Exhibit 10.1


    Exhibit
      10.1

    
 

    LOAN
      AGREEMENT

     

    THIS
      LOAN
      AGREEMENT (this “Agreement”)
      is
      made as of September 22, 2005, by and between ARC LAKEWAY, L.P., a Tennessee
      limited partnership (together with its successors and assigns, “Borrower”),
      and
      GMAC COMMERCIAL MORTGAGE BANK, a Utah industrial bank (together with its
      successors and assigns, “Lender”).

    


    RECITALS

     

    A. Borrower
      now owns a seventy-seven (77) unit assisted living facility (the “ALF”)
      and
      the Land (defined below) upon which the ALF is located.

    B. Borrower
      proposes to construct or to have constructed upon the Land a ninety-nine (99)
      bed skilled nursing facility (the “SNF”)
      in
      accordance with the Plans (defined below) which have been approved or are
      subject to approval by Lender.

    C. Borrower
      has applied to Lender for a $21,000,000 loan to finance the development of
      the
      Land and construction and equipping of the SNF, and Lender has agreed to make
      a
      loan in the aggregate principal amount of Twenty-One Million and No/100 Dollars
      ($21,000,000) (the “Loan”) to Borrower to refinance the ALF and for payment of
      such costs in connection with the SNF, as itemized on the Approved Budget
      (defined below). The Loan shall be evidenced by this Agreement and by the Note
      (defined below) and secured by the Security Instrument (defined below) covering
      the Mortgaged Property (defined below) and by such security instruments and
      additional documents as Lender may require, as hereinafter
      described.

    


    AGREEMENT

    NOW,
      THEREFORE, it is hereby agreed as follows:

    


    ARTICLE
      I

    DEFINITIONS,
      ACCOUNTING PRINCIPLES, UCC TERMS.

    Section
      1.1 Certain
      Defined Terms.

     

    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 Security Instrument.

     

    “Actual
      Management Fees” means for any period, actual management fees paid or incurred
      in connection with operation of the Facility.

     

    “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, a sufficient quantity of the Stock of
      such
      Person to elect a majority of the directors or other managers of such Person
      or
      otherwise to direct the policies and management of such Person, and
      (c) each of such Person’s officers, directors, members, and
      partners.

     

    “ALF”
      has
      the meaning given to that term in the Recitals

     

    “Approved
      Budget” means that certain budget that has been submitted by Borrower and
      approved by Lender, which identifies on a line item basis all costs to be
      incurred in connection with the development of the Land and construction and
      equipping of the SNF and all costs for which proceeds of the Loan are to be
      disbursed and which is attached hereto as Exhibit
      C,
      as the
      same may be revised by Borrower and approved by Lender from time to time in
      accordance with this Agreement.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    “Architect”
      means Earl Swensson Associates.

     

    “Assignment
      of Contracts” means that certain Assignment of Contracts executed by Borrower
      for the benefit of Lender of even date herewith, as amended from time to
      time.

     

    “Assignment
      of Leases and Rents” means that certain Assignment of Leases and Rents of even
      date herewith by Borrower to and for the benefit of Lender as amended from
      time
      to time.

     

    “Assumed
      Management Fees” means for any period an amount equal to five percent (5%) of
      gross resident/patient revenues (after deduction for Medicare adjustment) of
      the
      Facility during such period.

     

    “Business
      Day” means a day, other than (i) Saturday, Sunday or a legal holiday when Lender
      is open for business or (ii) a federal holiday.

     

    “Claim”
      has the meaning given to that term in Section
      8.10
      (Indemnity).

     

    “Closing
      Date” means the date of this Agreement and the Note.

     

    “Commitment
      Letter” means the commitment letter issued by Lender to Borrower dated September
      6, 2005, together with any and all amendments and/or supplements
      thereto.

     

    “Completion
      Date” means April 1, 2007 as such date may be extended from time to time solely
      by written approval of Lender.

     

    “Completion
      Guaranty” means that certain Completion Guaranty Agreement of even date herewith
      executed by Guarantor for the benefit of Lender guaranteeing completion of
      construction of the SNF, as amended from time to time.

     

    “Construction
      Contract” means that certain Owner-Contractor Agreement dated as of
      _____________ by and between Borrower and General Contractor, together with
      amendments and modifications thereto.

     

    “Costs
      of
      Construction” means all costs incurred or to be incurred in connection with the
      financing, developing, constructing, completing, start-up and leasing of the
      SNF, including, without limitation, construction period interest, reserves
      for
      operating deficits during lease-up and a developer fee.

     

    “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 Security Instrument.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Event
      of
      Default” means (a) in this Agreement, any “Event of Default” as defined in
ARTICLE
      IX
      (Events
      of Default and Remedies), and (b) with respect to any other Loan Document,
      any
“Event of Default” as such term is defined in such Loan Document.

     

    “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.

     

    “Facility”
      means “The Summit at Lakeway,” an existing seventy-seven (77) unit assisted
      living facility located on the Land and a ninety-nine (99) bed skilled nursing
      facility to be constructed on the Land, as each may now or hereafter exist,
      together with any other general or specialized care facilities, if any
      (including any Alzheimer’s care unit or subacute facility), now or hereafter
      operated on the Land.

     

    “Force
      Majeure” means events occasioned by strikes, lock-outs, inability to obtain
      labor or power through ordinary sources, war or civil disturbance, terrorism,
      criminal action, natural disaster or acts of God which cause a delay in
      Borrower’s performance of an obligation; provided, however, that Borrower must
      give notice to Lender within ten (10) days after the occurrence of an event
      which it believes to constitute an event of Force Majeure.

     

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

     

    “General
      Contractor” means American Constructors, Inc.

     

    “General
      Partner” means ARC Tennessee GP, Inc., a Tennessee corporation.

     

    “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 American Retirement Corporation, a Tennessee corporation.

     

    “Guaranty
      Agreement” means, collectively, that certain Exceptions to Nonrecourse Guaranty,
      that certain Operating Deficit Guaranty Agreement and that certain Completion
      Guaranty of even date herewith executed by Guarantor for the benefit of
      Beneficiary, as amended from time to time.

     

    “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. §9601, et
      seq.,
      the
      Resource Conservation and Recovery Act, 42 U.S.C. §6901, et
      seq.,
      the
      Toxic Substance Control Act, 15 U.S.C. §2601, et
      seq.,
      the
      Clean Water Act, 33 U.S.C. §1251, et
      seq.,
      and the
      Hazardous Materials Transportation Act, 49 U.S.C. §1801, and their state
      analogs.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Improvements”
      has the meaning given to that term in the Security Instrument.

     

    “Indebtedness”
      means any (a) obligations of Borrower for borrowed money, (b) obligations,
      payment for which is being deferred by more than sixty (60) 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 by Borrower, and (d) the
      amount of any other obligation (including obligations under financing leases)
      which would be shown as a liability on Borrower’s balance sheet prepared in
      accordance with GAAP, except those obligations for resident security deposits
      and pre-paid rent received from residents of the Facility and except those
      obligations described in (b) above, payment for which by their terms are being
      deferred by less than sixty (60) days.

     

    “Indemnified
      Parties” has the meaning given to that term in Section
      10.4
      (Indemnification)

     

    “Indemnitee”
      and “Indemnitees” have the meaning givens to those terms in Section
      8.10
      (Indemnity).

     

    “Inspector”
      means Mark Okubo, its successors and assigns.

     

    “Interest
      Reserve Account” means certain estimated accrued interest on the disbursed
      principal of the Note during the term of the Loan as specified in Section
      2.4
      (Interest Reserve Account).

     

    “Inventory”
      has the meaning given to that term in the Security Instrument.

     

    “Land”
      means the real estate located in Austin, Texas, which is more particularly
      described in Exhibit
      A
      attached
      hereto and upon which the Facility is located or is to be located and which
      is
      owned by Borrower.

     

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

     

    “Loan”
      means the loan in the maximum principal sum of $21,000,000.00 made by Lender
      to
      Borrower in accordance with the terms hereof.

     

    “Loan
      Documents” means, collectively, this Agreement, the Assignment of Contracts, the
      Note, the Guaranty, the Completion Guaranty, the Operating Deficit Guaranty,
      the
      Security Instrument, the Assignment of Leases and Rents, and the Subordination
      of Management Agreement, together with any and all other documents executed
      by
      Borrower or others evidencing, securing or otherwise relating to the
      Loan.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

    “Major
      Subcontractors” means subcontractors which have entered into subcontracts with
      the General Contractor in connection with construction of the
      Facility.

     

    “Management
      Agreement” means that certain Management Agreement dated July 1, 2005 between
      Manager and Borrower obligating Manager to operate and manage the Facility,
      as
      amended from time to time, and any other Management Agreement approved by
      Lender.

     

    “Manager”
      means ARC Management, LLC, a Tennessee limited liability company and any other
      manager of the Facility approved by Lender in writing.

     

    “Maturity
      Date” has the meaning given to that term in the Note.

     

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

     

    “Medicare”
      means that certain federal program providing health insurance for eligible
      elderly and other individuals, under which physicians, hospitals, memory
      enhancement homes, 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.

     

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

     

    “Mortgagee’s
      Title Insurance Policy” means the Title Insurance Policy No. 2011000020 issued
      by Lawyers Title Insurance Corporation, together with any and all endorsements
      thereto now existing or hereafter issued.

     

    “Net
      Operating Cash Flow” means all of the Rents and any other cash proceeds received
      by Borrower from or in connection with the operation of the Land, the
      Improvements and the Facility less any operating expenses incurred by Borrower
      and approved by Lender (which approval shall not be unreasonably withheld)
      in
      connection with the maintenance of the Land, the Improvements and the Facility
      (including reasonable reserves), the payment of insurance premiums and real
      property taxes thereon, but excluding (a) the payment of any debt service on
      the
      Loan, (b) depreciation, amortization and other non-cash items and (c) the
      payment of any debt service on any other loan unless consented to by
      Lender.

     

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

     

    “OFAC
      List” means the list of specially designated nations 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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Offsite
      Materials” has the meaning given to that term in Section
      7.5
      (Offsite
      Materials).

     

    “Offsite
      Supplier” has the meaning given to that term in Section
      7.5
      (Offsite
      Materials).

     

    “Operating
      Deficit Guaranty” means that certain Operating Deficit Guaranty of even date
      herewith executed by Guarantor for the benefit of Borrower and assigned to
      Lender, as amended from time to time.

     

    “Payment
      and Performance Bonds” means those certain payment and performance bonds
      provided by or on behalf of the Contractor and more fully described on
Exhibit
      B
      attached
      hereto and incorporated herein.

     

    “Permits”
      has the meaning given to that term in the Security Instrument.

     

    “Permitted
      Change Orders” means modifications of the Plans which (a) for any single
      modification, result in an increase in construction costs of the Facility in
      the
      amount of Seventy-Five Thousand Dollars ($75,000) or less, or, if in excess
      of
      Seventy-Five Thousand Dollars ($75,000) are made with the prior written consent
      of Lender and (b) together with all prior modifications to the Plans, whether
      or
      not previously approved by Lender, (i) result in an aggregate increase in
      construction costs of the Facility in excess of Two Hundred Fifty Thousand
      Dollars ($250,000) and are made with the prior written consent of Lender, or
      (ii) result in an aggregate increase in construction costs of the Facility
      in an
      amount equal to or less than Two Hundred Fifty Thousand Dollars ($250,000)
      for
      all such modifications; provided, however, that Permitted Change Orders does
      not
      mean and does not include any extension of the date of “Substantial Completion”,
      as defined in the Construction Contract.

     

    “Permitted
      Encumbrances” has the meaning given to that term in Section
      6.2
      (No
      Liens, Exceptions).

     

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

     

    “Plans”
      means those certain plans and specifications more particularly described on
      Exhibit
      B
      attached
      hereto as revised from time to time by Permitted Charge Orders.

     

    “Proceeds”
      has the meaning given to that term in the Security Instrument.

     

    “Prohibited
      Activity and Condition” and “Prohibited Activities and Conditions” have the
      meanings given to those terms in Section 8.1.

     

    “Project
      Jurisdiction” means the state in which the Mortgaged Property is
      located.

     

    “Projected
      Stabilization Date” means July 1, 2008 which is the Stabilization Date as
      estimated by Lender, or such later date as may be approved by Lender after
      the
      occurrence of an event of Force Majeure.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    “Qualified
      Insurer” means an insurance carrier holding a rating of at least “AX” according
      to the Standard and Poor’s Rating’s Services issued most recently during the
      year of the Closing Date.

     

    “Reimbursement
      Contracts” has the meaning given to that term in the Security
      Instrument.

     

    “Rents”
      has the meaning given to that term in the Security Instrument.

     

    “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.

     

    “Security
      Instrument” means that certain Deed of Trust, Security Agreement and Fixture
      Filing of even date herewith from Borrower in favor of or for the benefit of
      Lender, encumbering the Land, as amended from time to time.

     

    “Single
      Purpose Entity” means, with respect to Borrower, a Person which owns no interest
      or property other than the Mortgaged Property.

     

    “SNF”
      has
      the meaning given to that term in the Recitals.

     

    “Stabilization
      Date” means the date on which the Facility has maintained an Occupancy Rate of
      eighty percent (80%) for a consecutive ninety (90) day period.

     

    “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
      of Management Agreement” means that certain Subordination of Management
      Agreement of even date herewith by and among Borrower, Manager and Lender,
      as
      amended form time to time.

     

    “Substantial
      Completion Date” means October 1, 2006.

     

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

     

    Section
      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.

     

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

     

    
      
        
        

      

      
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    Section
      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.

     

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

    


    ARTICLE
      II

    TERMS
      OF THE LOAN AND CONDITIONS PRECEDENT TO LOAN CLOSING

    Section
      2.1 The
      Loan.

     

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

     

    Lender
      will make advances of Loan proceeds in accordance with the terms and conditions
      set forth in Articles IV and VII hereof.

     

    Section
      2.2 Security
      for the Loan.

     

    The
      Loan
      will be evidenced, secured and guaranteed by the Loan Documents.

     

    Section
      2.3 Limitation
      on Interest.

     

    All
      agreements between Borrower 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 the Borrower and Lender.

     

    Section
      2.4 Interest
      Reserve Account.

     

    The
      amount of the Loan has been determined on the basis of a certified cost
      breakdown for the Land and the SNF prepared by Borrower and submitted to Lender
      and memorialized in the Approved Budget setting forth the estimated cost for
      the
      construction and equipping of the SNF and accrued interest on the disbursed
      principal of the Loan from the date of the initial advance under the Loan to
      and
      including the Projected Stabilization Date. Such accrued interest is estimated
      not to exceed the sum of Nine Hundred Ninety-Two Thousand Five Hundred Thirty
      Six and No/100 Dollars ($992,536.00). Subject to the conditions set forth in
      ARTICLE
      IV
      (Conditions Precedent to Loan Advances), on the first day of each month, Lender
      will disburse a portion of the principal of the Loan sufficient to pay accrued
      interest then due and payable on the Note, and the amount thereof shall reduce
      the balance of the Interest Reserve Account. However, to the extent that Net
      Operating Cash Flow is available for the month preceding the month for which
      interest is due under the Note, Borrower shall apply all such Net Operating
      Cash
      Flow toward the payment of interest due under the Note. Notwithstanding anything
      to the contrary above, Lender shall not be obligated to make any disbursements
      from the Interest Reserve Account for the payment of interest due under the
      Note
      until Borrower has so applied the Net Operating Cash Flow and has timely
      submitted its operating statements pursuant to Section
      5.6
      (Financial and Other Information). Under no circumstances shall the undisbursed
      principal of the Note be disbursed to pay accrued interest thereon upon
      depletion of the balance of the Interest Reserve Account. The depletion of
      the
      Interest Reserve Account shall not in any manner affect or impair Borrower’s
      obligation to continue to pay all interest accruing on the Loan. In lieu of
      disbursing principal of the Note to Borrower for payment of accrued interest
      thereon, Lender may handle such disbursement and payment by making appropriate
      entries on the books and records of Lender, whereupon a statement summarizing
      such entries shall be furnished to Borrower within fifteen (15) Business Days
      after such entry.

     

    
      
        
        

      

      
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    Section
      2.5 Completion.

     

    Upon
      (a)
      completion of the construction of the SNF as set forth in Section
      4.3(a)
      (Conditions Precedent to Final Construction Advance) and (b) the achievement
      of
      sufficient Net Operating Cash Flow to pay the debt service on the Loan, Borrower
      shall have the right to transfer the then remaining portion of the Interest
      Reserve Account to further fund the line item category in the Approved Budget
      known as operating deficits/working capital reserve.

     

    Section
      2.6 Fees.

     

    Borrower
      shall pay or cause to be paid to Lender on or before the closing of the Loan
      a
      non-refundable commitment fee equal to one percent (1%) of the face amount
      of
      the Note.

     

    Section
      2.7 Documents
      and Due Diligence Items.

     

    Lender’s
      obligation to make the Loan and perform its duties under this Agreement shall
      be
      subject to Lender’s receipt, review and approval, in its sole discretion, prior
      to the Closing Date, of the following items to the extent that such items have
      not been received and approved by Lender prior to the date of the Commitment
      Letter.

     

    (a) A
      complete set of the final Plans which must have also been approved by all
      Governmental Authorities having jurisdiction therefor;

     

    (b) A
      fully
      executed guaranteed maximum price construction
      contract for Twelve Million Five Thousand Eight Hundred Fifteen and No/100
      Dollars ($12,005,815) between Borrower and General Contractor for construction
      of the Improvements;

     

    (c) A
      list of
      Major Subcontractors and related subcontracts not previously submitted to
      Lender;

     

    (d) If
      required by Lender, written consents from each subcontractor to the assignment
      of General Contractor’s interest in the subcontracts to Lender upon Borrower’s
      default under this Agreement and subcontractor’s receipt of written notice from
      Lender that the assignment is effective;

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (e) A
      Payment
      and Performance Bond satisfactory to Lender for the General
      Contractor;

     

    (f) Evidence
      satisfactory to Lender that Borrower and Guarantor, and the persons signing
      on
      behalf of Borrower and Guarantor, respectively, have the capacity and authority
      to execute and deliver the Loan Documents on behalf of Borrower and Guarantor
      respectively. Such documentation shall include, without limitation, the
      following: (i) if Borrower or any entity which is a part thereof, or Guarantor,
      is a limited liability company, a copy of the operating agreement, certified
      as
      true, complete and in full force and effect by the managing member or all
      members, a copy of the certificate of formation, a certificate of status, and
      a
      limited liability company resolution authorizing the company to enter into
      the
      Loan and the members to execute the Loan Documents, (ii) if Borrower or any
      entity which is a part thereof, or Guarantor, is a partnership, receipt by
      Lender of a copy of the partnership agreement certified as true, complete and
      in
      full force and effect by one of the general partners, and a copy of the recorded
      Statement of Partnership or Certificate of Limited Partnership, whichever is
      applicable, and a certificate of good standing or existence, or (iii) Borrower
      or any entity which is a part thereof, or Guarantor, is a corporation, receipt
      by Lender of copies of its Articles of Incorporation and Bylaws certified as
      true, complete and in full force and effect by the Secretary of the corporation,
      and a certified copy of a corporate resolution authorizing the corporation
      to
      enter into the Loan and the appropriate corporate officers to execute the Loan
      Documents, the Completion Guaranty, the Guaranty, the Operating Deficit Guaranty
      and a certificate of good standing;

     

    (g) All
      taxes, fees and other charges in connection with the execution, delivery and
      recording of the Loan Documents shall have been paid, and all delinquent taxes,
      assessments or other governmental charges or liens affecting the Mortgaged
      Property, if any, shall have been paid;

     

    (h) At
      Borrower’s expense, Lender shall be furnished with an ALTA policy of title
      insurance (Form B-1970 or B-1992), in marked-up “pro forma” policy form together
      with such endorsements thereto as Lender may require, containing no exceptions
      other than Permitted Encumbrances, issued in substance and in form by a company
      or companies approved by Lender. Lender may require satisfactory evidence that
      the Mortgaged Property meets all applicable requirements of the Subdivision
      Map
      Act, if applicable;

     

    (i) Lender
      shall require a legal opinion satisfactory to Lender from Borrower’s and
      Guarantor’s counsel confirming that all of the documents and other matters
      relating to the Loan are valid, enforceable and binding in accordance with
      their
      terms and do not violate any applicable laws, including usury laws, opining
      as
      to any requirement of a recorded notice of completion as may be contemplated
      by
      the laws of the State in which the SNF is located with respect to mechanics’
      liens, and opining as to such other and further matters as Lender, in its
      discretion, may require regarding Borrower, the Mortgaged Property, and/or
      the
      Facility;

     

    (j) An
      ALTA
      minimum standard survey of the Land and the Improvements acceptable to Lender
      and the title insurance company issuing the title insurance policy referred
      to
      above and meeting the requirements of Lender, dated no more than ninety (90)
      days prior to the Closing Date and, showing no state of facts objectionable
      to
      Lender, together with a certificate from the licensed survey or, approved by
      Lender, that prepared the survey;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (k) A
      current
      report regarding the possible presence of any Hazardous Materials on, in or
      around the Land and the Improvements. Such report shall be in form and substance
      acceptable to Lender, prepared by a registered, certified engineer or geologist
      acceptable to Lender, and showing no state of facts objectionable to
      Lender;

     

    (l) An
      appraisal of the Mortgaged Property current within six (6) months of the date
      of
      this Agreement and prepared by an appraiser satisfactory to Lender. The
      appraisal must comply with the requirements of Lender as to form and content.
      The appraisal shall, among other things, reflect a loan to stabilized value
      ratio for the Facility of not greater than seventy-five percent
      (75%);

     

    (m) Front
      end
      plan of construction and cost review conducted by the Inspector, at Borrower’s
      expense;

     

    (n) A
      feasibility study for the SNF to be reviewed on Lender’s behalf by a consultant
      or company acceptable to Lender or, if required by Lender, a feasibility study
      for the Improvements obtained by Lender at Borrower’s expense;

     

    (o) Copies
      of
      all building permits, grading permits and any and all other permits necessary
      and required for the construction of the Improvements in accordance with the
      Plans;

     

    (p) Current
      financial statements for Borrower and Guarantor;

     

    (q) Evidence
      satisfactory to Lender (such as “will serve” letters or copies of existing
      invoices from appropriate governmental entities) of the availability to the
      Land
      of all public utility services and facilities when needed for construction
      and/or use, occupancy and operation of the Improvements;

     

    (r) Evidence
      satisfactory to Lender that Borrower has complied with all covenants,
      conditions, restrictions and reservations affecting the Land, that the Land
      is
      duly and validly zoned for the intended use, and that Borrower has obtained
      all
      zoning, subdivision and environmental approvals, permits and maps required
      to be
      obtained in order to construct the SNF;

     

    (s) A
      soils
      and geological report prepared by a licensed engineer acceptable to Lender,
      certifying in a manner satisfactory to Lender the adequacy of the subsoils
      and
      the foundation design of the SNF;

     

    (t) A
      site
      plan showing the location of any existing improvements, the proposed location
      of
      the SNF to be constructed in accordance with the Plans, and the location of
      all
      parking areas, listing the number of parking spaces provided by such parking
      areas and the number of parking spaces required by applicable zoning ordinances
      and certified by the Architect to be true and correct based upon the
      Plans;

     

    (u) Evidence
      satisfactory to Lender that the Land is not located in an area identified as
      a
      flood prone area as defined by the U.S. Department of Housing and Urban
      Development pursuant to the Flood Disaster Act of 1973;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (v) A
      Construction Loan Disbursement Agreement of even date herewith, signed by
      Borrower, Lender, General Contractor and Lawyers Title Insurance
      Corporation;

     

    (w) Except
      as
      set forth in Exhibit H hereto, if required by Lender, proof that all permits,
      consents and approvals required for the construction of the Improvements have
      been obtained, and any condition to such approvals must be acceptable to Lender
      in its sole discretion; and

     

    (x) Any
      other
      documents and assurances as Lender may reasonably request.

     

    Section
      2.8 Post-Closing
      Requirements.

     

    Lender’s
      obligation to perform its duties under this Agreement shall be subject to
      Lender’s receipt, review and approval, in its sole discretion, of the items set
      forth on Exhibit
      H
      attached
      hereto and incorporated herein (the “Post-Closing Items”), by the date that is
      thirty (30) calendar days after the Closing Date. The delivery of the
      Post-Closing Items in accordance with the terms of this Section
      2.8
      shall be
      an additional condition precedent to (a) the next advance of Loan funds after
      the initial advance, if the initial advance of Loan funds is made on the Closing
      Date, or (b) the initial advance of Loan funds, if such initial advance is
      to be
      made subsequent to the Closing Date. The failure of Borrower to deliver the
      Post-Closing Items in accordance with the terms of this Section
      2.8
      shall
      constitute an Event of Default under this Agreement.

    


    


    ARTICLE
      III

    BORROWER’S
      REPRESENTATIONS AND WARRANTIES

     

    To
      induce
      Lender to enter into this Agreement, and to make the Loan to Borrower, Borrower
      represents and warrants to Lender as follows:

     

    Section
      3.1 Existence,
      Power and Qualification.

     

    Borrower
      is a limited partnership, duly organized and validly existing under the laws
      of
      the State of Tennessee, 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. General Partner is a duly organized and validly existing corporation,
      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.

     

    Section
      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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    Section
      3.3 Due
      Execution and Enforcement.

     

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

     

    Section
      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 any
      Reimbursement Contracts. Borrower is not in violation of any agreement, order,
      judgment, or decree of any court, or any statute or governmental regulation
      to
      which it is subject, the violation of which might reasonably be expected to
      have
      a materially adverse effect on Borrower’s business, financial condition or
      prospects.

     

    (b) Condemnation
      or Casualty. 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 and/or the Improvements or the operation of the
      Facility in any manner. None of the Improvements is subject to any unrepaired
      casualty or other damage.

     

    Section
      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 respective financial condition of Borrower as of such dates,
      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
      and certified by Borrower. 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 to Lender with the delivery
      of such statements or prior to the Closing Date. All financial statements of
      the
      operations of the Facility heretofore or hereafter provided to Lender are and
      will be true and complete in all material respects as of their respective
      dates.

     

    Section
      3.6 Compliance
      with Licensure Laws.

     

    The
      ALF
      is duly licensed as an assisted living facility under the applicable laws of
      the
      Property Jurisdiction. Upon the Completion Date, the SNF shall be duly licensed
      as a skilled nursing facility under the applicable laws of the Project
      Jurisdiction. Borrower is the lawful owner of all Permits for the ALF
      (including, without limitation, any applicable certificate of need), and for
      the
      construction of the SNF, and all such Permits (a) are in full force and effect,
      (b) constitute all of the permits, licenses and certificates required
      for
      the use, operation and occupancy thereof (to the extent applicable to the SNF),
      (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 restricted in any way. Borrower, Manager and
      the Facility are in compliance in all material respects with the applicable
      provisions of nursing home and/or assisted living facility, independent living
      facility and/or memory enhancement facility laws, rules, regulations and
      published interpretations to which the Facility is subject. No waivers of any
      laws, rules, regulations or requirements (including, but not limited to, minimum
      area requirements per unit) are required for the ALF to operate at the foregoing
      licensed unit capacity. All Reimbursement Contracts with respect to the
      Facility, if any, are in full force and effect, and Borrower and Manager are
      in
      good standing with all respective agencies governing such applicable licenses,
      program certification, and Reimbursement Contracts, if any, and Borrower is
      current in the payment of all assessments with respect to such Reimbursement
      Contracts. Borrower will maintain or cause Manager to maintain (without allowing
      to lapse) any required Permits.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    Section
      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 and all of the licensed Facility units to any other
      location.

     

    Section
      3.8 Medicare
      and Medicaid Compliance.

     

    If
      and to
      the extent applicable, 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. If and to the extent
      applicable, 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.

     

    Section
      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 applicable Medicare, Medicaid and private insurance
      cost reports and financial reports submitted by Borrower or Manager are and
      will
      be materially accurate and complete and have not been and will not be misleading
      in any material respects. No cost reports for the Facility remain “open” or
      unsettled, except as otherwise disclosed.

     

    Section
      3.10 Governmental
      Proceedings and Notices.

     

    Neither
      Borrower, 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 a governmental agency, 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 patients or residents or result in the imposition of a fine, a sanction,
      a lower rate certification or a materially lower reimbursement rate for services
      rendered to eligible patients or residents; or 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (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 or Manager’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.

     

    Section
      3.11 Physical
      Plant Standards.

     

    The
      Facility and the use thereof complies and will continue to comply upon
      completion of construction in all material respects with all applicable local,
      state and federal building codes, fire codes, zoning codes, use restrictions,
      health care, nursing facility and other similar regulatory requirements (the
      “Physical Plant Standards”), and no waivers of Physical Plant Standards exist at
      the Facility.

     

    Section
      3.12 Pledge
      of Receivables.

     

    Borrower
      has not pledged its Accounts as collateral security for any loan or Indebtedness
      other than the Loan.

     

    Section
      3.13 Payment
      of Taxes and Property Impositions.

     

    Borrower
      has filed, or caused to be filed, all federal, state, and local tax returns
      which it is required to file, prior to delinquency, and has paid, or made
      adequate provision for the payment of, all taxes which are shown pursuant to
      such returns or are required to be shown thereon or to assessments received
      by
      Borrower, including, without limitation, provider taxes. All such returns are
      complete and accurate in all material respects. Borrower has paid or made
      adequate provision for the payment of all applicable water and sewer charges,
      government assessments, ground rents (if applicable) and Taxes (as defined
      in
      the Security Instrument) with respect to the Land and/or the
      Improvements.

     

    Section
      3.14 Title
      to 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 Security Instrument or the current use of the
      Land and the Improvements. All Improvements situated on the Land are situated
      wholly within the boundaries of the Land.

     

    Section
      3.15 Priority
      of Security Instrument.

     

    The
      Security Instrument constitutes a valid first lien against the real and personal
      property described therein, prior to all other liens or encumbrances, including
      those which may hereafter accrue, excepting only Permitted Encumbrances, which
      Permitted Encumbrances 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
      Security Instrument or (c) the current use and operation of the Land and the
      Improvements.

     

    Section
      3.16 Location
      of Chief Executive Offices.

     

    The
      location of Borrower’s principal place of business and chief executive office
      are set forth in Section
      10.7
      (Notices, Etc.).

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    Section
      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.

     

    Section
      3.18 Trade
      Names.

     

    Neither
      Borrower nor the Facility, which operates under the trade name “The Summit at
      Lakeway”, 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

     

    Section
      3.19 ERISA.

     

    As
      of the
      date hereof and throughout the term of this Agreement,

     

    (a) Borrower
      is not and will not be 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 constitutes
      or
      will 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 and will not be a “governmental plan” within the meaning of Section 3(32)
      of ERISA, and transactions by or with Borrower are not and will not be subject
      to state statutes applicable to Borrower 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, does 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”).
      Borrower shall not engage in a non-exempt prohibited transaction described
      in
      Section 406 of ERISA or Section 4975 of the Code, as such sections relate to
      Borrower, or in any transaction that would cause any obligation or action taken
      or to be taken hereunder or the exercise by Lender of any of its rights under
      the Loan Documents) to be a non-exempt prohibited transaction under
      ERISA.

     

    Section
      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
      D
      hereto.

     

    Section
      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. Construction of the SNF and the intended use, occupancy and
      operation thereof will in all respects conform to and comply with all covenants,
      conditions, restrictions and reservations affecting the Land and the
      Improvements and with all applicable zoning, environmental protection, use
      and
      building codes, laws, regulations and ordinances.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    Section
      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.

     

    Section
      3.23 Other
      Indebtedness.

     

    Borrower
      has no outstanding Indebtedness, secured or unsecured, direct or contingent
      (including any guaranties), other than (a) the Loan, (b) Indebtedness which
      represents trade payables or accrued expenses incurred in the ordinary course
      of
      business of owning and operating the Mortgaged Property and (c) Indebtedness
      which represents resident security deposits and pre-paid rent received from
      residents of the Facility; no other debt will be secured (senior, subordinate
      or
pari
      passu)
      by the
      Mortgaged Property.

     

    Section
      3.24 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 this Agreement, the Note,
      the Security Instrument and the other Loan Documents.

     

    Section
      3.25 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).

     

    Section
      3.26 Management
      Agreement.

     

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

     

    Section
      3.27 Access
      to the Property.

     

    All
      roads, streets, traffic turn lanes and accessways necessary for the full
      utilization of the SNF for its intended purposes have either been completed
      or
      the necessary rights of way therefor have either been acquired by the
      appropriate Governmental Authority or have been dedicated to public use and
      accepted by said Governmental Authority, and all necessary steps have been
      taken
      by Borrower and said Governmental Authority to assure the complete construction
      and installation thereof by the time needed for construction and/or occupancy
      and operation of the SNF.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    Section
      3.28 Utilities.

     

    All
      utility services and facilities necessary for the construction of the SNF and
      the operation thereof for their intended purposes are either available at the
      boundaries of the Land, or, if not, all necessary steps have been or are being
      taken by Borrower and the local authority or public utility company which
      provides such services to assure the complete installation and availability
      thereof when needed for construction and/or occupancy and operation of the
      SNF.

     

    Section
      3.29 Approval
      of Plans and Budget.

     

    The
      Plans
      are a true and accurate reflection of the SNF that Borrower intends to and
      shall
      construct and there have been no modifications to or refinements of the Plans.
      The Plans are satisfactory to Borrower and have been approved by Borrower,
      and
      have also been approved as required by all governmental bodies or agencies
      having jurisdiction and by the beneficiary of any applicable restrictive
      covenant affecting the Land. After diligent investigation of all relevant
      conditions and due consultation with such parties as Borrower deems appropriate,
      Borrower represents that the Approved Budget attached as Exhibit
      C
      reflects
      Borrower’s best true, accurate and complete estimate of the costs shown therein
      and of the costs estimated to be necessary to construct the SNF in accordance
      with the Plans.

     

    Section
      3.30 Single
      Purpose Entity.

     

    Borrower
      is a Single Purpose Entity.

     

    Section
      3.31 Incorporation
      of Representation and Warranties.

     

    The
      request by Borrower for any advance of Loan proceeds under this Agreement shall
      constitute a certification by Borrower that the aforesaid representations and
      warranties are true and correct as of the date of such request, except with
      respect to financial statements to the extent that such statements have been
      prepared with respect to an earlier date, and matters pertaining to the period
      of time after the Completion Date.

     

    Section
      3.32 No
      Illegal Activity as Source of Funds.

     

    No
      portion of the Mortgaged Property has been or will be purchased, improved,
      equipped or furnished with proceeds of any illegal activity.

     

    Section
      3.33 Compliance
      with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
      Laws.

     

    Borrower,
      and to the best of Borrower’s knowledge, after having made diligent inquiry, (a)
      each Person owning an interest in Borrower, (b) General Partner, (c) the Manager
      and (d) each tenant at the Mortgaged 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.

     

    Section
      3.34 Compliance
      with Health Care Laws.

     

    (a) Without
      limiting the generality of any other provision of this Agreement, including,
      without limitation, any other representation or warranty made herein, Borrower,
      Manager and the Mortgaged Property and, to Borrower’s knowledge, each of
      Borrower’s or Manager’s licensed employees and contractors (other than
      contracted agencies) in the exercise of their respective duties on behalf of
      Borrower or Manager (with respect to its operation of the Mortgaged Property)
      or
      any portion of the Mortgaged Property, is in material compliance with all
      applicable statutes, laws, ordinances, rules and regulations of any federal,
      state or local governmental authority with respect to regulatory matters
      primarily relating to patient healthcare and/or patient healthcare information,
      including without limitation, if applicable, the Health Insurance Portability
      and Accountability Act of 1996, as amended, and the rules and regulations
      promulgated thereunder (“HIPAA”) (collectively, “Healthcare Laws”)). Borrower
      and/or Manager, as applicable, has maintained in all material respects all
      records required to be maintained by any applicable governmental agency or
      authority or otherwise under the Healthcare Laws and, to the knowledge of
      Borrower, there are no presently existing circumstances which would result
      or
      likely would result in material violations of the applicable Healthcare Laws.
      Borrower and/or Manager, as applicable, and its or their respective Affiliates
      have such permits, licenses, franchises, certificates and other approvals or
      authorizations of governmental or regulatory authorities as are necessary under
      applicable law to own or lease, their respective projects and to conduct their
      respective business in connection with the projects (including without
      limitation such permits as are required under such Healthcare
      Laws).

     

    
      
        
        

      

      
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    (b) To
      the
      extent that and for so long as (i) Borrower or Manager is a “covered entity”
      within the meaning of HIPAA or (ii) Borrower or Manager (with respect to its
      operation of the Mortgaged Property) and/or their respective business and
      operations (with respect to the Mortgaged Property) are subject to or covered
      by
      the so-called “Administrative Simplification” provisions of HIPAA, such entity
      (A) has undertaken or will undertake in a timely manner all necessary surveys,
      audits, inventories, reviews, analyses and/or assessments (including any
      necessary risk assessments) or all areas of its business and operations required
      by HIPAA and/or that could adversely affected by the failure of such entity
      to
      be HIPAA Compliant (as defined below); (B) has developed or will develop in
      a
      timely manner a detailed plan and time line for becoming HIPAA Compliant (a
      “HIPAA Compliance Plan”); and (C) has implemented or will implement those
      provisions of such HIPAA Compliance Plan in all material respects necessary
      to
      ensure that such entity is or becomes HIPAA Compliant. For purposes hereof,
      “HIPAA Compliant” shall mean that Borrower or Manager, as applicable (1) is or
      will be in compliance with each of the applicable requirements of the so-called
      “Administrative Simplification” provisions of HIPAA on and as of each date that
      any part thereof, or any final rule or regulation thereunder, becomes effective
      in accordance with its or their terms, as the case may be (each such date,
      a
“HIPAA Compliance Date”) and (2) is not and could not reasonably be expected to
      become, as of any date following any such HIPAA Compliance Date, the subject
      of
      any civil or criminal penalty, process, claim, action or proceeding, or any
      administrative or other regulatory review, survey, process or proceeding, (other
      than routine surveys or reviews conducted by any governmental health plan or
      other accreditation entity) that could result in any of the foregoing or that
      could reasonably be expected to adversely affect Borrower’s or Manager’s
      business, operations, assets, properties or condition (financial or otherwise),
      in connection with any actual or potential violation by any such entity of
      the
      then effective provisions of HIPAA.

     

    (c) During
      the course of Lender's, its agents' or employees' inspection of the Facility
      pursuant to the terms of the Agreement, Lender, its agents or employees may
      encounter individually identifiable healthcare information or other confidential
      information relating to the residents at the Facility (collectively, the
      "Confidential
      Information").
      Unless otherwise required by law, Lender, its agents and employees shall not
      disclose, compile, aggregate, remove from the Facility or record in any manner
      any Confidential Information, and shall not cause Borrower or the Facility
      to
      violate any laws, regulations or ordinances intended to protect the privacy
      rights of the residents at the Facility, including, without limitation, the
      HIPAA or its implementing regulations.

    


    
      
        
        

      

      
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    Section
      3.35 No
      Change in Facts or Circumstances.

     

    All
      information in the 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, except to the extent updated
      or
      modified in the Loan Documents and the corresponding Exhibits. There has been
      no
      material adverse change in any fact or circumstance that would make any such
      information incomplete or inaccurate.

     

    Section
      3.36 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 in violation of the anti-kickback law, 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 in violation of the anti-kickback law.

     

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

     

    (c) Required
      Adjustments.
      All cost
      report periods for all Facility payors, that in the normal course of the
      operations of the Facility should have been closed and settled, have been closed
      and settled, and all required adjustments have been fully paid and/or
      implemented for such report periods.

    


    ARTICLE
      IV

    CONDITIONS
      PRECEDENT TO LOAN ADVANCES

     

    Section
      4.1 Conditions
      Precedent to Initial Construction Advance.

     

    Lender’s
      obligation to make the initial advance of Loan proceeds pursuant to the terms
      hereof (including, without limitation Section 7.1 hereof) shall be subject
      to
      receipt of the following documents and satisfaction of the following conditions
      precedent:

     

    (a) Receipt
      by Lender of satisfactory evidence described in Section
      7.2
      (Borrower’s Funds), that Borrower has paid the equity contribution required
      pursuant to that Section or satisfactory evidence that Borrower has sufficient
      cash or other liquid collateral available to pay such equity
      contribution.

     

    (b) A
      list of
      all Major Subcontractors identified by the General Contractor, and related
      subcontracts not yet reviewed by Lender.

     

    (c) No
      condition to subsequent construction advances as set forth in Section
      4.2(a),
      (b)
      or (c) (Conditions Precedent to Subsequent Construction Advances) hereof shall
      be breached with respect to the first advance.

     

    
      
        
        

      

      
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    (d) Receipt
      by Lender of any other documents and assurances as it may reasonably
      request.

     

    Section
      4.2 Conditions
      Precedent to Subsequent Construction Advances.

     

    In
      addition to compliance with the conditions precedent set forth in Section
      4.1
      (Conditions Precedent to Initial Construction Advance), Lender’s obligation to
      make any advance of Loan funds after the initial advance shall be subject to
      satisfaction of the following conditions precedent:

     

    (a) Borrower
      shall be in full compliance hereunder and shall not be in Default hereunder
      or
      under any of the Loan Documents; provided, however, that Lender may, in its
      discretion, elect to make advances notwithstanding the existence of a Default,
      and any advance so made shall be deemed to have been made pursuant to this
      Agreement and shall be secured by the Loan Documents.

     

    (b) Neither
      the Improvements, to the extent then constructed, nor the Land nor any part
      thereof shall have been materially damaged, destroyed, condemned or threatened
      with condemnation.

     

    (c) No
      order
      or notice shall have been made by, or received from, any Governmental Authority
      having jurisdiction stating that the work of construction is or will be in
      violation of any law, ordinance, code or regulation affecting the Land and/or
      the Improvements.

     

    (d) Prior
      to
      each disbursement, Lender may, if it determines that such endorsements are
      necessary to protect its first lien, require such endorsements to its title
      insurance policy as Lender may, in its sole discretion, determine are necessary.
      The form and substance of such endorsements must be satisfactory to Lender
      in
      its sole discretion.

     

    (e) A
      list of
      any additional Major Subcontractors together with related subcontracts not
      previously submitted to Lender.

     

    (f) Receipt
      by Lender of a report from Architect certifying the amount of such disbursement
      fairly reflects the value of the work and materials incorporated into the SNF
      and that the work being paid for has been satisfactorily completed in accordance
      with the Plans.

     

    (g) Receipt
      and approval by Lender of an updated environmental assessment report if
      requested by Lender in its sole discretion.

     

    Section
      4.3 Conditions
      Precedent to Final Construction Advance.

     

    In
      addition to the conditions set forth in Section
      4.1
      (Conditions Precedent to Initial Construction Advance) and Section
      4.2
      (Conditions Precedent to Subsequent Construction Advance), Lender’s obligation
      to make the final construction advance of retained Loan funds shall be subject
      to the satisfaction of the following conditions precedent.

     

    (a) Completion
      of construction of the SNF in accordance with the Plans, and receipt by Lender
      of an AIA Form G704, “Certificate of Substantial Completion,” fully executed by
      Borrower, General Contractor and Architect.

     

    (b) Receipt
      by Lender of the Certificate(s) of Occupancy for the SNF issued by the
      appropriate Governmental Authority.

     

    
      
        
        

      

      
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    (c) Borrower’s
      agreement to provide, upon completion of the SNF, such title insurance
      endorsements as Lender may require to its title insurance policy insuring that
      the SNF has been completed free of mechanics’ liens, or, at Lender’s election,
      an ALTA rewrite of its title insurance policy together with such endorsements
      thereto as Lender may require. Such additional endorsements or policy rewrite
      shall include, without limitation, an ALTA Form 3.1 endorsement with parking,
      if
      available under applicable law.

     

    (d) Receipt
      of an “as-built” ALTA minimum standard survey of the Land and the Improvements
      acceptable to Lender and the title insurance company issuing the title insurance
      policy referred to above and meeting the requirements of Lender, locating all
      property lines, building setback lines, easements and the Improvements, and
      showing no state of facts objectionable to Lender, together with a certificate
      from the licensed surveyor, approved by Lender, that prepared the
      survey.

     

    (e) There
      shall be no statutory liens on record for labor or material arising out of
      the
      construction of the SNF; provided, however, that if there are any such liens
      Borrower shall have made arrangements satisfactory to Lender for the disposition
      or bonding thereof.

     

    (f) Upon
      completion of the SNF, Borrower shall deliver to Lender a certificate of
      completion containing the following: (i) Borrower’s statement of the aggregate
      amount of costs incurred in connection with the construction of the SNF but
      not
      paid by Borrower before the Completion Date and (ii) Borrower’s certification
      that no portion of the proceeds of the Loan has been applied to pay or reimburse
      any costs or expenses in excess of the total amount of costs shown in the
      Approved Budget, together with interest and servicing fees incurred in
      connection with the Loan.

     

    (g) Receipt
      by Lender of an acceptable short term radon test.

     

    (h) Receipt
      by Lender of a copy of the recorded Notice of Completion, if
      applicable.

     

    (i) The
      Management Agreement shall be in full force and effect and no default shall
      have
      occurred and be continuing thereunder.

     

    (j) Updated
      certificates of insurance evidencing the insurance coverage required under
      Section
      5.5(d),
      (e)
      and (g) (Insurance).

     

    (k) Inspector
      has prepared a hard cost list of punch items to be approved by Lender and such
      list of punch items does not exceed $300,000 in the aggregate and Borrower
      expressly agrees to cause such list of punch items to be completed within ninety
      (90) days of the date of the final construction advance of retained Loan
      funds.

     

    (l) Receipt
      by Lender of written evidence that Borrower has filed an application to operate
      the SNF as a skilled nursing facility, under the laws of the state where the
      Land is located including without limitation, an application for all permits
      required for the use and occupancy of the Facility and the operation of the
      Facility as a skilled nursing facility.

     

    (m) Receipt
      by Lender of written evidence that Borrower has completed all deferred
      maintenance items listed in Exhibit
      I
      attached
      hereto and incorporated herein.

     

    
      
        
        

      

      
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    ARTICLE
      V

    AFFIRMATIVE
      COVENANTS OF BORROWER

     

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

     

    Section
      5.1 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 (after giving
      consideration to any applicable grace or cure period) or cause to be paid or
      performed all Loan Obligations hereunder and under the other Loan
      Documents.

     

    Section
      5.2 Maintenance
      of Existence.

     

    Maintain
      its existence as a Tennessee limited partnership, 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.

     

    Section
      5.3 Maintenance
      of Single Purpose. 

     

    Maintain
      its existence as a Single Purpose Entity.

     

    Section
      5.4 Accrual
      and Payment of Taxes.

     

    During
      each fiscal year, make adequate provision for the payment 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 Security Instrument), all required
      withholding of income taxes of employees, all required old age and unemployment
      contributions, and all required payments to employee benefit plans, and pay
      the
      same when they become due.

     

    Section
      5.5 Insurance.

     

    At
      all
      times while the Loan Obligations are outstanding, maintain, at its expense
      (and
      provide satisfactory evidence thereof to Lender) 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) Architect’s
      professional liability insurance in at least the amount of One Million Dollars
      ($1,000,000) per occurrence, Two Million Dollars ($2,000,000) aggregate, which
      shall include “tail” coverage insuring Borrower for acts occurring prior to the
      date hereof, with a Ten Million Dollar ($10,000,000) umbrella policy which
      includes coverage for professional liability.

     

    (b) 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
      One Million Dollars ($1,000,000) per occurrence and Three Million Dollars
      ($3,000,000) in the aggregate which shall also insure against claims for acts
      occurring prior to the date of the Loan.

     

    (c) Commercial
      general liability insurance against claims for personal injury, bodily injury,
      death or property damage, in or about the Facility to be on a so-called
“occurrence” basis for at least Three Million Dollars ($3,000,000) per
      occurrence and Six Million Dollars ($6,000,000) in the aggregate with a Ten
      Million Dollar ($10,000,000) umbrella coverage.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (d) Until
      completion of construction of the SNF, all risk course of construction insurance
      with Lender’s loss payable endorsement attached to a Builder’s Risk Completed
      Value non-reporting form of policy (provided that in no event may the amount
      of
      coverage to be maintained by Borrower be less than the amount of coverage
      necessary to eliminate any risk of co-insurance of loss).

     

    (e) Comprehensive
      “all risk” or “special” cause of loss insurance for the Facility (which must
      include coverage for the SNF upon completion of construction

     

    (f) Workers’
      compensation insurance for the General Contractor and as required by the laws
      of
      the Property Jurisdiction, in an amount at least equal to the minimum required
      by law, and employer’s liability insurance with a limit of One Million Dollars
      ($1,000,000) per accident and per disease per employee, with respect to the
      Facility.

     

    (g) Business
      interruption income insurance for the Facility (which must include coverage
      for
      the SNF upon completion of construction) in an amount equal to one hundred
      percent (100%) of the net operating income for the Facility plus carrying costs
      and extraordinary expenses of the Facility for a period of twelve (12) months
      as
      projected by Lender, containing a ninety (90) day extended period of indemnity
      endorsement. Such insurance shall also include an agreed insurance amount
      endorsement waiving all co-insurance provisions.

     

    (h) Comprehensive
      boiler and machinery insurance, including property damage coverage and time
      element coverage in an amount equal to one hundred percent (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.

     

    (i) A
      blanket
      fidelity bond and errors and omissions insurance coverage insuring against
      losses resulting from dishonest or fraudulent acts committed by (i) Borrower’s
      personnel, (ii) any employees of outside firms that provide appraisal, legal,
      data processing or other services for Borrower and (iii) temporary contract
      employees or student interns.

     

    (j) Motor
      vehicle coverage for all owned and non-owned vehicles used in connection with
      the operation of the Facility containing a minimum per occurrence coverage
      amount of Two Million Dollars ($2,000,000) and a minimum aggregate coverage
      amount of Five Million Dollars ($5,000,000).

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    (k) 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.

     

    (l) 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.

     

    (m) Such
      other insurance coverage 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 Security Instrument
      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 a licensed insurance carrier in the State
      in which the Facility is located and must be a Qualified Insurer. All liability
      insurance policies (including, but not limited to, general liability,
      professional liability and any applicable blanket and/or umbrella policies)
      must
      name “GMAC Commercial Mortgage Bank and its successors and/or assigns as their
      interests may appear” as additional insureds, and all property insurance
      policies must name “GMAC Commercial Mortgage 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. All insurance policies for the above
      required insurance must provide for thirty (30) days prior written notice of
      cancellation to Lender. The proceeds of any of the policies described in Section
      5.5(d) and (e) and shall be payable by check and shall be payable jointly to
      Lender and Borrower and delivered to Lender, the check shall be endorsed to
      Lender by Borrower and such proceeds shall be applied by Lender, at its sole
      option, either (i) to the full or partial payment or prepayment of the Loan
      Obligations (without premium), or (ii) to the repair and/or restoration of
      the
      Improvements, Equipment and Inventory damaged or taken as more particularly
      described below. If the check for such proceeds is received by Borrower, it
      shall be held in trust for Lender and promptly delivered to Lender by Borrower
      with Borrower’s endorsement to Lender.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    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 10.7 hereof and in
Exhibit
      “E”
      hereto.
      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 5.5. If the limits of any policy required hereunder are reduced or
      eliminated due to a covered loss, Borrower shall pay the additional premium,
      if
      any, in order to have the original limits of insurance reinstated, or Borrower
      shall purchase new insurance in the same type and amount that existed
      immediately prior to the loss.

    


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

    


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

    


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

    


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    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.

     

    Notwithstanding
      the foregoing to the contrary, Lender agrees that Lender shall make the net
      proceeds of insurance or condemnation (after payment of Lender’s reasonable
      costs and expenses) available to Borrower for Borrower’s repair, restoration and
      replacement of the Improvements, Equipment and Inventory damaged or taken if
      the
      following conditions are met:

     

    (a) the
      aggregate amount of all such proceeds shall not exceed the aggregate amount
      of
      all such Loan Obligations.

     

    (b) 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.

     

    (c) the
      Improvements, Equipment, and Inventory for which loss or damage has resulted
      shall be capable of being restored to their 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 the Inspector or (ii) the Maturity
      Date;

     

    (d) 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;

     

    (e) within
      sixty (60) days following the date of notice under the preceding subsection
      (d)
      and prior to any proceeds being disbursed to Borrower, Borrower shall have
      provided to Lender all of the following:

     

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

    


    (ii) 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.

    


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

    


    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

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

    


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

    


    (f) 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;

     

    (g) no
      portion of such proceeds shall be made available by Lender for architectural
      reviews or for any purpose which is not directly attributable to the cost of
      repairing, restoring or replacing the Improvements, Equipment and Inventory
      for
      which a loss or damage has occurred unless the same is covered by such
      insurance;

     

    (h) 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;

     

    (i) [Intentionally
      deleted];

     

    (j) each
      disbursement by Lender of such proceeds and deposits shall be funded subject
      to
      the conditions and in accordance with the terms hereof;

     

    (k) Lender
      shall have a first lien 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; and

     

    (l) in
      the
      event and to the extent such proceeds are not required or used for the repair,
      restoration and replacement of the Improvements, Equipment and Inventory for
      which a loss or damage has occurred, or in the event Borrower fails to timely
      make the election to have insurance proceeds applied to the restoration of
      the
      Improvements, Equipment, or Inventory, or, having made such election, fails
      to
      timely comply with the terms and conditions set forth herein, or, if the
      conditions set forth herein for such application are otherwise not satisfied,
      then Lender shall be entitled without notice to or consent from Borrower to
      apply such proceeds, or the balance thereof, at Lender’s option either (i) to
      the full or partial payment or prepayment of the Loan Obligations (without
      premium) in the manner aforesaid, or (ii) to the repair, restoration and/or
      replacement of all or any part of such Improvements, Equipment and Inventory
      for
      which a loss or damage has occurred.

     

    Notwithstanding
      the foregoing, all net proceeds of insurance or condemnation (after payment
      of
      Lender’s reasonable costs and expenses, including without limitation, inspection
      fees) in an amount equal to Two Hundred Fifty Thousand Dollars ($250,000.00)
      or
      less, per occurrence, shall be made available to Borrower to be applied to
      repair or rebuild is “economically feasible”. For purposes hereof, “economically
      feasible” shall mean that the Improvements, Equipment, and Inventory for which
      loss or damage has resulted shall be capable of being restored to their
      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 income insurance for the Facility
      (as described in Section 4.5(d) above) as determined by the Lender or its
      operating adviser or (ii) the date which is one hundred eighty (180) days prior
      to the Maturity Date.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Section
      5.6 Financial
      and Other Information. 

     

    Provide
      Lender, and cause Guarantor and Manager to provide to Lender, at its address
      set
      forth in Section 10.7 and at GMAC Commercial Mortgage Corporation, 8333 Douglas
      Avenue, Suite 1460, Dallas, Texas 75225, 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 Guarantor,
      consolidated financial statements for the Guarantor and its subsidiaries,
      including Borrower, prepared in accordance with generally accepted accounting
      principles consistently applied, audited by a nationally recognized accounting
      firm or independent certified public accounting firm acceptable to 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.

     

    (b) Within
      ninety (90) days after the end of each fiscal year of the Facility and Borrower
      (if different from the Facility), unaudited annual financial statements of
      the
      operations of the Facility, prepared by a financial officer of Borrower in
      accordance with generally accepted accounting principles consistently applied,
      and certified as true and correct in all material respects by a financial
      officer of Borrower, which statements shall include a balance sheet and a
      statement of income and expenses for the year then ended.

     

    (c) Within
      forty-five (45) days after the end of each fiscal month of the Facility (if
      different from Borrower), unaudited interim financial statements of the
      Facility, certified as true and correct in all material respects by a financial
      officer of Borrower, subject to customary year end adjustments, which statements
      shall be prepared in accordance with generally accepted accounting principles
      consistently applied and shall include a balance sheet, statement of income
      and
      expenses for the quarter then ended.

     

    (d) Within
      forty-five (45) days after the end of each fiscal quarter of Borrower, unaudited
      interim financial statements of Borrower certified as true and correct in all
      material respects by a financial officer of Borrower or General Partner, as
      the
      case may be, subject to customary year end adjustments, which statements shall
      be prepared in accordance with generally accepted accounting principles
      consistently applied and shall include a balance sheet and statement of income
      and expenses for the quarter then ended.

     

    (e) Within
      forty-five (45) days after the end of each fiscal quarter of Guarantor,
      unaudited interim financial statements of Guarantor, certified as true and
      correct in all material respects by a financial officer of Guarantor, subject
      to
      customary year end adjustments, which statements shall be prepared in accordance
      with general accounting principles consistently applied and shall include a
      balance sheet and a statement of income and expenses for the quarter then ended.
      In lieu of its obligations hereunder, Guarantor may submit to Lender a copy
      of
      its Form 10 Q as filed by Guarantor with the United States Securities and
      Exchange Commission.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    (f) Within
      forty-five (45) days after the end of each fiscal quarter of Borrower, a
      statement of the number of unit days available and the actual residents days
      incurred for such quarter, together with quarterly census information of the
      Facility as of the end of such quarter in sufficient detail to show resident-mix
      (i.e., private, Medicare, Medicaid, and VA) on a daily average basis for such
      year through the end of such quarter, certified by a financial officer of
      Manager or Borrower to be true and correct. Such statements of the Facility
      shall be accompanied by the Summary of Financial Statements and Census Data
      attached hereto as Exhibit
      “D”.

     

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

     

    (h) If
      and to
      the extent applicable, within ten (10) days after filing or receipt, all
      Medicaid and/or Medicare cost reports and any amendments thereto filed with
      respect to the Facility and all responses, audit reports or inquiries with
      respect to such cost reports.

     

    (i) If
      and to
      the extent applicable, within ten (10) days after receipt, copies of all
      licensure and certification survey reports and statements of deficiencies (with
      plans of correction attached thereto).

     

    (j) 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.

     

    (k) 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.

     

    (l) Within
      three (3) days of receipt, any and all notices (regardless of form) from any
      and
      all federal or state agencies, including any licensing and/or certifying
      agencies that the Facility license and/or the participation in Medicare,
      Medicaid or any other federal or state health care program, as applicable,
      of
      the Facility or any of its owners, officers, directors, agents or managing
      employees is being downgraded to a substandard category, revoked, suspended,
      or
      subjected to federal or state health care program exclusion, civil monetary
      penalty, criminal penalty, or false claims recovery, or that any such action
      is
      pending, threatened or being considered.

     

    (m) If
      requested by Lender, evidence of payment by Borrower or Manager of any
      applicable provider bed taxes or similar taxes, which Borrower or Manager agrees
      to pay.

     

    (n) If
      requested by Lender, within forty-five (45) days after the end of each of
      Borrower’s fiscal quarters, and more frequently, if requested by Lender, an aged
      accounts payable report and an aged accounts receivable report for the Facility
      in sufficient detail to show amounts due from each class of patient-mix (i.e.,
      private, Medicare, Medicaid, and V.A.) both by the account age classifications
      of 30 days, 60 days, 90 days, 120 days and over 120 days.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    Any
      deficiency (identified above) shall be corrected by the date required by the
      licensure and certification agency, if such deficiency could adversely affect
      either (a) the right to continue participation in Medicare and Medicaid for
      existing residents or (b) the right to admit new Medicare and Medicaid
      residents, or (c) the right to continue operating the Facility as a continuing
      care facility.

     

    If
      and to
      the extent applicable, Lender reserves the right to require that the annual
      financial statements of Borrower be audited and prepared by a nationally
      recognized accounting firm or independent certified public accountant 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, Guarantor, or Manager as the case may be.

     

    Lender
      further reserves the right to require such other financial information of
      Borrower, Guarantor, Manager and/or the Facility, in such form and at such
      other
      times (including monthly or more frequently) as Lender shall reasonably deem
      necessary, and Borrower agrees promptly to provide or to cause to be provided,
      such information to Lender. All financial statements must be in the form and
      detail as Lender may from time to time reasonably request.

     

    Section
      5.7 Compliance
      Certificate.

     

    At
      the
      time of furnishing the quarterly operating statements of the operations of
      the
      Facility required under the foregoing Section, furnish to Lender a compliance
      certificate in the form attached hereto as Exhibit
      E
      executed
      by an officer of Borrower or General Partner.

     

    Section
      5.8 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 or Manager’s offices, complete and
      accurate books of account and records (including copies of supporting bills
      and
      invoices) adequate to reflect correctly the results of the operation of the
      Facility, and copies of all material 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 copies
      of 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.

     

    Section
      5.9 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/or collateral
      for the payment and security thereof have been established as determined by
      Lender in its commercially reasonable discretion.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    Section
      5.10 Records
      of Accounts.

     

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

     

    Section
      5.11 Compliance
      with Licensure Laws.

     

    As
      of the
      date hereof with respect to the ALF and, upon the Completion Date with respect
      to the SNF:

     

    (a) the
      ALF
      and SNF shall be duly licensed as an assisted living facility and a skilled
      nursing facility, respectively, under the applicable laws of the state where
      the
      Land is located;

     

    (b) Borrower
      shall be the lawful owner of all Permits for the Facility, which shall be in
      full force and effect and shall constitute all of the permits, licenses and
      certificates required for the use and occupancy of the Facility and the
      operation of the Facility as an assisted living facility and skilled nursing
      facility;

     

    (c) Borrower
      and Manager, as well as the operation of the Facility, shall be in compliance
      in
      all material respects with the applicable assisted living facility and skilled
      nursing facility laws, rules, regulations and published interpretations to
      which
      the Facility is subject; and

     

    (d) all
      Reimbursement Contracts, if any, shall be in full force and effect with respect
      to the Facility, and Borrower and Manager shall be in good standing with all
      the
      respective agencies governing such applicable licenses, program certification,
      and Reimbursement Contracts, if any. Borrower and Manager shall remain current
      in the payment of all assessments with respect to such Reimbursement Contracts,
      if any, throughout the term of the Loan.

     

    Section
      5.12 Conduct
      of Business.

     

    Conduct,
      or cause Manager to conduct, as of the date hereof with respect to the ALF
      and
      as of the as of the date of opening of the SNF with respect to the SNF, 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 and patients of the Facility
      at
      all times at a level necessary to ensure quality care for the residents and
      patients 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,
      and any other agreements necessary for the use and operation of the Facility
      or
      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 and/or Manager (as applicable) to adequately perform
      operations of the Facility;

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    (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

     

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

     

    Section
      5.13 Periodic
      Surveys.

     

    Furnish
      to Lender 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 patients/residents or for new
      patients/residents to be admitted with Medicaid or Medicare coverage, by the
      date required for cure by such agency (plus extensions granted by such
      agency).

     

    Section
      5.14 [Intentionally
      deleted]

     

    Section
      5.15 [Intentionally
      deleted]

     

    Section
      5.16 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 withheld in the sole and absolute discretion
      of
      Lender. Borrower will enter into and cause Manager to enter into the
      Subordination of Management 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.

     

    Section
      5.17 Occupancy.

     

    Maintain
      or cause to be maintained, at all times, a daily average annual (calendar year)
      occupancy for the ALF of eighty percent (80%) or more, as measured at the end
      of
      each of the Facility’s fiscal quarters, (based on the number of units available
      at the Facility) with the minimum number of units available at the Facility
      remaining at or in excess of the number of units set forth in the Facility
      description in Article I hereof. Upon the earlier to occur of the Stabilization
      Date or the Projected Stabilization Date, maintain or cause to be maintained,
      at
      all times, a daily average annual (calendar year) occupancy for the SNF, of
      eighty percent (80%) or more (based on the number of units available at the
      SNF)
      with a minimum number of units available at the SNF equal to or in excess of
      the
      number of units set forth in the Facility description in Article I
      hereof.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    Section
      5.18 Updated
      Appraisals.

     

    For
      so
      long as the Loan remains outstanding, if any Event of Default shall occur
      hereunder, or if, in Lender’s commercially reasonable 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/or the
      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 necessary to complete such appraisal. Borrower agrees to pay all
      reasonable costs incurred by Lender in connection with such appraisal which
      costs shall be secured by the Security Instrument and shall accrue interest
      at
      the Default Rate until paid.

     

    Section
      5.19 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 Mortgaged Property in compliance in all material respects, 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.

     

    Section
      5.20 Taxes
      and Other Charges.

     

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

     

    Section
      5.21 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
      Documents, the Commitment Letter shall continue to be in effect and shall
      survive the execution of this Agreement and all other Loan
      Documents.

     

    Section
      5.22 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 under the Loan Documents 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, or if not, then
      stating the reasons for which such representations and/or warranties are no
      longer true and correct.

     

    Section
      5.23 Notice
      of Fees or Penalties.

     

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

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    Section
      5.24 Inspector:

     

    Pay
      all
      fees and expenses of Inspector.

     

    Section
      5.25 Construction
      Start and Completion.

     

    Commence
      construction of the SNF no later than thirty (30) days from the date hereof,
      and
      thereafter diligently proceed with construction of the SNF, in a good and
      workmanlike manner in accordance with the Plans, and substantially complete
      construction of the SNF in accordance with the Plans on or before the
      Substantial Completion Date. Borrower will, forthwith upon completion of the
      construction of the SNF, cause the same to be inspected by each appropriate
      governmental body, shall correct any defects and deficiencies which may be
      required by any such inspection and shall cause to be duly issued all occupancy
      certificates and other temporary licenses, permits, and authorizations necessary
      for the occupancy of the Land and the SNF and the operation of the SNF as a
      skilled nursing facility. In any event, Borrower shall do and perform all of
      the
      foregoing acts and things and cause to be issued and executed all such occupancy
      certificates, licenses and authorizations on or before the Completion Date
      subject to Force Majeure or Lender’s written consent to agree to extend such
      date.

     

    Section
      5.26 Protection
      Against Liens.

     

    Pay
      and
      discharge all claims for labor performed and material and services furnished
      in
      connection with construction of the SNF, to diligently record or procure the
      recordation of a valid notice of completion, if applicable, upon completion
      of
      construction, to diligently record or procure for recordation of a notice of
      cessation, if applicable, in the event of a cessation of labor, on the work
      of
      the SNF for a continuous period of thirty (30) days or more, and to take all
      other steps necessary to forestall the assertion of claims or liens either
      against the Land or the Improvements or any part thereof or right or interest
      appurtenant thereto or of claims against Lender or the Loan proceeds. Borrower
      shall give Lender written notice within ten (10) days of Borrower’s receipt of
      notice that a mechanic’s lien has been filed, along with a copy of the recorded
      lien. Nothing herein contained shall require Borrower to pay any claims for
      labor, materials or services which Borrower, in good faith disputes and which
      Borrower, at its own expense, is currently and diligently contesting; provided,
      however, that not later than ten (10) days after the notice of the filing of
      any
      claim or lien against the Land and/or the Improvements which is disputed or
      contested by Borrower, Borrower shall either (a) record or cause to be recorded
      a surety bond sufficient to release said claim or lien and promptly give notice
      of such recordation to the lienholder or claimant, or (b) make other
      arrangements therefor satisfactory to Lender. Lender shall not be required
      (a)
      to extend the Maturity Date by reason of Borrower’s failure to pay such claims,
      or (b) to make any disbursements of the proceeds of the Loan until any
      mechanic’s or materialmen’s lien claims have been waived or insured over by
      Lender’s title insurer.

     

    Section
      5.27 Construction
      Inspections Permitted.

     

    Lender
      and its representatives, including the Inspector, shall have the right, at
      all
      reasonable times during regular business hours and upon reasonable prior notice
      (and at any time in the event of an emergency), to enter upon the Land and
      inspect the work of construction to determine that the same is in conformity
      with the Plans and all of the requirements hereof. If in Lender’s sole judgment
      it is necessary, Lender shall have the further right, from time to time, to
      retain a consultant or consultants, at Borrower’s reasonable expense, to inspect
      the work and verify compliance by Borrower with the provisions hereof. Borrower
      understands and agrees that said inspections are for the sole purpose of
      protecting Lender’s Loan advances and security for the Loan and are made solely
      for Lender’s benefit; that such inspections may be superficial and general in
      nature, primarily to inform Lender of the progress of construction of the SNF;
      and that, in any event, Borrower shall not be entitled to rely on any such
      inspection(s) as constituting Lender’s approval, satisfaction or acceptance with
      respect to materials, workmanship, conformance to Plans or otherwise. Borrower
      hereby agrees to make its own inspections of the construction to determine
      that
      the quality of the SNF and all other requirements of the work of construction
      financed by the Loan are being performed in a manner satisfactory to Borrower,
      and Borrower agrees to immediately notify Lender in writing should the same
      show
      any work to be unsatisfactory in any manner. Without limiting the foregoing,
      Borrower shall permit Lender to examine and copy all books and account records
      and other papers relating to the Land and the construction of the SNF; and
      Borrower will use its best efforts to cause all contractors, subcontractors
      and
      materialmen to cooperate with Lender to enable it to do so.

     

    
      
        
        

      

      
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    Section
      5.28 Construction
      and Repairs.

     

    Complete
      or restore promptly and in good workmanlike manner any building or other
      Improvement which may be constructed, damaged, or destroyed and pay when due
      all
      costs incurred therefor. Borrower shall replace any work or materials which
      do
      not fully comply with the Plans approved by Lender, or are in some other manner
      in violation of this Agreement within fifteen (15) days after written notice
      to
      Borrower of such fact. Work shall not cease on the construction of the SNF
      for
      any reason whatsoever for a period of fifteen (15) consecutive calendar days
      unless and to the extent that such delay is the result of an event of Force
      Majeure or as otherwise consented to in writing by Lender.

     

    Section
      5.29 Notify
      Lender of Litigation or Compliance.

     

    Promptly
      notify Lender in writing (a) of any litigation or possible litigation affecting
      Borrower, Guarantor, the Facility, the Land and/or the Improvements or any
      part
      thereof, (b) of all complaints or charges made by any Governmental Authority
      affecting Borrower, the Facility, the Land and/or the Improvements in each
      case
      if such item described in (i) or (ii) above is reasonably likely to delay or
      require changes in the construction of the SNF or impair the security of Lender
      with respect to its Loan, and (c) in the event that any covenant contained
      herein becomes untrue or there shall have been any breach in Borrower’s
      compliance with any such covenant.

     

    Section
      5.30 Intentionally
      Deleted

     

    Section
      5.31 Loan
      Closing Certification.

     

    Immediately
      notify Lender, in writing, in the event any representation, warranty or covenant
      contained in that certain Loan Closing Certification of even date herewith,
      executed by Borrower for the benefit of Lender, becomes untrue (except by virtue
      of changes in facts and circumstances permitted by the terms of this Agreement
      and the other Loan Documents) or there shall have been any material adverse
      change in any representation, warranty or covenant.

     

    Section
      5.32 Further
      Documentation.

     

    In
      the
      event that any further documentation
      or
      information is deemed necessary or appropriate by Lender to correct patent
      mistakes in the Loan Documents, materials relating to the Lender’s Title
      Insurance Policy or the funding of the Loan, Borrower shall provide, or cause
      to
      be provided to Lender, at Borrower’s cost and expense, such documentation or
      information.

     

    
      
        
        

      

      
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    Section
      5.33 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 Section 3.32 (No Illegal Activity as Source
      of
      Funds) and Section 3.33 (Compliance with Anti-Terrorism, etc.) and this Section
      5.33 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.

     

    Section
      5.34 Compliance
      Program. 

     

    Maintain
      a compliance program including, at a minimum, the seven basic compliance
      elements described in Section II.A. of the OIG Compliance Program Guidance
      for
      Nursing Facilities published by the Office of the Inspector General on March
      16,
      2000, at 65 Fed. Reg. 14289, as amended from time to time. Upon Lender’s request
      to Borrower, Borrower or Manager shall (a) provide a copy of its written
      compliance program, (b) identify its program compliance officer, and (c)
      summarize its training and other activities conducted pursuant to such program
      during the preceding year.

    


    ARTICLE
      VI

    NEGATIVE
      COVENANTS OF BORROWER

     

    Until
      the
      Loan Obligations have been paid in full, Borrower shall not:

     

    Section
      6.1 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 to anyone
      other than Lender, 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 or patient records, medical and clinical records
      (except for removal of such resident or patient records as directed by the
      residents or patients owning such records), without Lender’s prior written
      consent, which consent may be granted or refused in Lender’s sole
      discretion.

     

    
      
        
        

      

      
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    Section
      6.2 No
      Liens; Exceptions.

     

    Create,
      incur, assume or suffer to exist any Lien upon or with respect to the Facility
      or 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) All
      liens, encumbrances or encroachments which are listed and described in Schedule
      B of the Lender’s Title Insurance Policy;

     

    (c) Easements
      created in the ordinary course of constructing the SNF in accordance with the
      Plans for which affirmative title insurance coverage is provided within thirty
      (30) days after the date of filing of any such easement;

     

    (d) 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 or otherwise resolved in accordance with the provisions of Section
      5.26 (Protection Against Liens);

     

    (e) 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;

     

    (f) Liens
      in
      connection with purchase money financing (including Equipment leases) for the
      acquisition of Equipment provided that at no time shall such purchase money
      financing (including the principal component of any Equipment leases) exceed
      $75,000.00 in any one case and $200,000.00 in the aggregate without Lender’s
      prior written consent; and

     

    (g) Liens
      for
      current year’s taxes, assessments or governmental charges or levies not yet due
      and payable.

     

    Section
      6.3 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.

     

    Section
      6.4 Disposition
      of Assets.

     

    Sell,
      lease, transfer or otherwise dispose of any material portion of its assets
      or
      assets having a value in excess of Fifteen Thousand Dollars ($15,000), unless
      replaced with assets of equal or greater value and utility, without the prior
      written consent of Lender, which consent may be granted or refused in Lender’s
      commercially reasonable discretion.

     

    
      
        
        

      

      
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    Section
      6.5 Change
      of Business.

     

    Make
      any
      material change in the nature of its business as it is being conducted (or
      contemplated to be conducted with respect to the SNF and disclosed to Lender)
      as
      of the date hereof.

     

    Section
      6.6 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.

     

    Section
      6.7 ERISA
      Funding and Termination.

     

    Engage
      in
      any transaction which would cause any obligation, or action taken or to be
      taken, hereunder (or the exercise by Lender of any of its rights under this
      Agreement, the Note, the Mortgage or any of the other Loan Documents) to be
      a
      non-exempt (under a statutory or administrative class exemption) prohibited
      transaction under ERISA.

     

    Section
      6.8 Transactions
      with Affiliates.

     

    Enter
      into any transaction with an Affiliate of Borrower or Guarantor 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.

     

    Section
      6.9 Transfer
      of Ownership Interests.

     

    Except
      as
      otherwise permitted under Section 13 of the Security Instrument, permit a change
      in the ownership interests of the Persons comprising Borrower unless the written
      consent of Lender is first obtained, which consent may be granted or refused
      in
      Lender’s sole discretion.

     

    Section
      6.10 Change
      of Use.

     

    Alter
      or
      change the use of the Facility except as contemplated in connection with the
      Loan or permit any management agreement for the Facility other than the
      Management Agreement or enter into any operating lease for the Facility
      (excluding residency agreements), 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.

     

    Section
      6.11 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.

     

    Section
      6.12 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.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    Section
      6.13 Changes
      to Plans.

     

    Make
      any
      material change to any of the Plans (other than in connection with Permitted
      Change Orders) or working drawings, whether by change order or otherwise,
      without the prior written approval of Lender, and, to the extent that such
      approvals may be required, without the prior written approval of all appropriate
      Governmental Authorities and the Inspector. As a condition to its approval
      of
      any change, Lender may require verification that the change will not materially
      increase the time required to complete the construction of the SNF or increase
      the total cost of constructing the SNF unless Borrower provides evidence of
      its
      ability to pay such increased costs into the Facility construction fund held
      by
      Lender. If the proposed change is reasonable likely to materially affect the
      Approved Budget, Borrower shall follow the procedure described in Section
      7.1(e)
      (Advance
      of Loan Funds) in requesting Lender to approve such change. For purposes herein,
      “materially” shall mean any single change order to the General Contractor’s
      construction contract in excess of Seventy-Five Thousand Dollars ($75,000)
      or
      any change orders to the General Contractor’s construction contract in excess of
      Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate.

     

    Section
      6.14 Personal
      Property Incorporation.

     

    Except
      for office equipment with an aggregate value not to exceed $25,000 and
      transportation vehicles leased from independent third party vendors, purchase
      or
      install in the Improvements materials, equipment or fixtures under any security
      agreement, conditional sales contract or other agreement wherein the seller
      reserves a security interest in, or the right to remove or to repossess, such
      items or to consider them personal property after their incorporation into
      the
      work of construction without Lender’s written consent. All personal property or
      construction material for which Lender advances Loan proceeds is to be stored
      on
      the Land and in Lender’s judgment must be reasonably secure from damage and
      theft and fully insured at all times.

     

    Section
      6.15 Dividends,
      Distributions and Redemptions.

     

    Unless
      Borrower is current in its Loan debt service payments as required under the
      terms of the Note and has paid all necessary and customary expenses required
      of
      it under the Loan Documents in connection with its ownership and operation
      of
      the Facility, or except as otherwise consented to by Lender in writing, declare
      or pay any distributions to its partners, or purchase, redeem, retire or
      otherwise acquire for value, any ownership interests in Borrower, now or
      hereafter outstanding, return any capital to its partners, or make any
      distribution of assets to its partners.

     

    Section
      6.16 Change
      Orders.

     

    Make
      any
      modification of the Plans, other than in connection with Permitted Change
      Orders. Upon receipt of Borrower’s written request for approval of a change
      order, Lender shall approve, disapprove or request additional information in
      order to consider such request, within ten (10) Business Days after the date
      of
      receipt. In the event that Lender does not respond to Borrower’s request within
      such period of time, Borrower may deliver to Lender a written notice of intent
      to proceed with such change order. If Lender does not approve, disapprove or
      request additional information within ten (10) Business Days after receipt
      of
      such notice, the proposed change order shall be deemed approved on the eleventh
      (11th)
      Business Day thereafter, and such change order shall be deemed, for purposes
      of
      this Agreement, a Permitted Change Order.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    Section
      6.17 Approved
      Expenditures.

     

    Expend
      any portion of the Loan proceeds on any Costs of Construction other than items
      listed on the Approved Budget.

     

    Section
      6.18 Correction
      of Deficiency.

     

    Fail
      to
      correct, within the time deadlines set by any applicable licensing agency,
      any
      deficiency which would result in the following actions by such agency with
      respect to the Facility:

     

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

     

    (b) a
      ban on
      new residents/patients generally.

     

    Section
      6.19 Maintain
      Single Purpose Entity.

     

    (a) Engage
      in
      any business or activity other than the ownership, operation and maintenance
      of
      the Mortgaged Property, construction of the Expansion, 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 or change its legal structure, without in each case Lender's
      consent;

     

    (d) Fail
      to
      preserve its existence as a limited partnership, validly existing and in good
      standing (if applicable) under the laws of the jurisdiction of its organization
      or formation, or without the prior written consent of Lender, amend, modify,
      terminate or fail to comply with the provisions of its partnership 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 Loan
      Document;

     

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

     

    (f) Commingle
      its funds or assets with the assets of, or pledge its assets with or for, any
      of
      its partners, affiliates, principals
      or of any other Person;

     

    (g) Incur
      any
      Indebtedness, secured or unsecured, direct or contingent (including guaranteeing
      any obligation), other than the Loan and trade payables incurred in the ordinary
      course of business and other than that certain Equipment purchase money
      financing described in Section 6.2(f) above, provided same are paid when
      due;

     

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

     

    (i) Enter
      into any contract or agreement with any of its partners, principals or
      affiliates, or the affiliates of any of its partners, 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;

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    (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 partners,
      principals and affiliates, the affiliates of any of its partners, principals
      or
      any other Person;

     

    (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 (except to the extent a loan or advance may be considered
      an
“Account”) to any third party, including any of its partners, principals or
      affiliates, or the affiliates of any of its partners or principals;

     

    (n) Fail
      to
      file its own tax returns, except as to the extent such tax returns are
      consolidated into those tax returns filed by or on behalf of
      Guarantor;

     

    (o) 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; (B) 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);

     

    (p) 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 (A) to mislead others as to the identity with which such other party is
      transacting business, or (B) to suggest that it is responsible for the debts
      of
      any third party (including any of its partners, principals or affiliates, or
      any
      general partner, principal or affiliate thereof); or

     

    (q) 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.

    Notwithstanding
      anything herein to the contrary, Borrower may, from time to time, (i) make
      lawful distributions in accordance with this Agreement and applicable law,
      or
      (ii) obtain lawful capital contributions in accordance with applicable law
      from
      its Affiliates to the extent necessary to satisfy its obligations as they become
      due; provided, however, that all such transactions are accurately reflected
      in
      the books and records of Borrower and each of its applicable
      Affiliates.

    


    ARTICLE
      VII

    DISBURSEMENT
      OF LOAN FUNDS

     

    Section
      7.1 Advances
      of Loan Funds.

     

    Unless
      Lender elects otherwise in Lender’s sole discretion, all advances of the Loan
      shall be made in accordance with the following:

     

    (a) At
      the
      time of the requested advance, Borrower must (i) not be in Default under this
      Agreement, the Note or any other Loan Document; (ii) have cured any
      non-performance of any event which, after notice thereof by Lender, with the
      passage of time may constitute a Default or an Event of Default; and (iii)
      have
      met all requirements of any Governmental Authority pertaining to Borrower,
      the
      Land, the Improvements and/or the Facility.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    (b) Subject
      to the provisions of this Agreement, advances of the Loan will be made by Lender
      only for payment of those items related to the development of the Mortgaged
      Property and the construction and equipping of the SNF as shown in the Approved
      Budget.

     

    (c) The
      Loan
      shall not exceed eighty percent (80%) of total Costs of Construction of the
      SNF,
      as set forth in the Approved Budget; the amount of the developer fee for the
      Facility will not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00)
      and is payable pro-rata during construction of the Facility, based on the
      progress of construction as determined by Lender and its Inspector.

     

    (d) Disbursements
      of Loan proceeds for construction items shall be made no more frequently than
      monthly within ten (10) Business Days after Borrower’s compliance with the terms
      hereof, in amounts equal to the total of (i) the purchase price of uninstalled
      materials stored on the Land in a manner acceptable to Lender and Offsite
      Materials (defined below) subject to the provisions of Section
      7.5
      (Offsite
      Materials), plus, (ii) the cost of the portions of the work acceptably completed
      as approved by Lender, pursuant to the terms of this Agreement less (iii)
      retainage of ten percent (10%), which shall be reduced to five percent (5%)
      at
      such time as fifty percent (50%) of the overall construction of the SNF on
      a
      line item basis have been completed as determined by the Inspector, in its
      sole
      discretion, and less (iv) the aggregate amount of all prior advances under
      the
      Loan. Retained construction funds shall be disbursed upon satisfaction of
      conditions precedent identified in ARTICLE
      IV
      (Conditions Precedent to Loan Advances). The monthly construction disbursement
      will be made to Borrower upon receipt by Lender of:

     

    (i) An
      updated list of Major Subcontractors for the Facility. Lender will not be
      obligated to disburse for any costs incurred with respect to work performed
      by
      any Major Subcontractors which Borrower has not listed for Lender prior to
      such
      disbursement request. If Lender so requests, Borrower will assign Borrower’s
      interest or cause the interest of the General Contractor in any or all
      subcontracts entered into by Major Subcontractors to be assigned to Lender,
      if
      assignable.

    


    (ii) A
      schedule of estimated monthly disbursements, which must be updated each month
      and accompany each disbursement request.

    


    (iii) Requisitions
      submitted to Lender in the form attached hereto as Exhibit
      G
      (as may
      be modified by Lender and provided to Borrower from time to time), showing
      a
      complete and detailed breakdown, including, but not limited to, the total amount
      actually expended by Borrower and that portion of costs actually reimbursed
      to
      Borrower.

    


    (iv) Satisfactory
      certification from Borrower and the General Contractor that all Loan proceeds
      previously received and currently requested have been or will be disbursed
      in a
      timely manner solely in payment of costs authorized by the Approved Budget
      and
      actually incurred.

    


    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

    (v) Certification
      acceptable to Lender from Borrower, the Architect and the General Contractor
      stating:

    


    (A) The
      percentage of completion of the SNF on a line item basis (as such line items
      are
      identified in the Approved Budget) with respect to each aspect of the cost
      of
      construction;

     

    (B) The
      costs
      to complete the SNF in accordance with the Plans approved by Lender on a line
      items basis (as such line items are identified in the Approved Budget);
      and

     

    (C) That
      the
      SNF is constructed in substantial conformance with the Plans approved by
      Lender.

     

    (vi) Appropriate
      lien releases from all contractors, subcontractors and material men who were
      the
      paid with the Loan disbursements made during the prior month, including, but
      not
      limited to, an unconditional lien release executed by General Contractor for
      payment made in the previous month’s disbursement, and a conditional lien
      release executed by General Contractor for payment requested in current
      disbursement.

    


    (vii) Copies
      of
      all invoices in current request greater than or equal to Five Thousand Dollars
      ($5,000).

     

    (e) Prior
      to
      any advance of Loan proceeds for costs incurred in connection with the
      development or construction of the SNF which are not within the Approved Budget,
      Borrower shall furnish Lender with a statement of additional expenses which
      covers all additional costs which are to be incurred in connection with the
      acquisition and development of the Land and the portions thereof to be financed
      by the Loan, with the dollar cost breakdown in such detail as Lender may
      require, including verification of any costs specified by Lender. Lender shall
      reserve the right to withhold its consent to any proposed amendment to the
      Approved Budget until such time as Borrower has complied with the terms of
      Section
      7.2
      (Borrower’s Funds).

     

    Section
      7.2 Borrower’s
      Funds.

     

    Any
      money
      required in excess of the Loan proceeds to fully pay all Costs of Construction
      is to be provided by Borrower (“Borrower’s Deposit”). Prior to the Closing Date,
      Borrower shall provide to Lender (a) evidence satisfactory to Lender that such
      money is available for payment of such costs and/or (b) copies of paid receipts
      evidencing payment by Borrower of such costs in an amount such that the
      remaining Costs of Construction after the Closing Date will not exceed the
      Loan
      proceeds available pursuant to the Approved Project plus any money available
      under clause (a) above. After the Closing Date, if the aggregate amount of
      Costs
      of Construction increases, Borrower shall provide to Lender either (a)
      satisfactory evidence that money required in excess of the Loan proceeds to
      fully pay Costs of Construction is available for payment of such costs or (b)
      such money shall be actually deposited by Borrower with Lender and advanced
      by
      Lender prior to the advance of any Loan proceeds hereunder. The amount of
      Borrower’s initial equity contribution, if any, is set forth in Exhibit
      C
      attached
      hereto. Notwithstanding any provisions to the contrary contained herein, at
      no
      time shall Lender be obligated to make any advance hereunder if, in Lender’s
      reasonable judgment, it appears that for any reason the remaining undisbursed
      Loan proceeds will be insufficient to complete construction of the Improvements
      in accordance with the Plans and to pay for all Costs of Construction to be
      incurred by Borrower until Borrower deposits with Lender such additional cash
      or
      liquid collateral as, in Lender’s reasonable judgment, will be sufficient to
      complete and fully pay the Costs of Construction. Borrower shall deposit such
      additional money with Lender into an interest bearing custodial account held
      by
      Lender (or provide evidence satisfactory to Lender of the availability of such
      additional funds) within seven (7) days after its receipt of Lender’s written
      demand therefor. Any money deposited by Borrower with Lender pursuant hereto
      shall constitute additional collateral for the Loan and shall be advanced prior
      to the Loan proceeds unless Lender in its sole discretion determines
      otherwise.

     

    
      
        
        

      

      
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    Section
      7.3 Cost
      Savings.

     

    Notwithstanding
      the provisions of Section
      7.1
      (Advances of Loan Funds) and Section
      7.2
      (Borrower’s Funds), in the event that the Costs of Construction with respect to
      a particular line item are less than the budgeted amount for such item, as
      established upon completion of all work to be performed in connection with
      such
      line item, then the amount unexpended for such line item may be reallocated,
      at
      Borrower’s direction and with Lender’s consent, which consent shall not be
      unreasonably withheld, to either another line item in the Approved Budget or
      to
      the contingency.

     

    Section
      7.4 Payment
      to Lender or Third Parties.

     

    Notwithstanding
      anything to the contrary herein contained, at Lender’s election, without further
      notice to or authorization by Borrower, Lender may use and disburse Loan
      proceeds and Borrower’s Deposit to pay or provide, as and when due, any Loan or
      commitment fees owing to Lender, interest on the Loan and such other sums as
      may
      be owing to Lender or to any third parties with respect to the Loan. Lender
      will
      disburse Borrower’s Deposit prior to making further advances on the Loan. In any
      such event, the amount of Borrower’s Deposit, if any, will be recalculated and
      Borrower will add additional cash or liquid collateral (or provide evidence
      satisfactory to Lender of the availability of such funds) to Borrower’s Deposit
      prior to Lender making further advances under the Loan for Costs of
      Construction.

     

    Section
      7.5 Offsite
      Materials.

     

    In
      the
      event that any disbursement request includes the cost of materials stored at
      a
      location other than the Land (“Offsite Materials”), precedent to such
      disbursement, Borrower shall provide:

     

    (a) evidence
      that Borrower has paid for the Offsite Materials;

     

    (b) if
      the
      Offsite Materials are stored at the facility of the supplier (an “Offsite
      Supplier”), a written statement from the Offsite Supplier that the Offsite
      Materials have been paid for by Borrower, have been segregated from other
      materials in such facility and have been marked with Borrower’s name. Such
      statement shall also acknowledge (i) Lender’s or Inspector’s right to enter the
      offsite supplier’s facility at reasonable times to inspect or remove the Offsite
      Materials and (ii) Lender’s security interest in the Offsite
      Materials;

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

    (c) if
      the
      Offsite Materials are stored in a place other than the facility of the Offsite
      Supplier, a written statement from the bailee or other custodian acknowledging
      (i) Lender’s or Inspector’s right to enter the storage site at reasonable times
      to inspect or remove the Offsite Materials and (ii) Lender’s security interest
      in the Offsite Materials;

     

    (d) certificates
      of insurance acceptable to Lender showing the Offsite Materials to be insured
      as
      required hereunder and showing Lender as co-insured; and

     

    (e) evidence
      that Borrower has paid all personal property taxes applicable to the Offsite
      Materials.

     

    Lender
      shall not be required to make disbursements for any Offsite Materials until
      Lender or Inspector has inspected and approved such Offsite
      Materials.

     

    Section
      7.6 Reallocation
      of Budget Line Items.

     

    Borrower
      shall have the right, at any time and from time to time (but not more often
      than
      once per calendar month, and then only in connection with a request for an
      advance), with the prior consent of Lender, to reallocate all or portions of
      the
      Loan contingency to a more specific line item in the Approved Budget, including
      amounts which may be necessary to cause a line item in the Approved Budget
      to be
      in balance, or to a new line item to fund other third-party costs and expenses
      incurred or to be incurred in connection with the development of the Property
      for which there is no existing line item in the Approved Budget.

    


    ARTICLE
      VIII

    ENVIRONMENTAL
      HAZARDS

     

    Section
      8.1 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”), if any, or matters described in
Section
      8.2
      (Exclusions), Borrower shall not cause or permit 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 Hazardous Materials in, on or under the Land, or the Improvements or any
      other property of Borrower that is adjacent to the Land, subject to Section
      8.2
      below;

     

    (b) The
      transportation of any Hazardous Materials to, from, or across the Land, subject
      to Section 8.2 below;

     

    (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 non-compliance 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

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

    (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 (d) above are referred to collectively
      in this ARTICLE
      VIII
      as
“Prohibited
      Activities and Conditions”
      and
      individually as a “Prohibited
      Activity and Condition.”

     

    Section
      8.2 Exclusions.

     

    Notwithstanding
      any other provision of ARTICLE
      VIII
      to the
      contrary, “Prohibited Activities and Conditions” shall not include the safe and
      lawful presence, handling, use, transportation, disposal 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 parking areas on the Land,
      so
      long as all of the foregoing are stored, handled, used, transported and disposed
      of in compliance with Hazardous Materials Laws.

     

    Section
      8.3 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.

     

    Section
      8.4 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 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.

     

    Section
      8.5 Borrower’s
      Environmental Representations and Warranties.

     

    Borrower
      represents and warrants to Lender that, except as previously disclosed by
      Borrower to Lender in writing:

     

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

     

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

     

    (c) The
      Land
      and the Improvements do not now contain any underground storage tanks, and,
      to
      the best of Borrower’s knowledge 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.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

    (d) Borrower
      has complied with all Hazardous Materials Laws, including all requirements
      for
      notification regarding releases of Hazardous Materials. Without limiting the
      generality of the foregoing, Borrower has obtained all Environmental Permits
      required for the operation of the Land and the SNF in accordance with Hazardous
      Materials Laws now in effect and all such Environmental Permits are in full
      force and effect. 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, non-compliance with the terms of any Environmental
      Permit. Borrower will obtain all Environmental Permits required for the
      operation of the SNF in accordance with Hazardous Materials Laws upon completion
      of construction and prior to occupancy of the SNF.

     

    (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 involve the
      Land and/or the Improvements and allege, arise out of, or relate to any
      Prohibited Activity and Condition.

     

    (f) Borrower
      has not received any 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
      VIII
      shall be
      continuing representations and warranties that shall be deemed to be made by
      Borrower throughout the term of the Loan, until the Loan Obligations have been
      paid in full.

     

    Section
      8.6 Notice
      of
      Certain Events.

     

    Borrower
      shall promptly notify Lender in writing of any and all of the following that
      may
      occur:

     

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

     

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

     

    (c) Any
      representation or warranty in this ARTICLE
      VIII
      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.

     

    Section
      8.7 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 Security
      Instrument), or required by Lender following a 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 delivery of any of Lender's Environmental
      Inspections.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

    Section
      8.8 Remedial
      Work.

     

    If
      any
      investigation, site monitoring, containment, clean-up, restoration or other
      remedial work (“Remedial Work”) is necessary to comply 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 prosecute it with reasonable
      diligence 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.

     

    Section
      8.9 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 violation of
      any
      Hazardous Materials Laws and any alleged Hazardous Materials Law and/or
      Prohibited Activity and Condition. Borrower, at its own expense, may contest
      by
      appropriate legal proceedings, conducted diligently and in good faith, the
      amount or validity of any such order, if (i) Borrower notifies Lender of the
      commencement or expected commencement of such proceedings, (ii) the Mortgaged
      Property is not in danger of being sold or forfeited, as determined by Lender,
      (iii) if requested by Lender, Borrower deposits with Lender cash reserves or
      other collateral sufficient to pay the contested order, (iv) Borrower furnishes
      whatever security is required in the proceedings or is reasonably requested
      by
      Lender, which may include the delivery to Lender of the reserves established
      by
      Borrower to pay the contested order, as additional security, and (v) such
      contest operates to suspend enforcement of such order.

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

    Section
      8.10 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”
      and
      individually an “Indemnitee”) 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
      VIII;

    


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

    


    (iii) The
      existence or alleged existence of any violation of any Hazardous Materials
      Laws
      or 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,
      subject to Section 8.2 above; 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 if such Indemnitee has reason to believe that its interests are not
      being adequately represented or diverge from the other interests being
      represented by such counsel. 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 arising in
      connection with any Hazardous Materials Laws (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.

     

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

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

     

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

    


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

    


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

    


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

    


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

    


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

    


    (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
      VIII.

    


    (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
      VIII.

    


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

    


    (f) In
      any
      circumstances in which the indemnity under this ARTICLE
      VIII
      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 in connection therewith, including all
      costs of settlements entered into in good faith, and the fees and out of pocket
      expenses of such attorneys and consultants.

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

    

    (g) The
      provisions of this ARTICLE
      VIII
      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
      VIII
      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
      VIII
      shall be
      joint and several. The obligations of Borrower to indemnify the Indemnitees
      under this ARTICLE
      VIII
      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.
      Notwithstanding anything in this Article VII to the contrary, the liability
      of
      Borrower hereunder shall not extend to any Prohibited Activity and Condition
      arising solely after the date the Lender, or its duly authorized agents, take
      possession of the Land and the Improvements pursuant to a receivership action,
      foreclosure or deed-in-lieu of foreclosure.

    


    ARTICLE
      IX

    EVENTS
      OF DEFAULT AND REMEDIES

     

    Section
      9.1 Events
      of Default.

     

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

     

    (a) The
      failure by Borrower to pay any installment of principal, interest, or other
      payments required under the Note, within ten (10) days after the same becomes
      due; or.

     

    (b) Borrower’s
      violation of any covenant set forth in ARTICLE
      VI
      (Negative Covenants of Borrower); or

     

    (c) Borrower’s
      failure to deliver or cause to be delivered the financial statements and
      information set forth in Section
      5.6
      (Financial and Other Information) within the times required and such failure
      is
      not cured within thirty (30) days following Lender’s written notice to Borrower
      thereof; or

     

    (d) 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 (a), (b)
      and (c) of this Section
      9.1)
      or any
      other Loan Documents which is susceptible of being cured and is not cured within
      any applicable cure period as set forth herein or therein, or, if no cure period
      is specified therefor, is not cured within thirty (30) days of Lender’s notice
      to Borrower of such Default provided, however, that if Borrower provides Lender
      with evidence satisfactory to Lender that 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; or

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

    (e) The
      filing by Borrower, General Partner, Manager or Guarantor of a voluntary
      petition, or the adjudication of any of the aforesaid Persons, or the filing
      by
      any of the aforesaid Persons of any petition or answer seeking or acquiescing,
      in any reorganization, arrangement, composition, readjustment, liquidation,
      dissolution or similar relief for itself under any present or future federal,
      state or other statute, law or regulation relating to bankruptcy, insolvency
      or
      other relief for debtors, or if any of the aforesaid Persons should seek or
      consent to or acquiesce in the appointment of any trustee, receiver or
      liquidator for itself or of all or any substantial part of its property or
      of
      any or all of the rents, revenues, issues, earnings, profits or income thereof,
      or the making 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; or

     

    (f) The
      entry
      by a court of competent jurisdiction of an order, judgment, or decree approving
      a petition filed against Borrower, General Partner, Manager or Guarantor 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);
      or

     

    (g) Except
      as
      otherwise permitted under Section 13 of the Security Instrument, any change
      in
      the ownership interests of Borrower, unless the written consent of Lender is
      first obtained, which consent may be granted or refused in Lender’s sole
      discretion; or

     

    (h) 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
      6.2
      (No
      Liens; Exceptions), any further encumbrance of the Mortgaged Property, unless
      the prior written consent of Lender is obtained; or

     

    (i) [Intentionally
      deleted]

     

    (j) Any
      certificate, statement, representation, warranty or audit heretofore or
      hereafter furnished by or on behalf of Borrower, General Partner, Manager or
      Guarantor 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 as of 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,
      General Partner, Guarantor or Manager that otherwise should have been disclosed
      therein or (iii) on the date of execution of this Agreement there shall have
      been any materially adverse change in any of the facts 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; or

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

    (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 that is not simultaneously replace
      with a substantial equivalent that is approved by Lender in its sole discretion,
      or any Permit; or

    


    (ii) a
      ban on
      either new admissions generally or on admission of patients/residents otherwise
      qualifying for Medicare or Medicaid coverage; or

    


    (l) Borrower,
      Manager or the Facility shall be assessed 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 Fifty Thousand Dollars ($50,000);
      or

     

    (m) A
      final
      judgment shall be rendered by a court of law or equity against Borrower,
      Manager, General Partner or Guarantor in excess of Twenty-Five Thousand Dollars
      ($25,000), and the same shall remain undischarged for a period of thirty (30)
      days, unless such judgment is either (i) fully covered by collectible insurance
      and such insurer has within such period acknowledged such coverage in writing,
      or (ii) although not fully covered by insurance, enforcement of such judgment
      has been effectively stayed, such judgment is being contested or appealed by
      appropriate proceedings and Borrower, Manager, General Partner or Guarantor,
      as
      the case may be, has established reserves adequate for payment of the reasonably
      estimated probable liability 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, Guarantor, General Partner or Manager, or the existence
      of any other condition which, in a commercial loan context, reasonably
      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, and if such condition is capable of being cured,
      is
      not remedied within thirty (30) days after written notice; or

     

    (o) The
      filing of any claim or Lien against the Mortgaged Property or any part thereof;
      provided, however, that no Event of Default shall exist hereunder as long as
      Borrower has fully complied with Section 5.26 (Protection Against Liens);
      or

     

    (p) Any
      material deviation in the work of construction from the Plans without the
      approval of Lender, or the presence of defective workmanship or materials as
      determined by Lender in its sole and absolute discretion, which deviations
      or
      defects are not corrected or substantially corrected within ten (10) days after
      receipt of written notice thereof from Lender to Borrower; or

     

    (q) Any
      of
      the Improvements encroach over the Land or setback lines or upon an easement,
      or
      any structure upon an adjoining property encroaches upon the Land;
      or

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

    (r) The
      work
      of construction of the SNF (i) is delayed or suspended for a period of fifteen
      (15) consecutive calendar days or more for any reason except Force Majeure,
      unless previously consented to in writing by Lender or (ii) does not proceed
      with due diligence and reasonably in accordance with the schedule of completion
      subject to force Majeure, unless previously consented to in writing by Lender,
      or (iii) is not completed in accordance with the Plans without the approval
      of
      Lender, or (iv) is not completed by the Completion Date or such later date
      as
      Lender may elect, unless such failure is caused by Force Majeure;
      or

     

    (s) The
      expenditure by Borrower of any portion of the Loan proceeds on any item, other
      than the items listed on the Approved Budget; or

     

    (t) Borrower’s
      failure to timely comply with the conditions and obligations contained in
ARTICLE
      IV
      (Conditions Precedent to Loan Advances); or

     

    (u) Except
      for reasons of Force Majeure or for reasons of third party default, Borrower
      fails to promptly commence construction of the SNF or fails to satisfy all
      of
      the conditions of this Agreement with respect to disbursement of Loan proceeds
      for costs of such construction on or before the expiration of thirty (30) days
      after the date of this Agreement; or

     

    (v) There
      occurs a default under the terms of the construction contract for construction
      of the SNF by either Borrower or General Contractor which is not cured within
      five (5) days from the date of the occurrence thereof; or

     

    (w) If
      Borrower at any time shall be in default (whether such default is monetary
      or
      non-monetary in nature, arising by virtue of a cross-default clause, or
      otherwise) under any notes or other evidence of any indebtedness to Lender
      or
      under any mortgages or other instruments from time to time securing and such
      indebtedness, and such default remains uncured after any applicable cure or
      grace period described in the document under which such default occurred;
      or

     

    (x) Failure
      to complete construction of the SNF substantially in accordance with the Plans
      on or before the Completion Date, subject to Force Majeure.

     

    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, in which case, 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.

     

    Section
      9.2 Remedies.

     

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

     

    (a) Immediately
      terminate any further advance of Loan proceeds hereunder, and from time to
      time
      apply all or any part of the undisbursed Loan proceeds to payment of accrued
      interest under the Note and/or upon any other obligations of Borrower hereunder
      or under the Loan Documents.

     

    (b) 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.

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

    (c) Enter
      upon the Land and complete construction of the Improvements in accordance with
      the Plans with such changes therein (except for material changes as to scope
      or
      use) as Lender may from time to time and in its judgment deem appropriate,
      all
      at the risk and expense of Borrower. Lender shall have the right at any time
      to
      discontinue any work commenced by it with respect to the Improvements or to
      change any course of action undertaken by it and not be bound by any limitations
      or requirements of time whether set forth herein or otherwise. Lender shall
      have
      the right and power (but shall not be obligated) to assume any construction
      contract made by or on behalf of Borrower in any way relating to the
      Improvements and to take over and use all or any part of the labor, materials,
      supplies, and equipment contracted for by or on behalf of Borrower whether
      or
      not previously incorporated into the Improvements, all in the discretion of
      Lender. In connection with any work of construction undertaken by Lender
      pursuant to the provisions of this Section
      9.2(c),
      Lender
      may (i) engage builders, contractors, architects, engineers and others for
      the
      purpose of furnishing labor, materials and equipment in connection with the
      construction of the Improvements, (ii) pay, settle or compromise all bills
      or
      claims which may become liens against the Land or which have been or may be
      incurred in any manner in connection with completing construction of the
      Improvements or for the discharge of liens, encumbrances or defects in title
      of
      the Land, (iii) take such other action, including the employment of watchmen
      to
      protect the Improvements, or refrain from taking action under this Agreement
      as
      Lender may in its discretion determine from time to time. Borrower shall be
      liable to Lender for all sums paid or incurred for completing construction
      of
      the Improvements, whether the same shall be paid or incurred pursuant to the
      provisions of this Section
      9.2(c)
      or
      otherwise, and all payments made or liabilities incurred by Lender hereunder
      of
      any kind whatsoever shall be paid by Borrower to Lender upon demand, with
      interest at the Default Rate set forth in the Note, and all of the foregoing
      shall be deemed and shall constitute advances under this Agreement and be
      secured by the Loan Documents. For the purpose of carrying out the provisions
      and exercising the rights, powers and privileges granted by this Section
      9.2(c),
      Borrower hereby unconditionally and irrevocably constitutes and appoints Lender
      its true and lawful attorney-in-fact to enter into such contracts, perform
      such
      acts and incur such liabilities as are referred to in this Section
      9.2(c)
      in the
      name and on behalf of Borrower. This power of attorney shall be deemed
      irrevocable and is coupled with an interest.

     

    (d) Where
      substantial deviations from the Plans appear which have not been approved as
      set
      forth herein, or defective or unworkmanlike labor or materials are being used
      in
      the construction of the Improvements, or upon receipt of knowledge of
      encroachments to which there has been no consent, Lender shall have the right
      immediately to order stoppage of the construction and demand that such
      condition(s) be corrected. After issuance of such an order in writing, no
      further work shall be done on the Improvements without the prior written consent
      of Lender unless and until said condition has been fully corrected.

     

    (e) 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.

     

    (f) 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.

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

    (g) 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.

     

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

    


    ARTICLE
      X

    MISCELLANEOUS

     

    Section
      10.1 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,
      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.

     

    Section
      10.2 Costs
      and Expenses.

     

    Borrower
      will bear all taxes, fees and commercially reasonable expenses (including actual
      attorneys’ fees and expenses of counsel for Lender) in connection with the Loan,
      the Note, the Security Instrument, 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; excluding, however, taxes assessed against Lender on the basis of
      its
      income or assets. If, at any time, an Event of 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, any Guarantor, General Partner, 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 event, all of the actual attorneys’ 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 (excluding taxes assessed against Lender on the basis of its
      income or assets), 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.
      All such amounts shall constitute a portion of the Loan Obligations, shall
      be
      secured by the Security Instrument and shall bear interest at the Default Rate
      from the date advanced by Lender until repaid.

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

    Section
      10.3 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
      Security Instrument and shall bear interest at the Default Rate from the date
      advanced until repaid.

     

    Section
      10.4 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 and/or
      the
      Security Instrument, any interest of Lender in the Mortgaged Property 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
      Loan
      Documents, whether or not suit is filed in connection with same, or in
      connection with Borrower, Guarantor, General Partner, Manager, any other
      guarantor 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, any 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) any and all claims and demands whatsoever which
      may be asserted against Lender by reason of any alleged obligations or
      undertakings on its part to perform or discharge any of the terms, covenants,
      or
      agreements contained in any lease or management agreement or any replacement
      or
      renewal thereof or substitution therefor, (j) 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, (k) 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 Security Instrument,
      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, (l) any
      misrepresentation made to Lender in this Agreement or in any of the other Loan
      Documents, (m) any tax on the making and/or recording of the Security
      Instrument, the Note or any of the other Loan Documents; (n) the violation
      by
      Borrower of any requirements of the Employee Retirement Income Security Act
      of
      1974, as amended, (o) 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 (p) the enforcement
      by
      any of the Indemnified Parties of the provisions of this Section
      10.4.
      Any
      amounts payable to Lender by reason of the application of this Section
      10.4,
      shall
      become immediately due and payable, and shall constitute a portion of the Loan
      Obligations, shall be secured by the Security Instrument and shall accrue
      interest at the Default Rate. The obligations and liabilities of Borrower under
      this Section
      10.4
      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 Security Instrument. Notwithstanding anything contained
      herein, the liabilities and obligations of the Borrower under Section 10.4(d),
      (e), (h) or (o) shall not extend to any activity or condition giving rise to
      any
      such liability or obligation which activity or condition arises solely after
      the
      date the Lender, or its duly authorized agents, take possession of the Land
      and
      the Improvements pursuant to a receivership action, foreclosure or deed in
      lieu
      of foreclosure. For purposes of this Section
      10.4,
      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 Security Instrument is or will have been recorded, any Person
      who
      may hold or acquire or will have held a full or partial interest in the Loan
      (including, without limitation, any investor in any securities backed in whole
      or in part by the Loan) as well as the respective directors, officers,
      shareholder, partners, members, employees, agents, servants, representatives,
      contractors, subcontractors, affiliates, subsidiaries, participants, successors
      and assigns of any and all of the foregoing (including, without limitation,
      any
      other Person who holds or acquires or will have held a participation or other
      full or partial interest in the Loan or the Mortgaged Property, whether during
      the term of the Security Instrument 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).

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

    

    Section
      10.5 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.

     

    Section
      10.6 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.

     

    Section
      10.7 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:

    

      
        	
                To
                  Borrower:

              	
                ARC
                  Lakeway, L.P.

              
	 	
                c/o
                  American Retirement Corporation

              
	 	
                111
                  Westwood Place, Suite 200

              
	 	
                Brentwood,
                  Tennessee 37027

              
	 	
                ATTN:George
                  Hicks, Executive Vice President

              
	 	 
	
                with
                  a copy to:

              	
                Bass,
                  Berry & Sims, PLC

              
	 	
                315
                  Deaderick Street, Suite 2700

              
	 	
                Nashville,
                  Tennessee 37238-0002

              
	 	
                ATTN:T.
                  Andrew Smith, Esq.

              
	 	 
	
                To
                  Lender:

              	
                GMAC
                  Commercial Mortgage Bank

              
	 	
                100
                  South Wacker Drive, Suite 400

              
	 	
                Chicago,
                  Illinois 60606

              
	 	
                ATTN:Construction
                  Lending Department

              
	 	 
	
                with
                  a copy to:

              	
                GMAC
                  Commercial Mortgage Corporation

              
	 	
                8333
                  Douglas Avenue, Suite 1460

              
	 	
                Dallas,
                  Texas 75225

              
	 	
                ATTN:Monique
                  Bimler

              
	 	 
	
                and
                  a copy to:

              	
                Ballard
                  Spahr Andrews & Ingersoll LLP

              
	 	
                601
                  13th
                  Street, NW, Suite 1000 South

              
	 	
                Washington,
                  DC 20005

              
	 	
                ATTN:Kelly
                  M. Wrenn, Esq

              


      

    

     

    
      
        
        

      

      
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    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. Each party agrees that it will not refuse or reject delivery
      of
      any Notice given in accordance with this Section
      10.7
      (Notices), that it will acknowledge, in writing, the receipt of any Notice
      upon
      request by the other party and that any Notice rejected or refused by it shall
      be deemed for purposes of this Section
      10.7
      to have
      been received by the rejecting party on the date so refused or rejected, as
      conclusively established by the records of the U.S. Postal Service or the
      courier service.

     

    Section
      10.8 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.

     

    Section
      10.9 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
      amount due from Borrower pursuant to the Loan Documents. 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.

     

    Section
      10.10 Signs.

     

    Borrower
      will not place a sign on the Land and/or the Improvements, evidencing that
      construction financing is being provided by Lender, without the prior written
      consent to and approval of such sign by Lender.

     

    Section
      10.11 Supersedes
      Prior Agreements; Counterparts.

     

    This
      Agreement, the other Loan Documents and the instruments referred to herein
      and
      therein 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.

     

    Section
      10.12 Loan
      Agreement Governs.

     

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

     

    
      
        
        

      

      
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    Section
      10.13 Incorporation
      of Exhibits.

     

    All
      Exhibits referenced herein and attached hereto are incorporated into this
      Agreement by reference as if fully set forth herein.

     

    Section
      10.14 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 TEXAS. THE PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS
      TO
      OBJECT) TO NON-EXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF TEXAS, 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 SOUTHERN
      DISTRICT OF TEXAS OR ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL
      JURISDICTION.

     

    Section
      10.15 WAIVER
      OF JURY TRIAL.

     

    TO
      THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWER AND LENDER HEREBY
      WAIVES ANY RIGHT THAT EACH 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. 

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, Borrower and Lender have caused this Loan Agreement to be
      properly executed as of the date first above written.

     

    
      	
               

               

              WITNESS:

               

               

               

              _______________________________

              Name:
                _______________________

            	
              BORROWER:

               

              ARC
                LAKEWAY, L.P., a Tennessee limited partnership

               

              By: ARC
                TENNESSEE GP, INC., a Tennessee corporation, General Partner

               

              By:
                _____________

              Name:
                ___________

              Title:
                _______________

            
	 	 


    

    


    


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              WITNESS:

               

               

               

              _______________________________

              Name:
                _______________________

            	
              LENDER:

               

              GMAC
                COMMERCIAL MORTGAGE BANK, a Utah industrial bank

               

               

               

              By:_________________________

              Name:

              Title:

            


    

     

    
       

      
        
          
          

        

        
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