    


    (g)  The
      provisions of this Article VI shall be in addition to any and all other
      obligations and liabilities that Borrower may have under the applicable law
      or
      under the other Loan Documents, and each Indemnitee shall be entitled to
      indemnification under this Article VI without regard to whether Lender or that
      Indemnitee has exercised any rights against the Land and/or the Improvements
      or
      any other security, pursued any rights against any guarantor, or pursued any
      other rights available under the Loan Documents or applicable law.  If
      Borrower consists of more than one Person or entity, the obligation of those
      Persons or entities to indemnify the Indemnitees under this Article VI shall
      be
      joint and several.  The obligations of Borrower to indemnify the
      Indemnitees under this Article VI shall survive any repayment or discharge
      of
      the Loan Obligations, any foreclosure proceeding, any foreclosure sale, any
      delivery of any deed in lieu of foreclosure, and any release of record of the
      lien of the Mortgage.

    


    ARTICLE
      VII

    EVENTS
      OF DEFAULT AND REMEDIES

    


    7.1  Events
      of Default.  The occurrence of any one or more of the
      following shall constitute an “Event of Default” hereunder:

    


    (a)  The
      failure by Borrower to pay any installment of principal, interest, or other
      payments required under the Note, any Mortgage or any other Loan Document on
      the
      day such payment becomes due after the expiration of any applicable cure
      period;

    


    (b)  Any
      failure by Borrower to provide and maintain in full force and effect the
      insurance coverage required by Section 4.5(a) – (j), inclusive, of this
      Agreement;

    


    (c)  The
      violation by Borrower of any covenant set forth in Article V
      hereof;

    


    (d)  The
      failure by Borrower to deliver or cause to be delivered the financial statements
      and information set forth in Section 4.7 of this Agreement within the times
      required, and such failure is not cured within thirty (30) days following
      Lender’s written notice to Borrower thereof;

    


    (e)  The
      failure by Borrower or Guarantor to establish and maintain the capital
      expenditures reserve fund in accordance with Section 4.14 of this
      Agreement;

    


    (f)  The
      failure of Borrower properly and timely to perform or observe any covenant
      or
      condition set forth in this Agreement (other than those specified in this
      Section 7.1) or any of the other Loan Documents which failure is not cured
      within any applicable cure period as set forth herein or in such other Loan
      Document, or, if no cure period is specified therefor, is not cured within
      thirty (30) days after notice to Borrower of such Default; provided, however,
      that if such Default cannot be cured within such thirty (30) day period, such
      cure period shall be extended for an additional sixty (60) days, as long as
      Borrower is diligently and in good faith prosecuting said cure to
      completion;


    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    


    (g)  The
      filing by Borrower, Guarantor or Manager of a voluntary petition, or the
      adjudication of any of the aforesaid Persons, or the filing by any of the
      aforesaid Persons of any petition or answer seeking or acquiescing in any
      reorganization, arrangement, composition, readjustment, liquidation, dissolution
      or similar relief for itself under any present or future federal, state or
      other
      statute, law or regulation relating to bankruptcy, insolvency or other relief
      for debtors, or if any of the aforesaid Persons should seek or consent to or
      acquiesce in the appointment of any trustee, receiver or liquidator for itself
      or of all or any substantial part of its property or of any or all of the rents,
      revenues, issues, earnings, profits or income thereof, or the mailing of any
      general assignment for the benefit of creditors or the admission in writing
      by
      any of the aforesaid Persons of its inability to pay its debts generally as
      they
      become due;

    


    (h)  The
      entry by a court of competent jurisdiction of an order, judgment, or decree
      approving a petition filed against Borrower, Guarantor or
      Manager which petition seeks any reorganization,
      arrangement, composition, readjustment, liquidation, dissolution or similar
      relief under any present or future federal, state or other statute, law or
      regulation relating to bankruptcy, insolvency, or other relief for debtors,
      which order, judgment or decree remains unvacated and unstayed for an aggregate
      of sixty (60) days (whether or not consecutive) from the date of entry thereof,
      or the appointment of any trustee, receiver or liquidator of any of the
      aforesaid Persons or of all or any substantial part of its properties or of
      any
      or all of the rents, revenues, issues, earnings, profits or income thereof
      which
      appointment shall remain unvacated and unstayed for an aggregate of sixty (60)
      days (whether or not consecutive);

    


    (i)  Unless
      otherwise permitted hereunder or under any other Loan Documents, the sale,
      transfer, lease, assignment, or other disposition, voluntarily or involuntarily,
      of the Mortgaged Property, or any part thereof, except for Permitted
      Encumbrances as described in Section 5.2 above, or any further encumbrance
      of
      the Mortgaged Property (except for Permitted Encumbrances), unless the prior
      written consent of Lender is obtained;

    


    (j)  Any
      certificate, statement, representation, warranty or audit heretofore or
      hereafter furnished by or on behalf of Borrower, Guarantor or Manager or any
      of
      their respective officers, directors or trustees pursuant to or in connection
      with this Agreement (including, without limitation, representations and
      warranties contained herein or in any Loan Documents) or as an inducement to
      Lender to make the Loan to Borrowers, (i) proves to have been false in any
      material respect at the time when the facts therein set forth were stated or
      certified, or (ii) proves to have omitted any substantial contingent or
      unliquidated liability or claim against Borrower, Guarantor or Manager or
      (iii) on the date of execution of this Agreement there shall have been any
      materially adverse change in any of the acts previously disclosed by any such
      certificate, statement, representation, warranty or audit, which change shall
      not have been disclosed to Lender in writing at or prior to the time of such
      execution;

    


    (k)  The
      failure of Borrower to correct or to cause Manager to correct, within the time
      deadlines set by any applicable Medicare, Medicaid or licensing agency, any
      deficiency which would result in the following actions by such agency with
      respect to the Facility;

    


    (i)  a
      termination of any Reimbursement Contract or any Permit; or


    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    


    (ii)  a
      ban on new admissions generally or, if applicable, on admission of patients
      otherwise qualifying for Medicare or Medicaid coverage;

    


    (l)  The
      assessment against Borrower, Manager, or the Facility of any fines or penalties
      by any state or any Medicare, Medicaid, health or licensing agency having
      jurisdiction over such Persons or the Facility in excess of
      $150,000;

    


    (m)  A
      final judgment is rendered by a court of law or equity against Borrower,
      Guarantor or Manager in excess of $250,000.00, and the same remains undischarged
      for a period of thirty (30) days, unless such judgment is either (i) fully
      covered by collectible insurance and such insurer has within such period
      acknowledged such coverage in writing, or (ii) although not fully covered by
      insurance, enforcement of such judgment has been effectively stayed, such
      judgment is being contested or appealed by appropriate proceedings and Borrower,
      Guarantor or Manager as the case may be, has established reserves adequate
      for
      payment in the event such Person is ultimately unsuccessful in such contest
      or
      appeal and evidence thereof is provided to Lender; or

    


    (n)  The
      occurrence of any material adverse change in the financial condition or
      prospects of Borrower or Guarantor or Manager, or the existence of any other
      condition which, in Lender’s reasonable determination, constitutes a material
      impairment of any such Person’s ability to operate the Facility or of such
      Person’s ability to perform their respective obligations under the Loan
      Documents, which is not remedied within thirty (30) days after written
      notice.

    


    Notwithstanding
      anything in this Section, all requirements of notice shall be deemed eliminated
      if Lender is prevented from declaring an Event of Default by bankruptcy or
      other
      applicable law.  The cure period, if any, shall then run from the
      occurrence of the event or condition of Default rather than from the date of
      notice.

    


    Notwithstanding
      anything in this Section, the occurrence of any one or more of the events
      described in subsections l and m above with respect to any one or more Facility
      (ies) shall not constitute an Event of Default unless such occurrence(s) is/are
      of a magnitude as to have material adverse effect on the Facilities in the
      aggregate, as determined by Lender in its reasonable discretion.

    


    7.2  Remedies.  Upon
      the occurrence of any one or more of the foregoing Events of Default, Lender
      may, at its option:

    


    (a)  Declare
      the entire unpaid principal of the Loan Obligations to be, and the same shall
      thereupon become, immediately due and payable, without presentment, protest
      or
      further demand or notice of any kind, all of which are hereby expressly waived;
      and/or

    


    (b)  Proceed
      to protect and enforce its rights by action at law (including, without
      limitation, bringing suit to reduce any claim to judgment), suit in equity
      and
      other appropriate proceedings including, without limitation, for specific
      performance of any covenant or condition contained in this Agreement;
      and/or


    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    


    (c)  Exercise
      any and all rights and remedies afforded by the laws of the United States,
      the
      states in which any of the Mortgaged Property is located or any other
      appropriate jurisdiction as may be available for the collection of debts and
      enforcement of covenants and conditions such as those contained in this
      Agreement and the Loan Documents; and/or

    


    (d)  Exercise
      the rights and remedies of setoff and/or banker’s lien against the interest of
      Borrower in and to every account and other property of Borrower which is in
      the
      possession of Lender or any Person who then owns a participating interest in
      the
      Loan, to the extent of the full amount of the Loan; and/or

    


    (e)  Exercise
      its rights and remedies pursuant to any other Loan Documents.

    


    7.3  Segregation
      of Obligations.  The Facilities are located in three (3)
      different states, with the Mortgage related to a particular Facility being
      governed by the laws of the State where the Facility is located.  It
      is the intent of the parties to avoid triggering what is known in some states
      as
“one action” rules by including in a foreclosure of any Borrower’s Mortgage, the
      obligations of any other Borrower under this Agreement.  Accordingly,
      each Borrower’s liability hereunder shall only include the obligations under
      this Agreement that pertain to such Borrower and such Borrower’s assets only and
      shall not include obligations under this Agreement that pertain to any other
      Borrower or its assets, with the result that no Borrower shall be personally
      liable for any other Borrower’s obligations under this Agreement.  It
      is agreed, however, that the Default of any one Borrower hereunder shall
      constitute a Default by the other Borrowers.

    


    ARTICLE
      VIII

    MISCELLANEOUS

    


    8.1  Waiver.  No
      remedy conferred upon, or reserved to, a party in this Agreement or any of
      the
      other Loan Documents is intended to be exclusive of any other remedy or
      remedies, and each and every remedy shall be cumulative and shall be in addition
      to every other remedy given hereunder or now or hereafter existing in law or
      in
      equity. Exercise of or omission to exercise any right of a party shall not
      affect any subsequent right of such party to exercise the same.  No
      course of dealing between Borrower and Lender or any delay on a party’s part in
      exercising any rights shall operate as a waiver of any of such party’s
      rights.  No waiver of any Default under this Agreement or any of the
      other Loan Documents shall extend to or shall affect any subsequent or other,
      then existing, Default or shall impair any rights, remedies or powers of either
      party.


    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    


    8.2  Costs
      and Expenses.  Each Borrower will bear all taxes, fees
      and expenses (including actual, reasonable attorneys’ fees and expenses of
      counsel for Lender) in connection with the Loan, the Note, the preparation
      of
      this Agreement and the other Loan Documents (including any amendments hereafter
      made), and in connection with any modifications thereto and the recording of
      any
      of the Loan Documents.  If, at any time, a Default occurs or Lender
      becomes a party to any suit or proceeding in order to protect its interests
      or
      priority in any collateral for any of the Loan Obligations or its rights under
      this Agreement or any of the Loan Documents, or if Lender is made a party to
      any
      suit or proceeding by virtue of the Loan, this Agreement or any Mortgaged
      Property and as a result of any of the foregoing, Lender employs counsel to
      advise or provide other representation with respect to this Agreement, or to
      collect the balance of the Loan Obligations, or to take any action in or with
      respect to any suit or proceeding relating to this Agreement, any of the other
      Loan Documents, any Mortgaged Property, Borrower, Guarantor or Manager, or
      to
      protect, collect, or liquidate any of the security for the Loan Obligations,
      or
      attempt to enforce any security interest or lien granted to Lender by any of
      the
      Loan Documents, then in any such events, all of the actual, reasonable
      attorney’s fees arising from such services, including attorneys’ fees for
      preparation of litigation and in any appellate or bankruptcy proceedings, and
      any reasonable expenses, costs and charges relating thereto shall constitute
      additional obligations of Borrowers to Lender payable on demand of
      Lender.  Without limiting the foregoing, each Borrower has undertaken
      the obligation for payment of, and shall pay, all recording and filing fees,
      revenue or documentary stamps or taxes, intangibles taxes, and other taxes,
      expenses and charges payable in connection with this Agreement, any of the
      Loan
      Documents, the Loan Obligations, or the filing of any financing statements
      or
      other instruments required to effectuate the purposes of this Agreement, and
      should Borrowers fail to do so, Borrowers agree to reimburse Lender for the
      amounts paid by Lender, together with penalties or interest, if any, incurred
      by
      Lender as a result of underpayment or nonpayment.  Such amounts shall
      constitute a portion of the Loan Obligations, shall be secured by the Mortgage
      and shall bear interest at the Default Rate (as defined in the Note) from the
      date advanced until repaid.

    


    8.3  Performance
      of Lender.  At its option, upon Borrowers’ failure to do
      so, Lender may make any payment or do any act on Borrowers’ behalf that Borrower
      or others are required to do to remain in compliance with this Agreement or
      any
      of the other Loan Documents, and Borrower agrees to reimburse Lender, on demand,
      for any payment made or expense incurred by Lender pursuant to the foregoing
      authorization, including, without limitation, actual, reasonable attorneys’
fees, and until so repaid any sums advanced by Lender shall constitute a portion
      of the Loan Obligations, shall be secured by the Mortgage and shall bear
      interest at the Default Rate (as defined in the Note) from the date advanced
      until repaid.


    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    


    8.4  Indemnification.  Borrowers
      shall, at their sole cost and expense, protect, defend, indemnify and hold
      harmless the Indemnified Parties from and against any and all claims, suits,
      liabilities (including, without limitation, strict liabilities), actions,
      proceedings, obligations, debts, damages, losses, costs, expenses, fines,
      penalties, charges, fees, expenses, judgments, awards, amounts paid in
      settlement, punitive damages, foreseeable and unforeseeable consequential
      damages, of whatever kind or nature (including but not limited to actual,
      reasonable attorneys’ fees and other costs of defense) imposed upon or incurred
      by or asserted against Lender by reason of (a) ownership of the Note, the
      Mortgage, the Mortgaged Property or any interest therein or receipt of any
      Rents, (b) any amendment to, or restructuring of, the Loan Obligations and/or
      any of the Loan Documents, (c) any and all lawful action that may be taken
      by
      Lender in connection with the enforcement of the provisions of the Mortgage
      or
      the Note or any of the other Loan Documents, whether or not suit is filed in
      connection with same, or in connection with Borrower, Guarantor, Manager and/or
      any partner, joint venturer, member or shareholder thereof becoming a party
      to a
      voluntary or involuntary federal or state bankruptcy, insolvency or similar
      proceeding, (d) any accident, injury to or death of persons or loss of or damage
      to property occurring in, on or about the Land, the Improvements or any part
      thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
      parking areas, streets or ways, (e) any use, nonuse or condition in, on or
      about
      the Land, the Improvements or any part thereof or on the adjoining sidewalks,
      curbs, adjacent property or adjacent parking areas, streets or ways, (f) any
      failure on the part of Borrower, Guarantor or Manager to perform or comply
      with
      any of the terms of this Agreement or any of the other Loan Documents, (g)
      any
      claims by any broker, Person or entity claiming to have participated in
      arranging the making of the Loan evidenced by the Note, (h) any failure of
      the
      Land and/or Improvements to be in compliance with any applicable laws, (i)
      performance of any labor or services or the furnishing of any materials or
      other
      property with respect to the Land, the Improvements or any part thereof,
      (j) the failure of any Person to file timely with the Internal Revenue
      Service an accurate Form 1099-b, statement for recipients of proceeds from
      real
      estate, broker and barter exchange transactions, which may be required in
      connection with the Mortgage, or to supply a copy thereof in a timely fashion
      to
      the recipient of the proceeds of the transaction in connection with which the
      Loan is made, (k) any misrepresentation made to Lender in this Agreement or
      in
      any of the other Loan Documents, (l) any tax on the making and/or recording
      of
      the Mortgage, the Note or any of the other Loan Documents; (m) the violation
      of
      any requirements of the Employee Retirement Income Security Act of 1974, as
      amended, (n) any fines or penalties assessed or any corrective costs incurred
      by
      Lender if the Facility or any part of the Land and/or Improvements is determined
      to be in violation of any covenants, restrictions of record, or any applicable
      laws, ordinances, rules or regulations, or (o) the enforcement by any of the
      Indemnified Parties of the provisions of this Section 8.4.  Any
      amounts payable to Lender by reason of the application of this Section 8.4,
      shall become immediately due and payable, and shall constitute a portion of
      the
      Loan Obligations, shall be secured by the Mortgage and shall accrue interest
      at
      the Default Rate (as defined in the Note).  The obligations and
      liabilities of Borrower under this Section 8.4 shall survive any termination,
      satisfaction, assignment, entry of a judgment of foreclosure or exercise of
      a
      power of sale or delivery of a deed in lieu of foreclosure of the
      Mortgage.  For purposes of this Section 8.4, the term “Indemnified
      Parties” means Lender and any Person who is or will have been involved in the
      origination of the Loan, any Person who is or will have been involved in the
      servicing of the Loan, any Person in whose name the encumbrance created by
      the
      Mortgage is or will have been recorded, any Person who may hold or acquire
      or
      will have held a full or partial interest in the Loan (including, without
      limitation, any investor in any securities backed in whole or in part by the
      Loan) as well as the respective directors, officers, shareholder, partners,
      members, employees, agents, servants, representatives, contractors,
      subcontractors, affiliates, subsidiaries, participants, successors and assigns
      of any and all of the foregoing (including, without limitation, any other Person
      who holds or acquires or will have held a participation or other full or partial
      interest in the Loan or the Mortgaged Property, whether during the term of
      the
      Mortgage or as a part of or following a foreclosure of the Loan and including,
      without limitation, any successors by merger, consolidation or acquisition
      of
      all or a substantial portion of Lender’s assets and business).

    


    8.5  Headings.  The
      headings of the Sections of this Agreement are for convenience of reference
      only, are not to be considered a part hereof, and shall not limit or otherwise
      affect any of the terms hereof.

    


    8.6  Survival
      of Covenants.  All covenants, agreements, representations
      and warranties made herein and in certificates or reports delivered pursuant
      hereto shall be deemed to have been material and relied on by Lender,
      notwithstanding any investigation made by or on behalf of Lender, and shall
      survive the execution and delivery to Lender of the Note and this
      Agreement.


    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    


    8.7  Notices,
      etc.  Any notice or other communication required or
      permitted to be given by this Agreement or the other Loan Documents or by
      applicable law shall be in writing and shall be deemed received (a) on the
      date
      delivered, if sent by hand delivery (to the person or department if one is
      specified below) with receipt acknowledged by the recipient thereof, (b) three
      (3) Business Days following the date deposited in U.S. mail, certified or
      registered, with return receipt requested, or (c) one (1) Business Day following
      the date deposited with Federal Express or other national overnight carrier,
      and
      in each case addressed as follows:

    


    
      	
               

            	
              If
                to Borrower:

            	 
	 	
               

            	 	 
	 	 	
              Emeritus
                Corporation

            	 
	 	 	
              3131
                Elliott Avenue, #500

            	 
	 	 	
              Seattle,
                WA 98121

            	 
	 	 	
              Attention:     
                

            	
              Eric
                Mendelsohn, Director of

            	 
	 	 	 	
              Real
                Estate and Business Legal Affairs

            	 
	 	 	 	 
	 	
              with
                a copy to:

            	 
	 	 	 	 
	 	 	
              Pircher,
                Nichols & Meeks

            	 
	 	 	
              900
                N. Michigan Avenue, Suite 1050

            	 
	 	 	
              Chicago,
                IL 60611

            	 
	 	 	
              Attention:  Real
                Estate Notices (JDL/KMR)

            	 
	 	 	
              Fax:  312-915-3348

            	 
	 	 	 	 
	 	 	 	 
	 	
              If
                to Lender:

            	 
	 	 	 	 
	 	 	
              Capmark
                Finance Inc.

            	 
	 	 	
              200
                Witmer Road

            	 
	 	 	
              P.O.
                Box 1015

            	 
	 	 	
              Horsham,
                Pennsylvania  19044-0809

            	 
	 	 	
              Attn:  Servicing
                – Accounting Manager

            	 
	 	 	 	 
	 	
              with
                a copy to:

            	 
	 	 	 	 
	 	 	
              Kay
                K. Bains

            	 
	 	 	
              Bradley
                Arant Rose & White LLP

            	 
	 	 	
              One
                Federal Place

            	 
	 	 	
              1819
                Fifth Avenue North

            	 
	 	 	
              Birmingham,
                AL 35203

            	 
	 	 	
              Phone:  205-521-8220

            	 
	 	 	
              Fax:
                205-488-6220

            	 


    

    


    Either
      party may change its address to another single address by notice given as herein
      provided, except any change of address notice must be actually received in
      order
      to be effective.

    


    8.8  Benefits.  All
      of the terms and provisions of this Agreement shall bind and inure to the
      benefit of the parties hereto and their respective successors and
      assigns.  No Person other than Borrowers or Lender shall be entitled
      to rely upon this Agreement or be entitled to the benefits of this
      Agreement.


    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    


    8.9  Participation.  Each
      Borrower acknowledges that Lender may, at its option, sell participation
      interests in the Loan to other participating lenders, which participations
      may
      be sold without Borrower’s consent, or Lender may (but shall not be obligated
      to) assign its interest in the Loan to other assignees (the “Assignee”) to be
      included as a pool of properties to be financed in a proposed Real Estate
      Mortgage Investment Conduit (REMIC), but any such assignment to a REMIC shall
      require Borrower’s consent, not to be unreasonably withheld, conditioned or
      delayed.  Each Borrower agrees with each present and future
      participant in the Loan or Assignee of the Loan that if an Event of Default
      should occur, each present and future participant or Assignee shall have all
      of
      the rights and remedies of Lender with respect to any deposit due from
      Borrower.  The execution by a participant of a participation agreement
      with Lender, and the execution by Borrower of this Agreement, regardless of
      the
      order of execution, shall evidence an agreement between Borrower and said
      participant in accordance with the terms of this Section.  If the Loan
      is assigned to the Assignee, the Assignee will engage an underwriter (the
“Underwriter”), who will be responsible for the due diligence, documentation,
      preparation and execution of certain documents required in connection with
      the
      offering of interests in the REMIC.  Borrower agrees that if Lender
      assigns its interest in the Loan to the Assignee for inclusion in the REMIC,
      with Borrower’s consent as required herein, Borrower agrees to provide the
      Assignee with such information as may be reasonably required by the Underwriter
      in connection therewith or by an investor in any securities backed in whole
      or
      in part by the Loan or any rating agency rating such
      securities.  Borrower irrevocably waives any and all right it may have
      under applicable law to prohibit such disclosure, including, but not limited
      to,
      any right of privacy, and consents to the disclosure of such information to
      the
      Underwriter, to potential investors in the REMIC, and to such rating
      agencies.  Notwithstanding anything in this Agreement or any other
      Loan Document to the contrary, Borrowers shall not be required to “gross-up”
payments for United States withholding taxes to any Assignee or Person treated,
      for United States federal income tax purposes, as the owner of the assets of
      an
      Assignee if such Assignee is a disregarded entity for United States federal
      income tax purposes, that is not organized under the laws of the United States
      of America or a state thereof (a “Non-U.S. Entity”), and such Non-U.S. Entity
      fails to establish an exemption from United States withholding
      taxes.

    


    8.10  Supersedes
      Prior Agreements; Counterparts.  This Agreement and the
      instruments referred to herein supersede and incorporate all representations,
      promises and statements, oral or written, made by Lender in connection with
      the
      Loan.  This Agreement may not be varied, altered, or amended except by
      a written instrument executed by an authorized officer of
      Lender.  This Agreement may be executed in any number of counterparts,
      each of which, when executed and delivered, shall be an original, but such
      counterparts shall together constitute one and the same instrument.

    


    8.11  Loan
      Agreement Governs.  The Loan is governed by the terms and
      provisions set forth in this Loan Agreement and the other Loan Documents and
      in
      the event of any irreconcilable conflict between the terms of the other Loan
      Documents and the terms of this Loan Agreement, the terms of this Loan Agreement
      shall control; provided, however, that in the event that there is any apparent
      conflict between any particular term or provision which appears in both this
      Loan Agreement and the other Loan Documents and it is possible and reasonable
      for the terms of both this Loan Agreement and the Loan Documents to be performed
      or complied with, then, notwithstanding the foregoing, both the terms of this
      Loan Agreement and the other Loan Documents shall be performed and complied
      with.


    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    


    8.12  CONTROLLING
      LAW.  THE PARTIES HERETO AGREE THAT THE VALIDITY, INTERPRETATION,
      ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
      IN
      ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS AND THE PARTIES HERETO SUBMIT
      (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL JURISDICTION IN
      THE
      STATE OF ILLINOIS, FOR THE ENFORCEMENT OF ANY AND ALL OBLIGATIONS UNDER THE
      LOAN
      DOCUMENTS, EXCEPT THAT IF ANY SUCH ACTION OR PROCEEDING ARISES UNDER THE
      CONSTITUTION, LAWS OR TREATIES OF THE UNITED STATES OF AMERICA, OR IF THERE
      IS A
      DIVERSITY OF CITIZENSHIP BETWEEN THE PARTIES THERETO, SO THAT IT IS TO BE
      BROUGHT IN COOK COUNTY, ILLINOIS, IN A UNITED STATES DISTRICT COURT, IT SHALL
      BE
      BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
      ILLINOIS OR ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL
      JURISDICTION.

    


    8.13  WAIVER
      OF JURY TRIAL.  BORROWER AND LENDER HEREBY WAIVE ANY RIGHT THAT
      EITHER OR BOTH MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF,
      DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED
      TO
      THIS AGREEMENT OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING
      OR
      RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER WITH RESPECT
      TO THE LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE
      OF
      EITHER PARTY’S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE OR THE
      CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING
      CASES
      WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT,
      TORT
      OR OTHERWISE.  BORROWER AGREES THAT LENDER MAY FILE A COPY OF THIS
      AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
      BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY
      JURY
      AS AN INDUCEMENT TO LENDER TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED
      BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT
      MODIFIED HEREIN) BETWEEN BORROWER AND LENDER SHALL INSTEAD BE TRIED IN A COURT
      OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
      JURY.

    


    8.14  Governing
      Law Regarding Remedies.  Notwithstanding anything to the
      contrary in the Note, the Guaranty Agreement and this Agreement, the law
      governing the Mortgages shall be applicable to the rights of Lender to seek
      a
      deficiency judgment pursuant to the Loan Documents following foreclosure or
      other realization proceedings pursuant to the Mortgages and the right to pursue
      one or more remedies against one or more Borrowers under the
      Mortgages.


    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    


    8.15  Reasonable
      Discretion.  As applied to this
      Agreement and the Loan Documents,  Lender shall be deemed to have
      exercised reasonable discretion or shall be deemed to have given its reasonable
      consent if Lender's actions are consistent with the standard of care that Lender
      employs in connection with its exercise of rights and remedies with other
      borrowers and loans of similar structure, size, complexity and number of
      facilities.

    


    8.16  Purpose
      of Loan.  The entire proceeds of the
      Loan evidenced by the Note constitute a “business loan” as that term is used in
      Illinois Compiled Statutes, Chapter 815, Act 205, Section 4, and the beneficiary
      of Borrower is a “business” as that term is defined in said Illinois Compiled
      Statutes, Chapter 815, Act 205, Section 4.

    


    [SIGNATURES
      BEGIN ON NEXT PAGE]


    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, Borrowers and Lender have caused this Agreement to be
      properly executed by their respective duly authorized representatives as of
      the
      date first above written.

    


    


    
      	 	
              CAPMARK
                FINANCE INC.,

            	 
	 	
              a
                California corporation

            	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Sarah S. Duggan       (Seal)

            	 
	 	
              Name:

            	
              Sarah
                S. Duggan

            	 
	 	
              Its:

            	
              Senior
                VP

            	 


    


    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, Borrowers and Lender have caused this Agreement to be
      properly executed by their respective duly authorized representatives as of
      the
      date first above written.

    


    
      	
              BORROWER:

            
	 	 	 
	 	
              EMERICHIP
                STOCKTON  LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 	 
	 	
              By:

            	
              EMERITUS
                CORPORATION,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            
	 	 	 
	 	 	 
	 	
              EMERICHIP
                DOVER  LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 	 
	 	
              By:

            	
              EMERITUS
                CORPORATION,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            
	 	 	 
	 	 	 
	 	
              EMERICHIP
                NEW PORT RICHEY  LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 	 
	 	
              By:

            	
              EMERITUS
                CORPORATION,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            


    

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    
      	 	
              EMERICHIP
                VENICE  LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 	 
	 	
              By:

            	
              EMERITUS
                CORPORATION,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            
	 	 	 
	 	 	 
	 	
              EMERICHIP
                ALTAMONTE  LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 	 
	 	
              By:

            	
              EMERITUS
                CORPORATION,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            
	 	 	 
	 	 	 
	 	
              EMERICHIP
                DALLAS  LP,

            
	 	
              a
                Delaware limited partnership

            
	 	 	 
	 	
              By:

            	
              Emerichip
                Texas LLC,,

            
	 	 	
              a
                Delaware limited liability company

            
	 	 	
              its
                General Partner

            
	 	 	 
	 	
              By:

            	
              ESC
                GP II Inc.,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            


    

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

       

    

    
      	 	
              EMERICHIP
                EL PASO  LP,

            
	 	
              a
                Delaware limited partnership

            
	 	 	 
	 	
              By:

            	
              Emerichip
                Texas LLC,,

            
	 	 	
              a
                Delaware limited liability company

            
	 	 	
              its
                General Partner

            
	 	 	 
	 	
              By:

            	
              ESC
                GP II Inc.,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            
	 	 	 
	 	 	 
	 	
              EMERICHIP
                CAMBRIA  LP,

            
	 	
              a
                Delaware limited partnership

            
	 	 	 
	 	
              By:

            	
              Emerichip
                Texas LLC,,

            
	 	 	
              a
                Delaware limited liability company

            
	 	 	
              its
                General Partner

            
	 	 	 
	 	
              By:

            	
              ESC
                GP II Inc.,

            
	 	 	
              a
                Washington corporation

            
	 	 	
              its
                Sole Member

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Eric Mendelsohn

            
	 	 	
              Eric
                Mendelsohn,

            
	 	 	
              Director
                of Real Estate and Legal Affairs

            


    

    

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

    

     

    SCHEDULE
      A

    [List
      of
      Borrowers]

    


    EMERICHIP
      NEW PORT RICHEY LLC

     

    EMERICHIP
      VENICE LLC

     

    EMERICHIP
      DOVER LLC

     

    EMERICHIP
      ALTAMONTE LLC

     

    EMERICHIP
      STOCKTON LLC

     

    EMERICHIP
      CAMBRIA LP

     

    EMERICHIP
      EL PASO LP

     

    EMERICHIP
      DALLAS LP

     

    
      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      B

    


    [LIST
      OF FACILITIES]

    


    


    
      	
              Borrower

            	 	
              Facility

            
	 	 	 
	
              Emerichip
                Cambria LP

            	 	
              Cambria,
                a 76 unit assisted living facility located at 1991 Saul Klienfeld
                Dr., El
                Paso, TX  79936

            
	 	 	 
	
              Emerichip
                Stockton LLC

            	 	
              Fulton
                Villa, an 80 unit assisted living facility located at 517 East Fulton
                St.,
                Stockton, CA  95204

            
	 	 	 
	
              Emerichip
                Dover LLC

            	 	
              Green
                Meadows at Dover, a 51 unit assisted living facility located at 150
                Saulsbury Rd., Dover, DE  19904

            
	 	 	 
	
              Emerichip
                El Paso LP

            	 	
              Palisades,
                a 152 unit assisted living facility located at 1831 Murchison Dr.,
                El
                Paso, TX  79902

            
	 	 	 
	
              Emerichip
                Altamonte LLC

            	 	
              Stanford
                Centre, a 118 unit assisted living facility located at 433 Orange
                Dr.,
                Altamont Springs, FL  32701

            
	 	 	 
	
              Emerichip
                Dallas LP

            	 	
              Lakeland
                Hills (12 Oaks East), a 170 unit independent living/assisted living
                facility located at 3305 Dilido Rd., Dallas,
                TX  75228

            
	 	 	 
	
              Emerichip
                New Port Richey LLC

            	 	
              Park
                Place – New Port Richey, a 70 unit assisted living/Alzheimer’s facility
                located at 5539 Charles Street, New Port Richey,
                FL  34652

            
	 	 	 
	
              Emerichip
                Venice LLC

            	 	
              Park
                Place – Venice, a 78 unit assisted living facility located at 200 Nassau
                Street North, Venice,
                FL  34285

            


    

     

    
      
51