**LOAN
      AGREEMENT**






**THIS
      LOAN AGREEMENT** (this
“Agreement”) is made as of March 26, 20 07,
      by
      and among EMERI-SKY SC LLC, a Delaware limited liability company, EMERIVILL
      SC
      LLC, a Delaware limited liability company, and EMERIPARK SC LLC, a Delaware
      limited liability company (together, collectively, with their respective
      successors and assigns, “Borrowers” or “Borrower”, and, individually, a
“Borrower”), and CAPMARK BANK, a Utah industrial bank (together with its
      successors and assigns, “Lender”).




**RECITALS**




A.  Borrower
      has requested that Lender make a loan to each Borrower, in the aggregate
      principal sum of $23,600,000.00.




B.  Lender
      has agreed to make such loans 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”** has the
      meaning given to that term in the Mortgage.




**“Actual
      Management Fees”** means
      actual management fees paid or incurred in connection with operation of the
      Facilities.




**“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.




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




**“Assignment
      of Licenses”** means
      that certain Assignment of Licenses, Permits and Contracts of even date herewith
      to and for the benefit of Lender.




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




**1**


**“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.




**“Commitment
      Letter”** means
      the commitment letter issued by Lender to Borrowers dated March 26,
      2007.




**“Cross-Collateralization
      Agreement”** means
      the Cross-Collateralization, Cross-Default and Mortgage Modification Agreement
      of even date herewith by and between each Borrower and Lender.




**“Debt
      Service Coverage Ratio”** means a
      ratio in which the numerator is the sum of “net pre-tax income” from usual
      operations of all the Facilities as set forth in the financial statements
      provided to Lender (without deduction for management fees or management expenses
      paid or incurred), calculated based upon the preceding twelve (12) months (or
      such lesser period of time as shall have elapsed following the closing of the
      Loans), plus Loan interest expense or Facility lease expense to the extent
      deducted in determining net income and non-cash expenses or allowances for
      depreciation and amortization of the Facilities for such period, less either
      Assumed Management Fees or Actual Management Fees (based upon the covenant
      to
      which such definition relates) for such period and the denominator is calculated
      by using the then current principal balance due under all the Notes, applying
      the then current interest rate under the Notes (which shall not exceed the
      maximum rate of interest under the Interest Rate Agreement), calculating such
      principal and interest payments for the applicable period, assuming a
      twenty-five (25) year amortization of the Notes. 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.




“ **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.




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




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




**“Extraordinary
      Income and Extraordinary Expenses”** means
      material items of a character significantly different from the typical or
      customary business activities of Borrower 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 Borrower’s business, and which
      would be treated as extraordinary income or extraordinary expenses under
      GAAP.




**2**


**“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.




**“Facilities”** means
      the three (3) facilities known as (i) Skylyn Place, a 256-unit rental Continuing
      Care Retirement Community located at 1705 Skylyn Drive, Spartanburg,
      SC **;** (ii)
      Countryside Village, a 146-unit rental Continuing Care Retirement Community
      located at 706 Pelzer Highway, Easley, SC; and (iii) Countryside Park, a 48-unit
      Assisted Living Facility located at 125 Zion School Road, Easley, SC, 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 nursing and/or assisted living facility), now or hereafter operated
      on
      the Land.





**“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.




**“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 Corporation, a **** Washington
      corporation.




**“Guaranty
      Agreement”** means
      that certain Guaranty of even date herewith from Guarantor to and for the
      benefit of Lender.




**“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.




**3**


**“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.




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




**“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.




**“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”
      or “Loans”** means
      the Loans in the aggregate principal sum of $23,600,000.00 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, the Assignment of Management Agreement and the Subordination
      Agreement, together with any and all other documents executed by any Borrower,
      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
      Notes and all expenses, charges and other amounts from time to time owing under
      the Notes, 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.




**4**


**“Management
      Agreement”** means
      that certain Management Agreement dated March 26, 2007, between Manager and
      Borrower, obligating Manager to operate and manage the Facilities.




**“Manager”** means
      Emeritus Corporation, and any successor manager of the Facilities approved
      by
      Lender in writing.




**“Maturity
      Date”** means
      April 1, 2010.




**“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.




**“Mortgage”** means
      collectively those three (3) certain Mortgages and Security Agreements of even
      date herewith, one from each Borrower in favor of Lender, encumbering the real
      estate located in Pickens and Spartanburg Counties, South Carolina, as modified
      by the Cross-Collateralization Agreement, which is more particularly described
      in Exhibit
      “A” hereto,
      and upon which the Facilities are located.




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




**“Note”
      or “Notes”** means
      the three (3) Promissory Notes of even date herewith in the aggregate principal
      amount of the Loan payable by Borrowers 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




**5**


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.




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




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




**“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
      Asset Entity”** means a
      Person which owns no interest or property other than the Mortgaged Property
      and
      the real and personal property securing the Loan or interests in
      Borrower.




**“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, and Lender.




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




**6**


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.




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** .
      Borrowers have 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 Borrowers have made the covenants, representations,
      and warranties herein and therein as a material inducement to Lender to make
      the
      Loans.




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




**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 Borrower. 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 Borrower and Lender.







**7**









**ARTICLE
      III**




**BORROWER’S
      REPRESENTATIONS AND WARRANTIES**




To
      induce
      Lender to enter into this Agreement, and to make the Loan to Borrowers, each
      Borrower 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, 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.




**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**  **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.




**3.5**  **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




**8**


heretofore
      or hereafter provided to Lender are and will be true and complete in all
      material respects as of their respective dates.




**3.6**  **Compliance
      with Facility Laws** .
      The
      Facility is duly licensed under the applicable laws of the state where the
      Land
      is located and is currently operated as the type of facility identified in
      the
      definition of “Facilities”. Borrower is the lawful owner of 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 other loan or
      Indebtedness, (d) are held free from any restriction or any encumbrance
      which would materially adversely affect the use or operation of the Facility
      and
      (e) are not provisional, probationary or materially restricted in any way.
      Borrower and Manager as well as the operation of the Facility are in compliance
      in all material respects with the applicable provisions of all 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 unit) are required for the Facility
      to
      operate at the foregoing licensed unit capacity. All Reimbursement Contracts
      are
      in full force and effect with respect to the Facility, and Borrower and Manager
      are in good standing with all the respective agencies governing such applicable
      Facility licenses, program certification and Reimbursement Contracts. Borrower
      and Manager are current in the payment of all so-called provider specific taxes
      or other assessments with respect to such Reimbursement Contracts. Borrower
      will
      maintain the Certificate of Need, if applicable, and/or any required Permits
      in
      full force and effect. In the event Lender acquires the Facility through
      foreclosure or otherwise, neither Lender nor a subsequent manager, a subsequent
      lessee or any subsequent purchaser (through foreclosure or otherwise) must
      obtain a Certificate of Need prior to applying for and receiving a license
      to
      operate the Facility and certification to receive Medicare and Medicaid payments
      (and its successor programs) for patients having coverage thereunder provided
      that no service or unit complement is changed.




**3.7**  **Maintain
      Unit Capacity** .
      Neither
      Borrower nor Manager has granted to any third party the right to reduce the
      number of licensed 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.




**3.8**  **Medicare
      and Medicaid Compliance** .
      The
      Facility is in compliance with all requirements for participation in Medicare
      and Medicaid, including without limitation, the Medicare and Medicaid Patient
      Protection Act of 1987. The Facility is in conformance in all material respects
      with all insurance, reimbursement and cost reporting requirements and has a
      current provider agreement which is in full force and effect under Medicare
      and
      Medicaid.




**3.9**  **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




**9**


misleading
      in any material respects. No cost reports for the Facility remain “open” or
      unsettled except as otherwise disclosed.




**3.10**  **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:




(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.




**3.11**  **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.




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




**3.13**  **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.




**3.14**  **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 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.




**3.15**  **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




**10**


which
      may
      hereafter accrue, excepting only Permitted Encumbrances which do not and will
      not materially and adversely affect (a) the ability of Borrower to pay in
      full the principal of and interest on the Note when due, (b) the security
      (and its value) intended to be provided by the Mortgage or (c) the current
      use of the Land and the Improvements.




**3.16**  **Location
      of Chief Executive Offices** .
      The
      location of Borrower’s chief executive office(s) are set forth on Exhibit
      “B” hereto.
      Borrower has no places of business other than the locations of the Facilities
      listed on Exhibit
      “B” .




**3.17**  **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.




**3.18**  **Trade
      Names** .
      Neither
      Borrower nor the Facility has 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.




**3.19**  **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”).




**3.20**  **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.




**3.21**  **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.




**3.22**  **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.




**11**


**3.23**  **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.




**3.24**  **Other
      Indebtedness** .
      Borrower has no outstanding Indebtedness, secured or unsecured, direct or
      contingent (including any guaranties), other than (a) the Loan, and (b)
      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.




**3.25**  **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.




**3.26**  **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) has received reasonably equivalent value in exchange for its
      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).




**3.27**  **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.




**3.28**  **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.




**12**


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




(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.




**3.29**  **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.




**3.30**  **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 a Borrower and
      in
      the Single Purpose Entity that is the managing member of Borrower, (b)
      Guarantor, (c) Manager, and (d) each tenant at the Property: (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.




**3.31**  **Compliance
      Program.** To the
      extent required, Borrower has adopted and is adhering to a compliance program
      meeting the guidelines published by the Office of the Inspector General on
      March
      16, 2000, at 65 Fed. Reg. 14289.




**ARTICLE
      IV**




**AFFIRMATIVE
      COVENANTS OF BORROWERS**




Each
      Borrower agrees with and covenants unto Lender that until the Loan Obligations
      have been paid in full, each Borrower shall:




**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 its existence as a limited liability company in good standing under
      the
      laws of the jurisdiction of its organization or formation, 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 Asset Status** .
      Maintain its existence as a Single Purpose Asset 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




**13**


required
      old age and unemployment contributions, and all required payments to employee
      benefit plans, and pay the same when they become due.




**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.




**14**


(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.




(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 Bank and its successors and/or assigns” as additional insureds, and
      all property insurance policies must name Capmark Bank 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. Notwithstanding anything contained herein,
      Borrower shall be entitled to all insurance proceeds covered by and disbursed
      under the above-referenced comprehensive all risk insurance policy provided
      such
      proceeds do not exceed $25,000.00 per occurrence.




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




**15**


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.




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




**16**


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.




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.




**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 and 00/l00 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 and 00/l00 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;




(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:




**17**


(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.




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




**18**


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/or Manager to provide to Lender, at its address
      set forth in Section 8.7 and at Capmark Bank, 2801 Highway 280 South, Suite
      305,
      Birmingham, Alabama 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 Guarantor,
      audited 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. In lieu of its
      obligations hereunder, Guarantor 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
      forty-five (45) days after the end of each of the first three (3) fiscal
      quarters, and within one hundred-twenty (120) 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
      Guarantor, financial statements of Guarantor, 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 Guarantor 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 Guarantor, together with all supporting documentation
      and required schedules.




(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.




**19**


(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 Borrower and Guarantor 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, Guarantor, 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.




**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




**20**


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 units 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;




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




**21**


(f)  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**  **Debt
      Service Coverage Requirements** .




(a)  Maintain
      (commencing with the closing of the Loan) and within forty-five (45) days after
      the end of each fiscal quarter of Borrower, provide evidence to Lender of the
      achievement of, the following Debt Service Coverage Ratios until the Loans
      are
      paid in full:




(i)  a
      Debt
      Service Coverage Ratio, after deduction of Actual Management Fees, of not less
      than 1.10 to 1.0;




(ii)  a
      Debt
      Service Coverage Ratio after deduction of Assumed Management Fees, of not less
      than 1.15 to 1.0 for the trailing three (3) months ending June 30,
      2008;




(iii)  a
      Debt
      Service Coverage Ratio after deduction of Assumed Management Fees, of not less
      than 1.20 to 1.0 for the trailing three (3) months ending September 30, 2008;
      and




(iv)  a
      Debt
      Service Coverage Ratio after deduction of Assumed Management Fees of not less
      than 1.25 to 1.0 for all remaining quarters during the term of the Loan
      commencing with the quarter ending on December 31, 2008, and continuing
      thereafter until the Loans are paid in full.




If
      Borrower fails to achieve or provide evidence of achievement of the Debt Service
      Coverage Ratio, Borrower may deposit with Lender, at Borrower’s option within
      fifteen (15) days of such failure, additional cash or other liquid collateral
      in
      an amount which, when added to the first number of the debt service coverage
      calculation, would have resulted in the noncomplying debt service requirement
      having been satisfied. If after Borrower has deposited such additional cash
      or
      liquid collateral, Borrower again fails to achieve or provide evidence of the
      achievement of the Debt Service Coverage Ratio requirements set forth above
      and
      such failure continues for two (2) consecutive quarters, Borrower may deposit
      with Lender, at Borrower’s option within fifteen (15) days of such failure,
      additional cash or other liquid collateral (with credit for amounts currently
      being held by Lender pursuant to the foregoing sentence), in an amount which,
      if
      the same had been applied on the first (1st) day of the first quarter for which
      such noncompliance of the debt service coverage requirement occurred to reduce
      the outstanding principal indebtedness




**22**


of
      the
      Loan, would have resulted in the noncomplying debt service coverage requirement
      having been satisfied. Any additional cash or liquid collateral deposited by
      Borrower hereunder in order to achieve the required Debt Service Coverage Ratio
      and cure any existing default with respect thereto will be held by Lender in
      a
      standard custodial account and shall constitute additional collateral for the
      Loan Obligations and an “Account” as defined in this Agreement, and, upon the
      occurrence of an Event of Default, may be applied by Lender, in such order
      and
      manner as Lender may elect, to the reduction of the Loan Obligations. Borrower
      shall not be entitled to any interest earned on such additional collateral.
      Provided that there is no outstanding Default or Event of Default, such
      additional collateral which has not been applied to the Loan Obligations will
      be
      released by Lender at such time as Borrower provides Lender with evidence that
      the required debt service coverage requirements outlined above have been
      achieved and maintained (without regard to any cash deposited pursuant to this
      Section 4.14) for two (2) consecutive fiscal quarters.




**4.15**  **Occupancy** .
      Maintain or cause to be maintained at all times, a daily average annual
      aggregate occupancy for the Facilities, as tested quarterly (on the basis of
      a
      calendar year), commencing on **** June
      30 **,** 2007 **,** of
      eighty
      percent (80%) or more (based on the number of units **** available
      at the Facilities, with the minimum number of units available at the Facilities
      remaining at or in excess of the units stated in the defined term
“Facilities”).




**4.16**  **Capital
      Expenditures** .
      Maintain, and/or cause Manager to maintain, Facility in good condition and
      make
      minimum capital expenditures for each Facility in each fiscal year, in an amount
      equal to the $300 **** 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




**23**


an
      inspection of the Facility. If the inspector’s report indicates that repairs or
      replacements are necessary over and above the $300 per unit requirement in
      this
      Section 4.16, 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.




**4.17**  **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.




**4.18**  **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.




**4.19**  **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.




**4.20**  **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.




**4.21**  **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




**24**


Documents,
      the Commitment Letter shall continue to be in effect and shall survive the
      execution of this Agreement and all other Loan Documents.




**4.22**  **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.




**4.23**  **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.




**4.24**  **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.




4.25  **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 3.28 and 3.30 and this Section 4.25
      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.




4.26  **Compliance
      Program** **.** Within
      ninety (90) days after the date hereof, adopt, and thereafter at all times
      maintain, a compliance program consisted with the guidelines published by Office
      of the Inspector General at 65 Fed. Reg. 14289 (March 16, 2000), as amended
      from
      time to time. Upon Lender’s request, Borrower shall (a) provide a copy of its
      written compliance program, and (b) identify its program compliance
      officer.




**25**







**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), 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)  Liens,
      if
      any, permitted pursuant to the Mortgage;




(c)  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;




(d)  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




(e)  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.







**26**




**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 **** Operating
      Agreement or similar organizational document, 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 **** members,
      shareholders, Affiliates, principals or any other Person;




(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 members, shareholders, principals and Affiliates, the Affiliates
      of
      any of its **** members,
      shareholders, principals, and any other Person;




(i)  Enter
      into any contract or agreement with any of its members, shareholders, principals
      or Affiliates, or the Affiliates of any of its 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 (Lender hereby approves the terms of the Management Agreement
      as it exists on the date hereof);




(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 members,
      shareholders, principals and Affiliates, the Affiliates of any of its
      shareholders, principals or any other Person;




**27**







(l)  Hold
      itself out to be responsible for the debts of another Person or pay another
      Person’s liabilities out of its own funds;




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




(n)  Fail
      to
      have prepared and filed its own tax returns;




(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); or




(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 the board of directors of its managing member 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 board of directors 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




**28**


Lender
      of
      any of its rights under the Loan Documents) to be a non-exempt prohibited
      transaction under ERISA.




**5.8**  **Transactions
      with Affiliates** **.** 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 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.




**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:




(a)  The
      presence, use, generation, release, treatment, processing, storage (including
      storage in above ground and underground storage tanks), handling, or disposal
      of
      any




**29**


Hazardous
      Materials in, on or under the Land, any Improvements, or any other property
      of
      Borrower that is adjacent to the Land in violation of applicable Hazardous
      Materials Laws;




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




(c)  Any
      occurrence or condition on the Land or in the Improvements or any other property
      of Borrower that is adjacent to the Land, 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, the Improvements or any property of Borrower that is
      adjacent to the Land; 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, 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 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.




**30**


**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 have existed.




(c)  The
      Land
      and the Improvements do not now contain any underground storage tanks, and,
      to
      the best of Borrower’s knowledge after reasonable and diligent inquiry, 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 after reasonable
      and diligent inquiry, 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 after reasonable and diligent inquiry, threatened that involves 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, the Improvements
      or
      any other property of Borrower that is adjacent to the Land. 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,




**31**


health
      or
      safety matters affecting the Land, the Improvements or any other property of
      Borrower that is adjacent to the Land.




(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 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 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 party, including 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
      any party (either as part of a notice of sale or otherwise) 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 any 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, the 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 necessary 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.




**32**


**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.




**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, the Improvements or any property of Borrower that is adjacent to the
      Land;
      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 approval
      of
      those Indemnitees. Notwithstanding anything contained herein, any Indemnitee
      may
      elect to defend any claim or legal or administrative proceeding at Borrower’s
      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,
      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.




(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:




**33**


(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;




(ii)  Reimburse
      Indemnitees for any 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 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 costs and
      expenses incurred by Lender, including all costs of settlements entered into
      in
      good faith, and the fees and out of pocket expenses of such attorneys and
      consultants.




(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




**34**


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 any 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 4.16 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;




(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




**35**


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 Borrower, (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




(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




**36**


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.




**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




(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.












**ARTICLE
      VIII**




**MISCELLANEOUS**




**8.1**  **Waiver** .
      No
      remedy conferred upon, or reserved to, Lender in this Agreement or any of the
      other Loan Documents is intended to be exclusive of any other remedy or
      remedies,




**37**


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 Lender shall not affect any
      subsequent right of Lender to exercise the same. No course of dealing between
      Borrower and Lender or any delay on Lender’s part in exercising any rights shall
      operate as a waiver of any of Lender’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 Lender.




**8.2**  **Costs
      and Expenses** .
      Borrower will bear all taxes, fees and expenses (including actual 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
      attorney’s fees arising from such services, including attorneys’ fees for
      preparation of litigation and in any appellate or bankruptcy proceedings, and
      any expenses, costs and charges relating thereto shall constitute additional
      obligations of Borrower to Lender payable on demand of Lender. Without limiting
      the foregoing, 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 Borrower fail to do so, Borrower
      agrees 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 Borrower’s failure to do so, Lender may make any payment or do any
      act on Borrower’s 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, 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.




**38**


**8.4**  **Indemnification** .
      Borrower shall, at its 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, diminutions
      in value, 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
      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




**39**


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.




**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:


3131
      Elliott Avenue, Suite 500


Seattle,
      Washington 98121


Attention:  Eric
      Mendelsohn,


Director
      of Real Estate and Business Legal Affairs





with
      a
      copy to:





David
      D.
      Buck




Riddell
      Williams P.S.




1001
      Fourth Avenue Plaza, Ste. 4500




Seattle,
      WA 98154




If
      to
      Lender:


Capmark
      Bank


6955
      Union Park Center, Suite 330


Midvale,
      Utah 84047


Attn:
      President








**40**


with
      a
      copy to:




Kay
      K.
      Bains


Bradley
      Arant Rose & White LLP


One
      Federal Place


1819
      5th
      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 Borrower or Lender shall be entitled to rely upon this Agreement
      or
      be entitled to the benefits of this Agreement.




**8.9**  **Participation** .
      Borrower acknowledges that Lender may, at its option, sell participation
      interests in the Loan or to other participating banks or Lender may (but shall
      not be obligated to) assign its interest in the Loan to its affiliates, or
      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). 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
      Lender may, at its sole option and without notice to or consent of Borrower,
      assign its interest in the Loan to the Assignee for inclusion in the REMIC
      and,
      in such event, 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.




**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.




**41**


**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.




**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 SOUTH CAROLINA AND THE PARTIES HERETO SUBMIT (AND
      WAIVE
      ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF
      SOUTH CAROLINA 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 A UNITED STATES DISTRICT COURT, IT SHALL BE BROUGHT IN THE UNITED
      STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA IN WHICH ANY FACILITY
      IS LOCATED 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.**




**42**







**BORROWER:**









**EMERI-SKY
      SC LLC,**




a
      Delaware limited liability company




By:
            EMERITUS
                CORPORATION,


a
      Washington corporation


Its
                Manager





By:
      /s/
      Eric Mendelsohn


Eric
      Mendelsohn


Its:  Director
      of Real Estate and Legal Affairs










**EMERIVILLE
      SC LLC,**




a
      Delaware limited liability company




By:
            EMERITUS
                CORPORATION,


a
      Washington corporation


Its
                Manager





By:
      /s/
      Eric Mendelsohn


Eric
      Mendelsohn


Its:  Director
      of Real Estate and Legal Affairs










**EMERIPARK
      SC LLC,**




a
      Delaware limited liability company




By:
            EMERITUS
                CORPORATION,


a
      Washington corporation


Its
                Manager





By:
      /s/
      Eric Mendelsohn


Eric
      Mendelsohn


Its:  Director
      of Real Estate and Legal Affairs








**43**





**LENDER:**




**WITNESS:**  CAPMARK
      BANK, a Utah industrial bank











/s/
      Lori K. Goobby     By:  s/
      Malana C. Bryant  (SEAL)





Lori
      K. Goobby     Name:  Malana
      C.
      Bryant


[Print
      Name]


Title:  Authorized
      Signer










**44**


**EXHIBIT
      “A”**









**LEGAL
      DESCRIPTION**









**45**





**EXHIBIT
      “B”**





**BORROWER’S
      PRINCIPAL PLACES OF BUSINESS**


**AND
      CHIEF EXECUTIVE OFFICE**





3131
      Elliott Avenue, Suite 500


Seattle,
      Washington 98121






**ADDRESSES
      OF FACILITIES:**




Skylyn
      Place


1705
      Skylyn Drive


Spartanburg,
      South Carolina











Countryside
      Village


706
      Pelzer Highway


Easley,
      South Carolina







Countryside
      Park


125
      Zion
      School Road


Easley,
      South Carolina















**46**


**EXHIBIT
      “C”**









**OWNERSHIP
      INTERESTS IN BORROWER**









100%
      owned by Emeritus Corporation


**47**


EXHIBIT
      “D”





QUARTERLY
      FINANCIAL STATEMENT AND CENSUS DATA


Facility
                Name:Management
                Company:Report
                Date:**Quarter**
              Ending
              (Date)
            
            **Quarter**
              Ending
              (Date)
            
            **Quarter**
              Ending
              (Date)
            
            **Quarter**
              Ending
              (Date)
            
            **12
                Mths.**
              Ending
              (Date)Census
                DataTotal
                Number of UnitsNumber
                of Days in PeriodTotal
                Resident Days AvailableResident
                Utilization DaysMedicaidPrivateMedicareOther
                Payor (Specify)Total
                Utilization Days**Average
                Occupancy**Debt
                Service Coverage Analysis(C)
            Net
                Routine Patient (Resident) RevenueOther
                RevenuesTotal
                RevenuesTotal
                ExpensesPre-Tax
                IncomeAdd
                BackDepreciation
                and AmortizationInterest
                on Capmark loan (or Facility Lease Expense)Extraordinary
                Items(A)
            Net
                Operating Income after Actual Management Fees(B)
            Principal
                and Interest payments due for the period**(A)
                (B)**
            **Debt
                Service Coverage after Actual Mgmt. Fees**(A)
            Net
                Operating Income after Actual Management Fees+
            Add
                BackActual
                Management Fees-
            Less(C)
                * 5%
            Assumed
                Management Fees (1)(D)
            Net
                Operating Income after Assumed Management Fees**(D)
                (B)**
            **Debt
                Service Coverage after Assumed Mgmt. Fees**




I
      certify
      the above to be true and correct. Dated this _____ day of
      _______________.




By:Name:


**48**





Title:




(1)
      Percentage used as defined in definitions section of Loan
      Agreement.










**49**


EXHIBIT
      “E”





COMPLIANCE
      CERTIFICATE


Capmark
      Bank











Re:
            Loan
                Agreement dated _____________, 2007 (together with amendments, if
                any, the
                “Loan Agreement”), by and amongCAPMARK
                BANK,
                as Lender, and EMERI-SKY SC LLC, a Delaware limited liability company,
                EMERIVILL SC LLC, a Delaware limited liability company, and EMERIPARK
                SC
                LLC, a Delaware limited liability company (together, collectively,
                with
                their respective successors and assigns, “Borrowers” or “Borrower”, and,
                individually, a “Borrower”), as
                Borrowers




The
      undersigned officer of the above-named Borrowers, does hereby certify that
      for
      the quarterly financial period ending __________________:




1.  No
      Default or Event of Default has occurred or exists except
      _____________.




2.  The
      Debt
      Service Coverage Ratio after deduction of Actual Management Fees for the
      preceding twelve (12) months (or such lesser period as shall have elapsed
      following the closing of the Loan) through the end of such period
      is:




Required:
            1.0
                to 1.0


Actual:   ___
      to
      1.0




**The
      manner of calculation is attached in** **Exhibit
      “D”** **to the Loan Agreement.**




3.  The
      Debt
      Service Coverage Ratio after deduction of Assumed Management Fees for the
      preceding twelve (12) months (or such lesser period as shall have elapsed
      following the closing of the Loan) through the end of such period
      is:




Required:
            1.35
                to 1.0


Actual:   ___
      to
      1.0




**The
      manner of calculation is attached in** **Exhibit
      “D”** **to the Loan Agreement.**




4.  The
      year
      to date average daily occupancy (on a twelve (12) calendar month rolling basis)
      for all Facilities is:




Required:
            Not
                less than 80%


Actual:   _____
      %









**50**


5.  **[ANNUAL
      COMPLIANCE CERTIFICATE ONLY]** The
      capital expenditures per unit are:




Required:
            $300.00
                per unit.


Actual:
            $______
                per unit.




**Evidence
      of such capital expenditures is attached hereto.**




6.  The
      outstanding principal balance of all Indebtedness (other than the Loan) of
      Borrower is $___________, consisting of the following:




**[Describe
      each debt and the balance thereof.]**




7.  If
      Borrower is a partnership, the outstanding principal balance of all indebtedness
      of the Borrower to its partners as of the date hereof is
      $____________.




8.  All
      representations and warranties made by Borrower in the Loan Agreement and in
      other Loan Documents are true and correct in all material respects as though
      given on the date hereof, except ________________________.




9.  All
      information provided herein is true and correct.




10.  Capitalized
      terms not defined herein shall have the meanings given to such terms in the
      Loan
      Agreement.




Dated
      this ______ day of _____________________, _______.




By:


Name:


Title:


**51**